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New Product Design

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Role of design in new product development Conjoint Analysis for product design Designing a hotel exercise Xerox conjoint study – PowerPoint PPT presentation

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Title: New Product Design


1
New Product Design
  • Role of design in new product development
  • Conjoint Analysis for product design
  • Designing a hotel exercise
  • Xerox conjoint study

2
Arthur D. Little Worldwide Survey
  • Where companies want to put their efforts in new
    product development
  • Getting our new products to the market on time,
    as planned (76 of companies interviewed).
  • Improving the appeal of our new products to
    customers (73).
  • Developing our new products faster from concept
    to introduction (68).
  • Developing products that are easier to
    manufacture, sell, install, and service (61).
  • Reducing costs/investments related to new product
    development and introduction (47).
  • Reducing the payback period of our new products
    (47).
  • Increasing the number of new products (44)

3
Breakdown of Success Factors Process versus
Environment
Source Robert G. Cooper, Winning at New Products
(1993)
4
Success measured using four factors (1) whether
it met or exceeded managements criteria for
success, (2) the profitability level (1-10
scale), (3) market share at the end of three
years, and (4) whether it met company sales and
profit objectives (1-10 scale).
Source Robert G. Cooper, Winning at New Products
(1993)
New Product Management (Spring 1998), Penn State
University 4
5
Source Robert G. Cooper, Winning at New Products
(1993)
New Product Management (Spring 1998), Penn State
University 5
6
Source Robert G. Cooper, Winning at New Products
(1993)
New Product Management (Spring 1998), Penn State
University 6
7
Source Robert G. Cooper (1993)
New Product Management (Spring 1998), Penn State
University 7
8
Value of Good Design
  • 80 of a products manufacturing costs are
    incurred during the first 20 of its design
    (Varies with product category).

9
What is Conjoint Analysis?
A way to understand and incorporate the structure
of customer preferences into the new product
design process. In particular, it enables one to
evaluate how customers make tradeoffs between
various product attributes.
  • The basic output of conjoint analysis are
  • A numerical assessment of the relative importance
    that customers attach to attributes of a product
    category
  • The value (utility) provided to customers by each
    potential feature of a product

10
Why is Conjoint Analysis Useful?
  • Designing new products that enhance customer
    value
  • 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

11
Measuring Importance of Attributes
When ordering a computer, how important
is Circle one Not Very Important
Important Price 1 2 3 4 5 6 7
8 9 Performance 1 2 3 4 5 6 7
8 9 Reliability 1 2 3 4 5 6 7
8 9 Delivery time 1 2 3 4 5 6 7
8 9
12
How Do We Resolve These Design Questions?
Should we offer our business travelers more room
space or a fax machine in their room? Should we
offer more leisure-time activities (sauna,
exercise room, tennis courts) or more food
related services (several dining options, vending
machines, in-room kitchen facilities)? Given a
target cost for a product, should we enhance
product reliability or its performance? Should
we use a steel or aluminum casing to increase
customer preference for the new equipment?
13
An Example Conjoint Study Air Pollution Control
Equipment
Attributes
  • Price (4 options)
  • Delivery_terms (4 options)
  • Performance specs (4 options)
  • Delivery time (4 options)

Perf. specs Delivery time Price Exceed by
20 6 months 600k Exceed by 5 9
months 700k Meet specs 12
months 800k Short by 5 15
months 900k Delivery terms Installed, 2-year
guarantee Installed, 1-year guarantee Installed,
service contract FOB seller, service contract A
total of 256 (4x4x4x4) different offerings can be
designed from these options!
14
Data for Conjoint Analysis Paired Comparisons
Deluxe Mid-level model model Performance
specs Exceed by 20 Exceed by 5 Delivery time 12
months 6 months Price 700k 700k Delivery
terms Installed, 1 year Installed, service
contract Which do you prefer?
Which one would you buy?
15
Data for Conjoint Analysis Full-Profile Ratings
or Rankings
Product Perf_spec Del_time Price
Del_terms Example bundle
Preference number
score 1 Exceed_20 6_months 600k
Inst_2yr 100 2 Exceed_20
9_months 700k Inst_ser
80 3 Exceed_20 12_months 800k
FOB_ser 40 4 Exceed_20
15_months 900k Inst_1yr
20 5 Exceed_5 6_months
700k Inst_1yr 70 6
Exceed_5 9_months 600k
FOB_ser 75 7 Exceed_5
12_months 900k Inst_ser
65 8 Exceed_5 15_months 800k
Inst_2yr 70 9 Meet_specs
6_months 700k Inst_ser
50 10 Meet_specs 9_months 900k
Inst_2yr 20 11 Meet_specs
12_months 600k Inst_1yr
40 12 Meet_specs 15_months 700k
FOB_ser 30 13 Short_5
6_months 900k FOB_ser
5 14 Short_5 9_months 800k
Inst_1yr 10 15 Short_5
12_months 700k Inst_2yr
10 16 Short_5 15_months 600k
Inst_ser 0
16
Example Part Worth for Attributes
17
Example Part Worths for Attribute Options
18
Conjoint Utility Computations
a
k
U(P) S S aijxij
i1
j1
P A particular product/concept of
interest U(P) The utility associated with
product P aij Utility associated with th jth
level (j 1, 2, 3...kj) on the ith
attribute kj Number of levels of attribute
i m Number of attributes xij 1 if the jth level
of the ith attribute is present in product P 0
otherwise
19
Market Share Forecasts
  • The relevant market consists of products P1,
    P2,...PN. Some of theses may be existing
    products and, others concepts being evaluated.
  • (Assume) Each consumer will prefer to buy the
    product with the highest utility among those
    available

Then forecasted market share for products Pi is
given by
Where K is the number of consumers who
participated in the study
20
Market Share Computation (Air Pollution Control
Equipment)
  • Market consists of three products and three
    customers

Product
Waste watch Thermatrix Wahlco Pe
rformance specs Exceed 5 Exceed 20 Meet
Specs Delivery time 9 months 9 months 6
months Price 800k 900k 600k Delivery
terms FOB_ser Inst_1Yr Inst_ser
21
Market Share Computation (Air Pollution Control
Equipment)
22
Market Share Computation (Air Pollution Control
Equipment)
Computed Utility for Products
Waste Watch Thermatrix Wahlco Sunoco
70 78 61 Mattel 40 30 75 ICI
50 78 40
  • Maximum Utility Rule If we assume customers will
    only buy the product with the highest utility,
    the market share for Thermatrix is 2/3 and 1/3
    for Wahlco.
  • Share of preference rule If we assume that each
    customer will buy each product in proportion to
    its utility relative to the other products, then
    market shares for the three products are

Waste Watch 30.3 Thermatrix 34.8
Wahlco 34.9
23
Situations Where Conjoint Analysis Might Be
Valuable
  • The new concept involves important tradeoffs
    affecting design, production, marketing, or other
    operational variables.
  • Product/service is realistically decomposable
    into a set of basic attributes.
  • Product/service choice tends to be high
    involvement.
  • Factorial combinations of basic attribute levels
    are believable.
  • Desirable new-product alternatives can be
    synthesized from basic alternatives.
  • Product/service alternatives can be realistically
    described, either verbally or pictorially.
    (Otherwise, actual product formulations should be
    considered).
  • Perceptions of hypothetical combinations are
    reasonably homogeneous across members of the
    target group.

24
Conjoint Study at Xerox Color Printer/Finisher
Module Study
Purpose of Study To determine the equipment
capabilities most needed in a digital production
printing/copying environment.
25
Conjoint Study
  • Determine the tradeoffs individuals in
    production management and supervisory positions
    were willing to make with respect to Black
    White digital production printing and copying
    equipment.
  • Collected data via a PC-based interview.
  • Obtained additional information relating to
    respondents current environment through
    self-administered paper and pencil survey.
  • Respondents were pre-recruited by telephone.
    Those meeting the necessary qualifications and
    who agreed to participate, were invited to a
    central location where the interview was
    administered. Each respondent was paid 75 to
    participate.

26
Sample Size/Composition
A total of 159 interviews were conducted among
respondents as follows Commercial
Printer 48 CRD/In-Plant 47 Quick
Printer 45 Service Bureau 9 Form
Printer 5 Book Printer 4 Other
1 TOTAL 159
27
Sample Size/Composition (Contd..)
  • All Respondents were required to meet the
    following qualifications
  • Production/General Manager in charge of printing
    or copying
  • Extremely/Very familiar with work process in shop
  • Have primary/shared responsibility in purchase
    decision process for new production printing or
    copying equipment
  • Print 800,000 or more impressions or pages in
    average month
  • Willing to participate in study

28
Attributes and Options
PRINT QUALITY 1. Indigo (Sample K) 2. Xeikon
(Sample L) 3. GTO-DI (Sample M) 4. Breakthrough
(Sample N) 5. Tetra (Sample O)
SERVICE and SUPPLIES COST per PAGE 1. 25 for
1,000 full color pages 2. 35 for 1,000 full
color pages 3. 50 for 1,000 full color pages 4.
75 for 1,000 full color pages 5. 125 for 1,000
full color pages
EQUIPMENT PURCHASE PRICE 1. 200,000 2.
250,000 3. 300,000 4. 400,000 5.
500,000
SERVICE CONTRACT 1. Flat fee with unlimited
print volume 2. Lower flat fee plus a fixed
cost/page 3. Flat fee plus a graduated
cost/page 4. None-Service billed on time
materials basis
29
Attributes and Options
OPERATOR vs. SERVICE TECHNICIAN 1. 80 of service
hrs by trained operator/20 by service
tech. 2. 50 of service by trained
operator/50 by service tech. 3. 0 of service
hrs by trained operator/100 by service tech.
PRINT SPEED 1. 35 PPM Simplex (BWC)/70 PPM
Duplex (BWC) 2. 70 PPM Simplex and Duplex
(BWC) 3. 100 PPM Simplex (BWC)/200 PPM
Duplex (BWC) 4. 70 PPM Simplex (BWC)/140 PPM
Duplex (BWC) 5. 100 PPM Simplex and Duplex
(BWC)
SYSTEM CONFIGURATION 1. Printing device
incorporates on-line screening 2. Printing
device incorporates on-line finishing 3.
Printing device incorporates on-line scanning
AND finishing
SERVICE ACTIONS 1. 5 service actions/1,000,000
prints 2. 10 service actions/1,000,000 prints 3.
15 service actions/1,000,000 prints 4. 20 service
actions/1,000,000 prints
30
Attributes and Options
MAINTENANCE 1. 80 of service hours are
scheduled/20unscheduled 2. 50 of service hours
are scheduled/50 unscheduled 3. 20 of
service hours are scheduled/80 unscheduled
OPERATOR TRAINING 1. Operator is fully skilled
after one month of full-time training 2.
Operator is fully skilled after two weeks of
full-time training 3. Operator is fully skilled
after one week of full-time training
31
Simulation Inputs - Competing Products
32
Some Resources for Tracking Developments in
Conjoint Analysis
  • http//www.nevada.edu/huc/html/conj.html
  • http//www.sawtooth.com

33
A Conjoint Application at Xerox
  • Early 1980s Running out of good sites for
    typical full-service Marriott hotels.
  • Idea new chain for dissatisfied travelers
  • Business travelers? (6 trips/midweek)
  • Pleasure travelers? (2 trips/stay in
    hotels/motels)
  • Hotel chain should
  • Offer good value for the money
  • Have minimal cannibalization of Marriotts other
    facilities
  • Offer market position with competitive
    advantages
  • Conjoint Analysis with 50 attributes (2-8
    options/attribute)

34
Some Hotel Design Features
  • building shape
  • landscape design
  • pool type and location
  • hotel size
  • room size decor
  • type of heating cooling
  • location/type of bathroom
  • type/location of restaurant
  • room service
  • vending services/stores
  • in-room kitchen
  • location
  • atmosphere
  • type of people (clientele)
  • External factors
  • Rooms
  • Food-related services
  • Lounge facilities

35
Some Hotel Design Features (Continued)
  • Services
  • Leisure facilities
  • Security factors
  • reservations
  • registration/checkoutl
  • limo to airport
  • bellman
  • message center
  • secretarial service
  • car rental
  • maintenance
  • sauna
  • exercise room
  • racquetball courts
  • tennis courts
  • game room
  • childrens playroom yard
  • security guards
  • smoke detectors
  • 24 hours video

36
Courtyard Marriott Implementation
  • From 3 test hotels in 1983, by late 1988, 175
    Courtyard by Marriott hotels were opened.
  • Fastest growing moderately priced hotel chain in
    U.S.
  • Market share 4 of that projected by conjoint
    simulation.
  • Occupancy rate above industry average.
  • Grew to 300 hotels by 1994, sales over 1
    billion, 14,000 new jobs
  • Created new market segment (5 new clone chains
    have been developed).

37
What do to After Conjoint Analyis? (The House of
Quality Concept)
Listening Enhancer
Cheap (lt25) L J L J Amplifies
human J J voice only Hands-free
L operation Multiple functions L
L Light weight L J J Durable L J J
J Contributes to benefit L Distracts from benefit
38
SAMPLE SIZE / COMPOSITION
  • Additional qualifications per segment were as
    follows
  • COMMERCIAL PRINTER
  • Majority of prints produced consist of 4 or more
    colors
  • Produce at least some prints in black and white
  • QUICK PRINTER/CRD
  • Have 2 or more color copiers or use offset
    equipment to print in two or more colors
  • Produce at least some prints in black and white
  • BOOK PRINTER
  • Produce at least some output in 2 or more colors
  • FORM PRINTER
  • Produce 25 or more of output in 2 or more colors
  • SERVICE BUREAU
  • Offer services to outside customers or firms
  • Process color prints by offset press or color
    copier
  • Produce at least some output in 2 or more colors

39
COMPUTER QUESTIONNAIRE
  • Conjoint Exercise
  • Importance Ratings (9-point scale)
  • Type of Stock for Output
  • Printer Capabilities for Full Process Color
  • Printer Capabilities for In-Line Finishing
  • Scanning Location Preference
  • Likelihood to Purchase Ratings (5-point scale)
  • AM Multigraphics Komori
  • Agfa Ryobi
  • Canon Scitex
  • Heidelberg Xeikon
  • Indigo Xerox
  • IBM / Pennant
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