42629 lecture 12 pt2

Protovation – Market testingThomas J. Howardhttps://sites.google.com/site/thomasjameshowardhomepage/[email protected]

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2012Original material by Thomas J. Howard for course 42629 – Innovation and Product Development Department of Mechanical Engineering, The Technical University of Denmark

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3Blank 2012, Crossing the Rubicon: Entrepreneurial education at the crossroads



Hypotheses Testing and Insight

Determine Your Market

• Should be divided into seven key parts1. Consumption2. Markets3. Distribution system4. Market entry5. Buyers6. Selling Arrangements7. Prices

Material from:

Khaled Ayesh 2009, “How to Prepare Innovative Feasibility Study in transitional economy”, Consulting Group for Development, CGD

1. Consumption• What is the current consumption of

the product or service?• What are the current trends in

consumption? Is consumption increasing or decreasing?

• How is the product or service being consumed? (Packaging, volumes)

1. Consumption… cont.• What is the quality of the product that

is being consumed? • Who consumes the product? What are

their demographics? (Age, income, educational levels, marital status, family size)

• Are these demographic segments growing or shrinking?

2. Markets

• What is the current structure of the marketplace?

• Who is currently supplying these products to customers?

• What will be the reaction of these firms if a new firm enters the market?

• Can a firm compete with existing firms or other potential entrants?

2. Markets ……cont.• What are the implications for a firm

who wants to expand its market?– What are the costs?– What revenues can be expected?

• Where are the markets (customers) located? Are they local, regional, national, or international? What will it cost to serve them?

3. Distribution System

• Will it be necessary to provide delivery services?

• What delivery schedules will be required?

• What common carrier options are available?

• Should the firm provide delivery itself?• Should delivery equipment be

purchased or leased?

4. Market Entry

• How will the product or service be introduced to the market?

• Will the product be marketed under the company’s name or under some other name?

• What will attract buyers? (Low prices, advertising, promotion, customer service, or some other method)

5. Buyers

• Will you sell directly to consumers or go through a “middleman” buyer?

• What types of buyers will purchase the product?

• Where are they located?• What product specifications will they

require?

5. Buyers ……cont.

• Have potential buyers expressed an interest in the product?

• What type of purchasing commitments are buyers willing to make?

• How reliable are the buyers?• What type of payment schedules will

be encountered? How severely will this affect the firm’s cash position?

6. Selling Arrangements

• What type of selling services will you need to provide?

• Will you need to employ a sales force or go through a buyer?

• If you employ a sales force, how many people will this require? What is their compensation plan?

6. Selling Arrangements ….cont.• How will they be selling the product? • What are the costs of these

activities?• Should you have sales offices located

throughout your geographic market area?

• Why have you chosen one method of selling activities over another?

7. Prices

• Setting a price is a critical activity in the market portion of the study.

• The price must be high enough to cover all costs and provide you a profit, but low enough that customers will purchase the product or service.

7. Prices ………cont• To help determine the price, look at:

– Past prices of the industry– Current price trends– Expectations of buyers (brokers)– Expectations of consumers– Quality levels of substitutes or

competitors• These factors only help you set a

price. They can’t set the price for you


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Sun cream on demand

What are the burning question related to the

market feasibility of this product?


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The burning questions about market feasibility of sun cream

1. How much variety is required in SPF ?2. What are the primary location for sales/need?3. Will customers change their mindsets/habits?4. How many (% & Vol.) people forget to bring SC?5. What are customers willing to do to receive the

product?6. What is the required dosing sizes?


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Choose a couple of the questions and discuss how you could test the

feasibility using a prototype10mins


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Protovate your market

Taking your own project and your list of burning

questions, design 2 market feasibility tests.

10mins


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Questions

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42629 lecture 12 pt2

Education

product specifications

market feasib

market entry5

crossroadsoriginal material

potential buyers

current consumption

types of buyers

geographic market area