# New Products Management

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```					New Products Management

Chapter 7
Analytical Attribute Approaches:
Techniques
• Put the determinant attributes together in
combinations or sets.
• Respondents rank these sets in order of
preference.
• Conjoint analysis finds the optimal levels of
each attribute.
What is Conjoint Analysis?

A way to incorporate the structure of customer preferences into
the new product design process. It helps evaluate how
customers make tradeoffs between various product attributes (a
decompositional approach).

The basic outputs of conjoint analysis are:
A numerical assessment of the relative importance each
customers attaches to attributes of a product set.
The value (utility) provided to each customer by each
attribute option.
Use of Conjoint Analysis
Designing new products that enhance consumer utility.
Forecasting sales/market share of alternative product
concepts.
Identifying market segments for which a given concept
has high value.
Identifying the “best” concept for a target segment.
Pricing products/product bundles.
Product line management.
Positioning new products to different segments.
Product Design: Conjoint
Analysis
The approach derives customers’ utility values for
attributes and attribute options based on customers’
stated overall preferences for different bundles of
attributes. The following example shows Memory and
Price bundles.

Price
Memory        \$1,000         \$1,500   \$2,000
8 Mb            4             2        1
16 Mb            7             5        3
24 Mb            9             8        6
9 =    Most preferred
•
•
•
1 =    Least preferred
Simplified Part-Worth
(Utility) Calculation
Price                   Part-
Memory        \$1,000        \$1,500   \$2,000          Worth
8 Mb           4             2        1       7/3    2.3
16 Mb           7             5        3      15/3    5.0
24 Mb           9             8        6      23/3    7.7
20/3          15/3     10/3
Part-Worth:    6.7           5.0      3.3
9 =   Most preferred
•
•
•
1 =   Least preferred
How to Use in
Example:     24 Mb    vs 16 Mb     = 7.7 – 5.0    = 2.7 units
\$1,000   vs \$1,500    = 6.7 – 5.0    = 1.7 units

So:    8 Mb is worth more than \$500 to this customer.

2.7
(    –––  (1,500 – 1,000)  \$795)
1.7

Can use to assess value to customer of non-product
(service) attributes.
Conjoint Analysis Input: Salsa Example
Figure 7-2

Thickness       Spiciness       Color        Actual    Ranking as
Ranking*   Estimated
by Model
Regular         Mild            Red            4            4
Regular         Mild            Green          3            3
Regular         Medium-Hot      Red           10           10
Regular         Medium-Hot      Green          6            8
Regular         Extra-Hot       Red           15           16
Regular         Extra-Hot       Green         16           15
Thick           Mild            Red            2            2
Thick           Mild            Green          1            1
Thick           Medium-Hot      Red            8            6
Thick           Medium-Hot      Green          5            5
Thick           Extra-Hot       Red           13           13
Thick           Extra-Hot       Green         11           11
Extra-Thick     Mild            Red            7            7
Extra-Thick     Mild            Green          9            9
Extra-Thick     Medium-Hot      Red           14           14
Extra-Thick     Medium-Hot      Green         12           12
Extra-Thick     Extra-Hot       Red           17           18
Extra-Thick     Extra-Hot       Green         18           17

* 1 = most preferred, 18 = least preferred.
Figure 7-3

Conjoint Analysis:
Graphical Output
Thickness                   Spiciness                    Color
2

1

0

-1

-2
Regular     Thick   Ex-Thick   Mild   Medium-Hot    Ex-Hot Red             Green
0.161        0.913     -1.074 1.667      0.105      -1.774 -0.161           0.161
Figure 7-3
(cont’d.)

Conjoint Analysis:
Relative Importance of Attributes
0     20   40      60           80   100 %

Spiciness                           59.8%

Thickness              34.6%
Color           5.6%
Some Qualitative Attribute
Analysis Techniques
• Dimensional Analysis
• Checklists
• Relationships Analysis
– There are many others.
Figure 7-4

A Dimensional Attribute List
•   Weight             •   Explosiveness
•   Rust resistance    •   Flammability
•   Length             •   Aroma
•   Color              •   Translucence
•   Water resistance   •   Buoyancy
•   Materials          •   Hangability
•   Style              •   Rechargeability
•   Durability         •   Flexibility
•   Shock resistance   •   Malleability
•   Heat tolerance     •   Compressibility
Figure 7-5

An Idea Stimulator Checklist
• Can the dimensions be changed? (larger, smaller, longer,
shorter, thicker...)
• Can the quantity be changed? (more, less, combine,
fractionate...)
•   Can the order be changed?
•   Can the time element be changed?
•   Can the cause or effect be changed?
•   Can there be a change in character?
•   Can the form be changed? (animated, speeded, slowed,
attracted...)
• Can the state or condition be changed?
• Can the use be adapted to a new market?
Relationships Analysis
• Force combinations of dimensions (features, functions, and
benefits) together.
• Techniques:
– Two-dimensional matrix
– Multidimensional (morphological) matrix
• Household cleaning products example used six
dimensions:
– Instrument used, ingredients used, objects cleaned, type
of container, substances removed, texture or form of
cleaner
Other Methods: Lateral Search
Techniques
•   Free association
•   Stereotype activity
•   Lateral thinking -- avoidance
•   Creative stimuli words
•   Studying “big winners”
•   Use of the ridiculous
•   Forced relationships
Some Creative Stimuli Words
•   Guest stars    •   Photography
•   Alphabet       •   Testimonials
•   Truth          •   Decorate
•   Outer space    •   Fantasy
•   Charity        •   Hobbies
•   His and hers   •   Holidays
•   Style          •   Weather
•   Nation         •   Calendar
•   Family         •   Push button
•   Videotape      •   Snob appeal
Designing Courtyard by Marriott
Problem for Marriott
Early 1980s:
Running out of good sites for typical full service Marriott
Hotels (missing low-end business traveller segment).

Idea:
New chain for low-end business and/or pleasure travellers.
Pleasure travellers? (2+ trips/stay in hotels/motels).

Hotel Chain should:
Offer good value for the money.
Have minimal cannibalization of Marriott’s other facilities.
Have market position with competitive advantage.
Overall Study Design
50 attributes, 2–8 levels/attributes.

Price elasticity, using ELASTICON model.

Positioning analysis: scaling, clustering to deal with
demographics, attitudes and hotel usage.

in Atlanta, Dallas, San Francisco, Chicago.
Optimal Hotel Design Features
1.   External factors:      G   building shape
G   landscape design
G   pool type and location
G   hotel size

2. Rooms:                   G   room size & decor
G   type of heating & cooling
G   location/type of bathroom

3. Food-related services:   G   type/location of restaurant
G   room service
G   vending services/stores
G   in-room kitchen

4. Lounge facilities:       G   location
G   atmosphere
G   type of people (clientele)
Optimal Hotel Design Features
cont’d

5. Services:               G   reservations
G   registration/checkout
G   limo to airport
G   bellman
G   message center
G   secretarial service
G   car rental
G   maintenance

6. Leisure facilities:     G   sauna
G   exercise room
G   racquetball courts
G   tennis courts
G   game room
G   children’s playroom & yard

7. Security factors:       G   security guards
G   smoke detectors
G   24 hour video
Overall Study Design and
Analysis
Management         Is the           What is the best        What combination     What pricing     What type of
Question         concept            competitive              of features          strategy         location
viable              position?              and services?        to follow?       to select?

Model                         Hybrid conjoint analysis                        ELASTICON         Attitude and
and simulation                                                 preference
scaling
Respondents’   Self-explicated         Multifact              Supplementary      Price/demand
complete offering        background data                       for location
types
Modeling and     Simulation
Cross-                                 Cross-
Validation
validation                             validation

Guidelines for                                                       Pricing      Recommendation
guidelines for
Output       product design,                                                  recommendation      for type of
segmentation,
positioning                                                                         location
positioning and
product design
50 Factors and 167 Levels
that Describe Hotel Features
External Factors               Pool type                      Corridor view
Building shape                     No pool                         Outside access/restricted view
L-shaped w/landscape          Rectangular shape               Enclosed access/unrestricted view/
Outdoor courtyard             Free form shape                   balcony or window
Landscaping                        Indoor/Outdoor             Hotel size
Minimal                   Pool location                       Small (125 rooms, 2 stories)
Moderate                      In courtyard                    Large (600 rooms, 12 stories)
Elaborate                     Not in courtyard

Rooms Size                     Sink location                  Bathroom features
Entertainment                      Small (standard)                In bath only                             None
Color TV                      Slightly larger (1 foot)        In separate area                         Shower Massage
Color TV w/movies at \$5       Much larger (2.5 feet)          In bath and separate                     Whirlpool (Jacuzzi)
Color TV w/30 channel         Small suite (2 rooms)      Size of bath                                  Steam bath
cable                       Large suite (2 rooms)           Standard bath                        Amenities
Color TV w/HBO,           Quality of Decor                    Slightly larger/sink                     Small bar soap
movies, etc.                Budget motel decor                separate                               Large soap/shampoo/
Color TV w/free movies        Old Holiday Inn decor           Much larger bath w/                        shoeshine
Entertainment/Rental in room       New Holiday Inn decor             larger tub                             Large soap/bath gel/
None                          New Hilton decor                Very large/tub for 2                       shower cap/sewing kit
Rental Cassettes/Atari        New Hyatt decor            Heating and Cooling                           Above items + toothpaste,
Rental Cassettes/Stereo                                       Wall unit/full control
Rental Movies/Betamax                                         Wall unit/soundproof/full control
Central H or C (seasonal)
Central H or C/full control
50 Factors and 167 Levels
that Describe Hotel Features
Food Restaurant nearby          Store                             Vending
Restaurant in hotel                 None                               No food in store             None
None (coffee shop next         Coffee shop                        Snack items                  Soft drink machine only
door)                        Fast food                          Snacks, refrigerated         Soft drink and snack
Restaurant/lounge combo,       Fast food or coffee shop             items, wine, beer,          machines
limited menu                     and moderate restaurant        liquor                       Soft drink, snack, and
Coffee shop, full menu         Fast food or coffee shop           Above items and               sandwich machines
Full-service restaurant,           and good restaurant              gourmet food items         Above and microwave
full menu                Room Service                      In-room kitchen facilities        available
Coffee shop, full menu         None                               None
and good restaurant          Phone-in order/guest to            Coffee maker only
Free continental                        pick up                        Coffee maker and
None                           Room service, limited menu         refrigerator
Continental included in        Room service, full menu            Cooking facilities in room
in room rate

Lounge                          Type of people                    Lounge nearby
Atmosphere                          Hotel guests and friends           None
Quiet bar/lounge                   only                           Lounge/bar nearby
Lively, popular bar/           Open to public—                    Lounge/bar w/
lounge                           general appeal                   entertainment nearby
Open to public -
many singles
50 Factors and 167 Levels
that Describe Hotel Features
Leisure                         Racquet ball courts              Children’s playroom/
Sauna                                None                               playground
None                            Yes                              None
Yes                        Tennis courts                         Playground only
Whirlpool/Jacuzzi                    None                             Playroom only
None                            Yes                              Playground and playroom
Outdoor                    Game room/Entertainment          Pool extras
Indoor                          None                             None
Exercise room                        Electric games/pinball           Pool w/slide
None                              Electric games/pinball/        Pool w/slides and
Basic facility w/weights          Ping-Pong                        equipment
Facility w/Nautilus             Above + movie theater,           Pool w/slides, waterfall,
equipment                      bowling                          equipment

Security                        Smoke detector                   Sprinkler system
Security guard                       None                             None
None                            In rooms and throughout          Lobby and hallways only
11 a.m. to 7 p.m.                 hotel                          Lobby/hallways/rooms
7 p.m. to 7 a.m.           Alarm button                     24-hours video cameras
24 hours                        None                              None
Button in room                    Parking/hallway/rooms
50 Factors and 167 Levels
that Describe Hotel Features
Services                       Limo to airport                Cleanliness/upkeep          Special Services
Reservations                       None                          Management skill             None
Call hotel directly             Yes                           Budget motel level           Information on
800 reservation number      Bellman                           Holiday Inn level             restaurants, theaters, etc.
Check-in                           None                          Non-convention Hyatt         Arrangements and
Standard                        Yes                             level                       reservations
Pre-credit clearance        Message service                   Convention Hyatt level       Travel problem
Machine in lobby                Note at front desk            Fine hotel level              resolution
Check out                          Light on phone             Laundry/Valet               Car maintenance
At front desk                   Light on phone and            None                         None
Bill under door/leave key         message under door          Client drop off and          Take car to service
Key to front desk/bill by       Recorded message                pick up                    Gas on premises/bill to
mail                      Secretarial services              Valet pick up and drop        room
Machine in lobby                None                            off                    Car rental/Airline reservations
Xerox machine                 Self service                 None
Xerox machine and typist                                   Car rental facility
Airline reservations
Car rental and airline
reservations
Room Price per Night is \$44.85
This full profile description of a hotel offering is one of the 50 cards developed by a fractional factorial design of the seven facets
each at the five levels (developed by the Marriott’s development team). Each rpondent received five cards following a block design.

Building Size, Bar/Lounge                                           Room Size & Function
Large (600 rooms) 12-storey hotel with:                             Room 1 foot longer than typical hote;motel room:
quiet bar/lounge,                                                 space for comfortable sofa-bed & 2 chairs,
enclosed central corridors & elevators, and                       large desk & coffee table, and
all rooms have very large windows                                 coffee maker & small refrigerator.
Landscaping/Court                                                   Service Standards
Building forms a spacious outdoor courtyard:                        Full service including:
many trees & shrubs,                                                 rapid check-in/check-out systems,
the swimming pool plus a fountain, and                               reliable message service,
terraced areas for sunning, sitting & eating.                        valet (laundry pick-up/delivery),
bellman,
Food                                                                       someone (concierge) arranges reservations,
Small, moderately priced lounge and restaurant for                         tickets, generally at no cost, and
hotel guests/friends:                                                      cleanliness, up-keep, management similar to
limited breakfast with juices, fruit, Danish,                       Hyatts & Marriotts .
cereal, bacon & eggs,
lunch: soup & sandwiches only, and                           Leisure
evening meal: salad, soup, sandwiches, six hot                      Combination indoor-outdoor pool,
entrees including steak.                                            enclosed whirlpool (Jacuzzi), and
well-equipped playroom/playground for kids.
Hotel/Motel Room Quality
Quality of room furnishings, carpet, etc., is similar to:           Security
Hyatt Regencies, and                                                 Night guard on duty 7 pm to 7 am,
Westin “Plaza” Hotels.                                               fire/water sprinklers throughout hotel, and
all rooms have very large windows.

o     Would stay there
almost all the time      o      Would stay there
on a regular basis      o Would stay there
now and then             o Would rarely
stay there              o Would not
stay there
Result

“Courtyard by Marriott”

not

“small Marriott”
Marriott–13

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