Concept and project evaluation Flashcards
What are reasons for product failure? (3)
- There is no basic need for the products, as seen by the intended user
- The new product did not meet its needs
- The new product idea was not properly communicated (marketed) to the intended user
= they did not need it, it didn’t work and they did not get the message.
What are the criteria for early stage screening assessment? (6)
- Uniqueness: is the idea original? Is it easily copied by competitors?
- Need fulfilment: Does it meet a customer need?
- Feasibility: Can we develop and launch it?
- Impact: How will our firm be affected?
- Scalability: Can we become more efficient in production?
- Strategic fit: Does it match with corporate strategy and culture?
Explain the cumulative expenditure curve? (2)
- Many high tech products have early expenditures: R&D is the big part of the cost package and market costs are relatively small
- Many consumer produces have late expenditures: tech expenditures might be small but a huge TV advertising programme is needed at introduction.
What about the risk /payoff Matrix at Each evaluation? (6)
- Cells AA and BB are “correct” decisions
- Cells BA and AB are “errors”, but they have different cost and probability dimensions.
- BA is a “go” error: a loser is continued to the next evaluation point: but don’t forget opportunity costs
- AB is a drop error: A “winner” is discarded
- AB is much worse than BA
- Consider how new to the world the product is as that has an impact on the risk level,
What are the 4 generic risk strategies that NPD teams should consider?
- Avoidance: Eliminate the risky product projects altogether, although an opportunity cost is incurred.
- Mitigation: Reduce the risk to an acceptable, threshold level
- Transfer: Move the responsibility to another organisation
- Acceptance: Develop the contingency plan now (active acceptance) or deal with the risk as they come up (passive acceptance).
What is the concept “rolling evaluation” in the Planning of the evaluation system? (5)
- Project is assessed continuously rather than a single Go/ No Go decision.
- Financial analysis also needs to be built up continuously and there is not enough data early on for complex financial analyses
- Run risk of killing off too many good ideas early
- Marketing begins early in the process
- NPD participants avoid “good/bad” mindsets and premature closure.
What is the concept “potholes” in the Planning of the evaluation system? (2 + EX)
- Know what the really damaging problems (deep holes) are for your firm and focus on the when evaluating concepts.
- if the pothole is deep enough- drop the project.
E.g. Drug companies focus on FDA approval and software developers focus on customer unwillingness to learn how to use complex software.
What is the concept “people” in the Planning of the evaluation system? (4)
- Proposal may be hard to stop once there is buy-in on the concept.
- Need tough demanding hurdles, especially late in new product process.
- Personal risk associated with new product development (job, promotions)
- Need system that protects developers and offers reassurance (if warranted).
What is the concept “surrogates” in the Planning of the evaluation system? (1 and examples)
- Surrogate questions gives clues to the real answer.
Real Q’s: Will they prefer it?
Surrogate Q’s: DI they keep the prototype product we gave them after the concept test?
Real Q’s: Will cost be competitive?
Surrogate Q’s: Does it match our manufacturing skills?
Real Q’s: Will competition leap in?
Surrogate Q’s: What did they do last time?
Real Q’s: Will it sell?
Surrogate Q’s: Did it do well in field testing?
What is the ATAR model and what does it ask? (4)
- Awareness: Who is aware of the product?
- Trial: Who wants to try the product?
- Availability: who has access to the product?
- Repeat: Who wants to try product again?
What are some definitions in the ATAR model ? (5)
- Buying unit: Purchase point (person or department/buying centre)
- Aware: has heard about the new product with some characteristic that differentiates it
- Available: if the buyer wants to try the product the effort to find it will be successful
- Trial: Usually means a purchase or consumption of the product.
- Repeat: the product is bought at lest once more or recommended to others.
How is the ATAR Model applied?
- Profits = Units Sold x Profit Per Unit
- Units Sold = Number of buying units
x % aware of product
x % who would try product if they can get it
x % to whom product is available
x repeat measure (what is the average number of units bought per person per year, including repeats)
x Number of units repeaters buy in a year
Profit Per Unit = Revenue per unit - cost per unit
What are points to note about ATAR model? (3)
- Each factor is subject to estimation (estimates improve with each step in the development phase)
- Inadequate profit forecast can be improved by changing factors and doing a “what-if” analysis.
- if profit forecasts is in adequate, look at each factor and see which can be improved and at what costs.
Explain more about concept testing? and what ideas are excluded? (2 & 4)
- Many new product ideas are eliminated before they are developed into concepts
- Ideas of the following types are excluded:
- ideas requiring technologies the firm does not have
- ideas to be sold to customers about whom the firm has no close knowledge
- ideas that offer too much or too little innovativeness
- ideas wrong on other dimensions: not low cost, too close to certain competitors etc.
What is the other defintion of a product concept? (2 + ex)
” a statement about anticipated product features that will yield selected benefits relative to other products or problem solutions already available”.
- recall importance of getting responses to product concepts and not simply ideas.
e.g. a new electronic razor whose screen is so thin it can cut closer than any other electronic razor on the market.
