4. Concept Definition and Evaluation Flashcards
Potential market
All customer who show interest in the product
Available market
All customers who have sufficient income to afford and access the product
Qualified available market
All customers who pass the availability and are qualified
Served or target market
All customers in the qualified market that the company decides to pursue
Penetrated market
All customers who have already bought the product
Making forecasts about the future - 2 features
- Expected level of variable given data is available
• function of structural variation - Degree of accuracy that can be assigned to forecasted value
• function of ability to correctly model the variable, random variation and sometimes unforeseen events
Time-series analysis
Time-series forecast projects past experiences into the future using historical data with the assumption that the future will be like the past
- trend
- seasonality
- cycles
- irregualar variations
- random variations
Causal forecasting methods
Causal models use a number of explanatory factors to predict a variable of interest
Adoption process of new products
How is a new idea, a good, or a service assimilated into a social system over time?
- Diffusion: Spread of an idea or the penetration of a market by a new product from its source of creation to its ultimate users or adopters
- Adoption: Steps an individual goes through from the time he hears about an innovation until final adoption
- Innovativeness: Difference among individuals in their response to new ideas
Bass Model
• model used to forecast first purchases of a new product for which no closely competing alternatives exist
• managers need such forecasts before investing significant resources in them
• model is used when:
- firm has recently introduced the product and has observed first sales
- firm has not introduced the product but it is similar to an existing product
Two types of customers
- Innovators: Buy the product using the information about the product through packaging and advertising (“external influence”)
- Imitators: Buy the product based on experience of other people (“internal influence”)
Assumptions underlying the Bass model
- market potential m remains constant
- the marketing strategies supporting the innovation do not influence the adoption process
- the customer decisions process is binary
- the value of q is fixed throughout the lifecycle of the innovation
- uniform mixing (everyone can come into contact with everyone else)
- imitation always has a positive impact
- sales of the innovation are considered to be independent of the adoption or non-adoption of other innovators
- there is no repeat or replacement purchase of the innovation
Innovation of the day: Heinz Ketchup
- Example description: in 2001, Heinz introduced new bottles that are stored upside down
- What made it stand out: New packaging design facilitated easy pouring
- How does it relate to concepts we discussed previously: It is an incremental innovation on the product and market level with a very strong sales growth response
Concept evaluation
- Initial screening:
• Which concepts should be tested with regard to their marketability? - Marketability analysis:
• Which market opportunities do the different product concepts have? - Economic feasibility:
• Which economic success is to be expected from the different product concepts? - Realization
Concept screening and forecasting methods
- question
Is a historical time-series of variable of interest available?
Yes: Economic methods
No: Judgemental methods
