Concept Testing Teaching materials to accompany Product Design

Concept Testing Teaching materials to accompany: Product Design and Development Chapter 9 Karl T. Ulrich and Steven D. Eppinger 5 th Edition, Irwin Mc. Graw-Hill, 2012.

Product Design and Development Karl T. Ulrich and Steven D. Eppinger 5 th edition, Irwin Mc. Graw-Hill, 2012. Chapter Table of Contents: 1. Introduction 2. Development Processes and Organizations 3. Opportunity Identification 4. Product Planning 5. Identifying Customer Needs 6. Product Specifications 7. Concept Generation 8. Concept Selection 9. Concept Testing 10. Product Architecture 11. Industrial Design 12. Design for Environment 13. Design for Manufacturing 14. Prototyping 15. Robust Design 16. Patents and Intellectual Property 17. Product Development Economics 18. Managing Projects

Product Development Process Planning Concept Development Qualitative Concept Testing System-Level Design Detail Design Testing and Refinement Production Ramp-Up Quantitative Concept Testing

Concept Development Process Mission Statement Identify Customer Needs Establish Target Specifications Generate Product Concepts Select Product Concept(s) Test Product Concept(s) Perform Economic Analysis Benchmark Competitive Products Build and Test Models and Prototypes Set Final Specifications Plan Downstream Development Plan

Outline • Essence of concept testing • Process for product concepts testing 3/18/2018 5

Nature of concept testing • Further narrow the set of concepts under consideration, – based data gathered from potential customers in the target markets, rather than the judgments made by the development team • Specific Objectives – Select one from multiple concepts, – Gather information on how to improve a concept, and – Estimate the sales potential of the product 3/18/2018 6

Input and output • Input to the potential customer – Prototype • Output from the potential customer – Likelihood for the potential customer to buy the product – Estimate of how many units of the product the company is likely to sell 3/18/2018 7

Purposes for Concept Testing • • Go/no-go decisions What market to be in? Selecting among alternative concepts Confirming concept selection decision Benchmarking Soliciting improvement ideas Forecasting demand Ready to launch? 3/18/2018 8

Concept testing process 1. Define the purpose of the concept testing 2. Choose a survey population and sample size 3. Choose a survey format 4. Communicate the concept 5. Measure customer response 6. Interpret the results 7. Reflect on the results and the process 3/18/2018 9

Define the purpose (step 1) • Which of the alternative concepts should be pursued • How can the concept be improved to better meet customer needs • Approximately how much units are likely to be sold • Should the development be continued 3/18/2018 10

Choose a survey population and sample size (step 2) 1. Sample size varies from a few to thousands 2. Factors affecting the sample size 1. 2. 3. 4. 5. The stage of product development Cost to conduct survey Nature and intent of the survey Budget (amount) of the development project How possible to collect the intended information. 3. Possible to structure multiple surveys with different objectives at different stages. 3/18/2018 11

Choose a survey format (step 3) • Formats – Face to face interaction – Telephone – Postal mail – Electronic mail – Internet (a test site on the internet) • Each has its pros and cons • Each has its bias. 3/18/2018 12

Communicate the concept (step 4) • Communication means – Verbal description – Sketch – Photos and renderings – Storyboard (a series of images shown a temporal sequence of actions involving the products) – Video (allowing more dynamic than the story board) – Simulation – Interactive multimedia (video and simulation) – Physical appearance model (looks-like) – Working prototypes (works-like) • Survey formats vs. means, page 154 3/18/2018 13

Measure customer response (step 5) • Measurement – – – – – Mere their preferences among alternative concepts Understand why and how they respond to the product concepts Attempt to measure purchase intent (the likelihood of buying) But avoid aggressively promoting the product concepts The solution space? Alternative function diagrams? Alternative ways to decompose the problem? Additional external resources? All ideas generated and integrated? • Survey form, page 156. 3/18/2018 14

Interpret the results (Step 6) • • Q=Nx. Ax. P – Where P = Cd x Fd + Cp x Fp • Q = the quantity of the expected sales • N = the number of potential customers expected to buy • A = the fraction of these potential customers aware of the product and the product is available • P = the probability that the product is purchased if the customer is aware of it and it is available. • Fd = the fraction of survey respondents indicating that they would definitely purchase • Cd = the percentage that those in Fd will actually buy (. 1 -. 5) • Cp = the percentage that those in Fp will actually buy (0 -. 25) Be aware that sales also depends on – Words of month – Fidelity of the concept description – Pricing – Level of promotion 3/18/2018 15

Market sizes • Population and demographic data • Sales volume of various products – – – – 3/18/2018 Airplanes Machine tools Cars Hand tools Printers Ball pens Razor blades 16

Concept Testing Example: em. Power Electric Scooter

Scooter Example • Purpose of concept test: – What market to be in? • Sample population: – College students who live 1 -3 miles from campus – Factory transportation • Survey format: – Face-to-face interviews

Communicating the Concept • • • Verbal description Sketch Photograph or rendering Storyboard Video Simulation Interactive multimedia Physical appearance model Working prototype

Verbal Description • The product is a lightweight electric scooter that can be easily folded and taken with you inside a building or on public transportation. • The scooter weighs about 25 pounds. It travels at speeds of up to 15 miles per hour and can go about 12 miles on a single charge. • The scooter can be recharged in about two hours from a standard electric outlet. • The scooter is easy to ride and has simple controls — just an accelerator button and a brake.

Sketch

Rendering

Storyboard

3 D Solid CAD Model

Appearance Model

Working Prototype

Beta Prototype

Video Animation Interactive Multimedia Live Demonstration

Survey Format • PART 1, Qualification – How far do you live from campus? • – How do you currently get to campus from home? – How do you currently get around campus? • PART 2, Product Description –

Survey Format • PART 3, Purchase Intent – If the product were priced according to your expectations, how likely would you be to purchase the scooter within the next year? I would definitely not purchase the scooter. I would probably not purchase the scooter. I might or might not purchase the scooter. I would probably purchase the scooter. I would definitely purchase the scooter. “second box” “top box”

Survey Format • PART 4, Comments – What would you expect the price of the scooter to be? – What concerns do you have about the product concept? – Can you make any suggestions for improving the product concept? • Thank you.

Interpreting the Results: Forecasting Sales Q=Nx. Ax. P • • Q N A P = sales (annual) = number of (annual) purchases = awareness x availability (fractions) = probability of purchase (surveyed) = Cdef x Fdef + Cprob x Fprob “top box” “second box”

Forecasting Example: College Student Market • • • N = off-campus grad students (200, 000) A = 0. 2 (realistic) to 0. 8 (every bike shop) P = 0. 4 x top-box + 0. 2 x second-box Q= Price point $795

Forecasting Example: Factory Transport Market • N = current bicycle and scooter sales to factories (150, 000) • A = 0. 25 (single distributor’s share) • P = 0. 4 x top-box + 0. 2 x second-box • Q = 150, 000 x 0. 25 x [0. 4 x 0. 3 + 0. 2 x 0. 2] = 6000 units/yr • Price point $1500

em. Power’s Market Decision: Factory Transportation

Production Product

Sources of Forecast Error • • • Word-of-Mouth Effects Quality of Concept Description Pricing Level of Promotion Competition

Discussion • Why do respondents typically overestimate purchase intent? – Might they ever underestimate intent? • How to use price in surveys? • How much does the way the concept is communicated matter? – When shouldn’t a prototype model be shown? • How do you increase sales, Q? • How does early (qualitative) concept testing differ from later (quantitative) testing?

Other Images

Issues to discuss • Why do respondents typically overestimate purchase intent? – Might they ever underestimate intent? • How to use price in surveys? – Or how much would the customer be willing to pay? • How much does the way (the concept is communicated) matter? – When shouldn’t a prototype model be shown? • How do you increase sales? • How does early (qualitative) concept testing differ from later (quantitative) testing? 3/18/2018 42

Sources of Forecast Error • • • Word-of-Mouth Effects Quality of Concept Description Pricing Level of Promotion Competition 3/18/2018 43