Using Marketing in High Technology Product & Service

Development

Dr. Alan Carsrud

FIU Center for Global Entrepreneurship and Innovation

Overview of the Stage Gate Process

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Adapted from the Stage Gate process by Robert J. CooperS

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Idea

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Detailed Investigation

Adapted from the Stage Gate process by Robert J. Cooper

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Key Activities

Market Analysis

Competitive Analysis

User Needs & Wants

Study

Customer Wish List:

Product Rqmts

Technical Assessment: Translation

Technically Feasible

Concept(s)

Mfg Costs/ Production

NeedsProject Plan: Development, Test, Marketing & Production

Financial Justification: Financial, Risk, Business Justification

Product Definition: Target Market, Concept, Position & Benefits Requirements & Specs

Expected Sales

Financial Analysis

Concept Test:

Purchase Intent

Identify User Needs & Wants

• Gather raw data– Interviews– Focus Groups– Observation

• Interpret raw data– Affinity Diagram– Needs Statements

• Organize needs & establish importance – Surveys– Conjoint Analysis

Karl T. Ulrich and Steven D. Eppinger2nd Edition, Irwin McGraw-Hill, 2000.

UnhappyCustomers

HappyCustomers

Never TriedProduct

PreferCompetitors

LeadUsers

Male

Female

Children

Tra

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Seg

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Non-Traditional Segmentation

Gather Raw Data-Interview Segmentation

Mark Martin,Acting Assistant ProfessorStanford University, 2000

Number of Custom ers Interview ed

0%

20%

40%

60%

80%

100%

5 10 15 20 25 30

Percent of NeedsIdentified

G riffin & H auser 1993

* Per major market segment

How many interviews are needed? *

Focus Groups

• Two hours of one-on-one interviews = Two-hour focus group *

• Focus groups can cause “group-think”– Participants agree with a question in focus

group– Participants give opposing answers when asked

individually

* Silver & Thompson 1991

Interviews vs.Focus Groups

From: Griffin, Abbie and John R. Hauser. “The Voice of the Customer”, Marketing Science. vol. 12, no. 1, Winter 1993.

One-on-One Interviews (1 hour)

Focus Groups (2 hours)

0 1 2 3 4 5 6 7 8 9 10

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Number of Respondents or Groups

Interpret Raw Data :Screwdrivers Example

Affinity Diagram (a.k.a. KJ diagram)

• Organizes subjective information

• Example: Group the following CR’s• “ease of handling” “portability”

• “number readability” “dose metering”

• “load handling” “ease of use”

Five Guidelines for Writing Needs Statements

Guideline Customer Statement Need Statement-Wrong Need Statement-Right

What NotHow

Specificity

PositiveNot

Negative

Attributeof the

Product

Avoid“Must”

and“Should

“Why don’t you putprotective shields aroundthe battery contacts?”

“I drop my screwdriver allthe time.”

“It doesn’t matter if it’sraining, I still need towork outside onSaturdays.”

“I’d like to charge mybattery from my cigarettelighter.”

“I hate it when I don’tknow how much juice isleft in the batteries of mycordless tools.”

The screwdriver batterycontacts are covered bya plastic sliding door.

The screwdriver batteryis protected fromaccidental shorting.

The screwdriver isrugged.

The screwdriveroperates normally afterrepeated dropping.

The screwdriver is notdisabled by the rain.

The screwdriveroperates normally inthe rain.

An automobile cigarettelighter adapter cancharge the screwdriverbattery.

The screwdriver batterycan be charged from anautomobile cigarettelighter.

The screwdriver shouldprovide an indication ofthe energy level of thebattery.

The screwdriverprovides an indicationof the energy level ofthe battery.

Things to Remember

• Capture “What, Not How”• Collect visual, verbal, and textual data• Props will stimulate customer responses• Interviews are more efficient than focus groups• Interview all stakeholders and lead users• Develop an organized list of need statements• Look for latent needs• Survey to quantify tradeoffs

Translating CR’sinto Technical

Specs

PHASE I QFD -- Portable Slide ProjectorEngineering Metrics

Customer Requirements Cu

sto

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Bri

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Weig

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Dim

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Tim

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Tim

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Good image 9 9 9Easy to transport 9 9 9Device sets up quickly 9 3 1 9 3 3Works well for short present. 9 1 3 3 3Keeps present. flowing 1 3 3 9Image visible in bad conditions 3 9 3Minimizes unplanned interruptions 1 3 1 9Design makes the product attractive 3 3 3 9

Raw score

10

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90

58

72

27

Relative Weight 1

6%

17

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16

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8%

10

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4%

Customer Needs •Good image•Easy to transport•Keeps present. flowing•Image visible in bad conditions•Minimizes unplanned interruptions•Design makes the product attractive•Device sets up quickly•Works well for short present.

Engineering Metrics•Brightness•Weight•Dimensions (girth + width)

•Time/Tasks required to start present.•Distortion•Distance from presenter •Time to insert/pull-out slide•Attractive product

Portable Slide Projector

Example

Mark Martin, 2000

QFD Matrix Example

Engineering Metrics

Customer Requirements Cus

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Brig

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Dim

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Good image 9 9 9Easy to transport 9 9 9Device sets up quickly 9 3 1 9 3 3Works well for short present. 9 1 3 3 3Keeps present. flowing 1 3 3 9Image visible in bad conditions 3 9Minimizes unplanned interruptions 1 3 1 9Design makes the product attractive 3 3 3 9

Raw score

108

117

108

114

81 58 72 27

Relative Weight 16

%

17%

16%

17%

12%

8% 11%

4%

Phase I -

Portable Slide Projector

Part Characteristics

Engineering Metrics Ph

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Top c

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Bott

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Brightness 16% 9 9 1 9Weight 17% 9 9 1 1 3Dimensions (girth + width) 16% 9 9 3 9 1 3 3Time/ Tasks required to start presentation 16% 3 3Distortion 13% 9 9 1 1Distance from presenter (with 3' x 3' projection) 8% 9 9 9Time to insert/ pull-out slide 10% 3 1Attractive product 4% 9 9 9

Raw score 3

.6

3.3

4.4

4.9

1.1

1.3

2.7

Rel. Weight 1

7%

15%

21%

23%

5%

6%

13%

Rank 3 4 2 1 7 6 5

Phase II -

Portable Slide Projector

% Worth of components

Concept DevelopmentFunnel

concept generation

concept screening

concept scoring

concept testing

Clarify the Problem

Generate Product Concepts

Select Product Concept

• Concept Screening• Concept Scoring

Search Externally

Search Internally

• Existing Concepts • New Concepts

Reflect on the Process

• Continous ImprovementKarl T. Ulrich and Steven D. Eppinger

2nd Edition, Irwin McGraw-Hill, 2000.

Concept Generation Exercise:Vegetable Peelers

Vegetable Peeler Exercise:Voice of the Customer

• "Carrots and potatoes are very different."• "I cut myself with this one."• "I just leave the skin on."• "I'm left-handed. I use a knife."• "This one is fast, but it takes a lot off."• "How do you peel a squash?"• "Here's a rusty one."

Clarify the Problem:Key Customer Needs

1. The peeler can be used for a variety of produce.

2. The peeler can be used ambidextrously.

3. The peeler creates minimal waste.

4. The peeler saves time.

5. The peeler is durable.

6. The peeler is easy to clean.

7. The peeler is safe to use and store.

8. The peeler is comfortable to use.

9. The peeler stays sharp or can be easily sharpened.

External Search

• Lead Users– Benefit from improvement

– Innovation source

• Benchmarking– Competitive products

• Experts– Technical experts

– Experienced customers

• Patents– Search related inventions

• Literature– Technical journals

– Trade literature

Internal Search

• Suspend judgment• Generate a lot of ideas• Infeasible ideas are welcome• Use graphical and physical media• Make analogies• Use related stimuli• Use unrelated stimuli• Set quantitative goals• Trade ideas in a group

Concept SelectionProcess

• Prepare the Matrix– Criteria– Reference Concept– Weightings

• Rate Concepts– Scale (+ – 0) or (1–5)– Compare to Reference Concept or Values

• Rank Concepts– Sum Weighted Scores

• Combine and Improve– Remove Bad Features– Combine Good Qualities

• Select Best Concept– May Be More than One or None– Beware of Average Concepts

Example: Concept Screening

CONCEPT VARIANTS

SELECTIONCRITERIA A B C D E F G REF.

Ease of Handling 0 0 – 0 0 – – 0Ease of Use 0 – – 0 0 + 0 0Number Readability 0 0 + 0 + 0 + 0Dose Metering + + + + + 0 + 0Load Handling 0 0 0 0 0 + 0 0Manufacturing Ease + – – 0 0 – 0 0Portability + + – – 0 – – 0

PLUSES 3 2 2 1 2 2 2SAMES 4 3 1 5 5 2 3

MINUSES 0 2 4 1 0 3 2

NET 3 0 –2 0 2 –1 0RANK 1 3 7 5 2 6 4

CONTINUE? Yes Yes No No Yes No Yes

Example: Concept Scoring

ConceptsA DF E G+

Master Cylinder Lever Stop Swash Ring Dial Screw+

Selection Criteria Weight RatingWeighted

Score RatingWeighted

Score RatingWeighted

Score RatingWeighted

Score

Ease of Handling 5% 3 0.15 3 0.15 4 0.2 4 0.2

Ease of Use 15% 3 0.45 4 0.6 4 0.6 3 0.45

Readability of Settings 10% 2 0.2 3 0.3 5 0.5 5 0.5

Dose Metering Accuracy 25% 3 0.75 3 0.75 2 0.5 3 0.75

Durability 15% 2 0.3 5 0.75 4 0.6 3 0.45

Ease of Manufacture 20% 3 0.6 3 0.6 2 0.4 2 0.4

Portability 10% 3 0.3 3 0.3 3 0.3 3 0.3

Total Score

Rank

Continue? No Develop No No

(reference)

2.75

4

3.45

1

3.10

2

3.05

3

Things to Remember

The goal of concept selection is not to

• Select the best concept

The goal of concept selection is to

• Develop the best concept

So remember to combine and refine the concepts to develop better ones!

• Beware of the best "average" product

• Perform concept selection for each different customer group and compare results

• Check sensitivity of selection to the importance weightings and ratings

• May want to use all of detailed requirements in final stages of selection

• Note features which can be applied to other concepts

Things to Remember

Concept Testing

• Define the purpose of the test

• Choose a survey population

• Choose a survey format

• Communicate the concept

• Measure customer response

• Interpret the results

• Reflect on the results and the process

Concept Testingis Used for...

• 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?

Concept Testing Example:emPower 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

3D Solid CAD Model

Appearance Model

Working Prototype

Beta Prototype

Survey Format

• PART 1, Qualification– How far do you live from campus?

• <If not 1-3 miles, thank the customer and end interview>

– How do you currently get to campus from home?

– How do you currently get around campus?

• PART 2, Product Description

– <Present the concept 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 might or might not purchase the scooter.

I would definitely purchase the scooter.

I would probably not

purchasethe scooter.

I would probably purchase the scooter.

“top box”“second 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?

Interpreting the Results:Forecasting Sales

Q = N x A x P• Q = sales (annual)

• N = number of (annual) purchases

• A = awareness x availability (fractions)

• P = probability of purchase (surveyed)

= Cdef x Fdef + Cprob x Fprob

“second box”“top 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 = 200,000 x 0.20 x [0.4 x 0.3 + 0.2 x 0.2]

= 6400 units/yr

• Price point $795

• Revenue = 5 million dollars

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

• Revenue = 9 million dollars

emPower’s Market Decision: Factory Transportation

Sources of Forecast Error

• Quality of Concept Description

• Quality of Testing Method– Concept testing v. conjoint analysis

• Pricing

• Level of Promotion

• Word-of-Mouth Effects

• Competition

Discussion

• Why do respondents typically overestimate purchase intent? Would 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 does early (qualitative) concept testing differ from later (quantitative) testing?

How to get to the next stage

• Similar gate process but more detailed than stage 1– Does it fit with the corporate strategy?

– Does it offer a competitive advantage?

– Is the market attractive?

– Is it technically feasible?

– Is it financially attractive?

• Critical evaluation before Stage 3 - the “money stage”

Sample Gate 3

Business Strategy Fit• Congruence (fit with company strategy)• Impact (financial and strategic impact)

Product & Competitive Advantage• Offers unique benefit to users• Meets user needs better than competitive product• Provides good value for money to customer

Market Attractiveness• Market size• Market growth rate• Competitive situation

Weight Score

Sample Gate 3

Strategic Leverage• Leverages marketing, distribution & selling resources• Leverages technological expertise & resources• Leverages operational capabilities & facilities

Technical Feasibility• Size of technical gap (small)• Technical complexity of project (low)• Technical uncertainty of outcome (low)

Risk v. Return• Expected profitability (NPV)• Percent return (IRR% or ROI%)• Payback period (years)• Certainty of estimates• Low cost and fast to do (low risk)

Weight Score