New Products Management

1
New Products Management

• Chapter 7
• Analytical Attribute Approaches
• Trade-Off Analysis and Qualitative Techniques

2
Trade-Off (Conjoint) Analysis

• 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.

3
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.

4
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.

5
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.

PriceMemory 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
6
Simplified Part-Worth(Utility) Calculation
Price Part- Memory 1,000 1,500 2,000 Wor
th 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
7
How to Use inDesign/Tradeoff Evaluation

• 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.

8
Conjoint Analysis Input Salsa Example
Figure 7-2
9
Figure 7-3
Conjoint Analysis Graphical Output
Thickness Spiciness Color
2 1 0 -1 -2
UTILITY
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
10
Conjoint AnalysisRelative Importance of
Attributes
Figure 7-3 (contd.)
0 20 40 60 80
100
Spiciness Thickness Color
59.8
34.6
5.6
11
Some Qualitative Attribute Analysis Techniques

• Dimensional Analysis
• Checklists
• Relationships Analysis
• There are many others.

12
A Dimensional Attribute List
Figure 7-4

• Weight
• Rust resistance
• Length
• Color
• Water resistance
• Materials
• Style
• Durability
• Shock resistance
• Heat tolerance

• Explosiveness
• Flammability
• Aroma
• Translucence
• Buoyancy
• Hangability
• Rechargeability
• Flexibility
• Malleability
• Compressibility

13
An Idea Stimulator Checklist
Figure 7-5

• 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?

14
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

15
Other Methods Lateral Search Techniques

• Free association
• Stereotype activity
• Lateral thinking -- avoidance
• Creative stimuli words
• Studying big winners
• Use of the ridiculous
• Forced relationships

16
Some Creative Stimuli Words

• Guest stars
• Alphabet
• Truth
• Outer space
• Charity
• His and hers
• Style
• Nation
• Family
• Videotape

• Photography
• Testimonials
• Decorate
• Fantasy
• Hobbies
• Holidays
• Weather
• Calendar
• Push button
• Snob appeal

17
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.
• Business travellers? (6 trips/mid-week).
• Pleasure travellers? (2 trips/stay in
  hotels/motels).
• Hotel Chain should
• Offer good value for the money.
• Have minimal cannibalization of Marriotts other
  facilities.
• Have market position with competitive advantage.

18
Overall Study Design

• 50 attributes, 28 levels/attributes.
• Hybrid conjoint task.
• Price elasticity, using ELASTICON model.
• Positioning analysis scaling, clustering to deal
  with demographics, attitudes and hotel usage.
• 263 mid-week business travellers,83 high-end
  business travellers,255 non-business travellers
• in Atlanta, Dallas, San Francisco, Chicago.

19
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)

20
Optimal Hotel Design Features contd
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 childrens playroom
yard 7. Security factors G security guards G
smoke detectors G 24 hour video
21
Overall Study Design and Analysis
What combination of features and
services? Supplementary tasks and background
data
What type of location to select? Attitude
and preference scaling Preference for
location types Recommendation for type
of location
What pricing strategy to follow? ELASTICON Pr
ice/demand response Pricing
recommendation
What is the best competitive position? Hybrid
conjoint analysis and simulation Multifact
evaluation of complete offering Cross- valida
tion
Is the concept viable Self-explicated evaluat
ion Simulation Guidelines for product
design, positioning and advertising
Management Question Model Respondents Tasks
Additional Modeling and Validation Output
Cross- validation
Additional guidelines for segmentation, positionin
g and product design
22
50 Factors and 167 Levelsthat 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 Lar
  ge 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

23
50 Factors and 167 Levelsthat 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/

24
50 Factors and 167 Levelsthat Describe Hotel
Features

• Leisure Racquet ball courts Childrens 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

25
50 Factors and 167 Levelsthat Describe Hotel
Features

• Services Limo to airport Cleanliness/upkeep Specia
  l 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

26
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 Marriotts
development team). Each rpondent received five
cards following a block design.

• Building Size, Bar/Lounge
• Large (600 rooms) 12-storey hotel with
• quiet bar/lounge,
• enclosed central corridors elevators, and
• all rooms have very large windows
• Landscaping/Court
• Building forms a spacious outdoor courtyard
• many trees shrubs,
• the swimming pool plus a fountain, and
• terraced areas for sunning, sitting eating.
• Food
• Small, moderately priced lounge and restaurant
  for hotel guests/friends
• limited breakfast with juices, fruit, Danish,
  cereal, bacon eggs,
• lunch soup sandwiches only, and
• evening meal salad, soup, sandwiches, six hot
  entrees including steak.
• Hotel/Motel Room Quality
• Quality of room furnishings, carpet, etc., is
  similar to
• Hyatt Regencies, and
• Westin Plaza Hotels.

• Room Size Function
• Room 1 foot longer than typical hotemotel room
• space for comfortable sofa-bed 2 chairs,
• large desk coffee table, and
• coffee maker small refrigerator.
• Service Standards
• Full service including
• rapid check-in/check-out systems,
• reliable message service,
• valet (laundry pick-up/delivery),
• bellman,
• someone (concierge) arranges reservations,
  tickets, generally at no cost, and
• cleanliness, up-keep, management similar to
  Hyatts Marriotts .
• Leisure
• Combination indoor-outdoor pool,
• enclosed whirlpool (Jacuzzi), and
• well-equipped playroom/playground for kids.
• Security
• Night guard on duty 7 pm to 7 am,

Would stay there Would stay there Would stay
there Would rarely Would not o almost all
the time o on a regular basis o now and then o
stay there o stay there
27
Result
Courtyard by Marriott not small Marriott
28
Marriott13