Elec3017:             Electrical Engineering Design            Chapter 3: Marketing Tools                          A/Prof ...
c°Taubman, 2006                 ELEC3017: Marketing Tools                   Page 22.1    SurveysSurveys are the most obvio...
c°Taubman, 2006                 ELEC3017: Marketing Tools                    Page 3One way to facilitate this is to create...
c°Taubman, 2006                ELEC3017: Marketing Tools                   Page 4considering the design of a professional ...
c°Taubman, 2006                 ELEC3017: Marketing Tools                   Page 54     Needs Assessment and Requirements ...
c°Taubman, 2006                 ELEC3017: Marketing Tools                   Page 6     guideline when doing this is to try...
c°Taubman, 2006                ELEC3017: Marketing Tools                   Page 75     Price and Sales Volume InformationT...
c°Taubman, 2006                ELEC3017: Marketing Tools                  Page 8that a successful new product may soon be ...
c°Taubman, 2006                 ELEC3017: Marketing Tools                    Page 9described above, other strategies for s...
c°Taubman, 2006                 ELEC3017: Marketing Tools                       Page 10                                   ...
c°Taubman, 2006                 ELEC3017: Marketing Tools                  Page 11Figure 1. The expected total profit is es...
c°Taubman, 2006                   ELEC3017: Marketing Tools               Page 12                                   Total ...
c°Taubman, 2006                     ELEC3017: Marketing Tools                  Page 13                     st             ...
c°Taubman, 2006                ELEC3017: Marketing Tools                 Page 14  2. Your organization has the technical c...
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Chapter3 marketing

  1. 1. Elec3017: Electrical Engineering Design Chapter 3: Marketing Tools A/Prof D. S. Taubman September 18, 20061 Purpose of this ChapterThis chapter is principally concerned with marketing tools. Customer-focusedmarketing tools are the subject of Section 2, while Section 3 considers some ofthe tools available to assess the state of the market at large, including markettrends and the state of your competitors. These tools are central to the needsassessment and requirements analysis phases of design, and so we also discussthese phases specifically in Section 4. Marketing tools also have application to other phases in the design process.Marketing plays a key role in establishing a price for your product, which alsoaffects the features and performance which can be achieved for that price; thistopic is the subject of Section 5. When you think of the term “marketing,” youprobably think of advertising. More generally, this aspect of marketing has todo with how your product will be positioned in the marketplace, with respect toits competitors. Positioning is central to a solid business plan and is discussedin Section 6.2 Finding out what Customers WantThis section is concerned with tools that can be used to find out what real cus-tomers actually want. This is also called primary marketing. These tools maybe used in the needs assessment phase to find out what needs exist that arenot being fulfilled by existing products. They may be used in the requirementsanalysis phase to find out what features customers would expect of a productyou plan to design. They may be used once a prototype has been constructed,to assess the usability of the prototype, discover previously unrecognized re-quirements, and so forth. 1
  2. 2. c°Taubman, 2006 ELEC3017: Marketing Tools Page 22.1 SurveysSurveys are the most obvious and also the least informative means to learn whatcustomers want. The most fundamental drawback of surveys is that they are notinteractive. A customer is limited to providing information in response to thequestions on the survey. This leaves no room for customers to provide feedbackof a nature which was not anticipated when the survey was constructed. Survey participants are usually unpayed, which means that they are unlikelyto devote much effort or thought to the questions which are put to them. Manypeople refuse to participate in surveys precisely because they seek to extractvaluable knowledge and time from consumers without appropriate compensa-tion. As a result, surveys do not provide a balanced sampling of the targetmarket. Nevertheless, surveys can be useful for answering certain questions, particu-larly where information is required from a large number of respondents. Surveyscan be used to deduce the price that people would expect or be prepared to payfor a product (see Section 5), but they are less useful for determining user needsor estimating sales volume. For example, you could find that 50% of all surveyrespondents say that they would purchase a product, as described, but whenyou actually put the product on the market only 1% of potential customersactually buy it. Beware of this trap if you are planning to use surveys for yourELEC3017 design project.2.2 Focus GroupsFocus groups typically involve 8 to 12 potential customers who are payed toparticipate in a focussed discussion session lasting 1 or 2 hours. A moderatorfacilitates the discussion, describing the type of product being explored andexplaining the type of questions to which answers are sought. The principleidea behind focus groups is that participants can feed off each other’s remarksto come up with ideas that would not have emerged if each participant wereinterviewed separately. For this reason, the moderator must be careful not toimpose too rigid a structure on the discussion. Focus groups are normally videotaped and later analyzed to ensure that all information is captured. Focus groups are not cheap, either in time or money. To capture mostpotential customer needs may require 5, 10 or even more separate focus groups,each lasting a couple of hours. One way to improve the effectiveness of a focusgroup is to seek to populate the group with lead users. The term lead user isused to refer to refer to people whose jobs, hobbies or interests cause them toexperience needs early, before the majority of the market. Lead users are alsoknown as early adopters. Lead users may be familiar with the inadequaciesof existing products well before the rest of the market; indeed, they may evenalready have a solution in mind. Also, since lead users are likely to benefit mostfrom new products, they often tend to be willing to help. Another important factor in the success of focus groups is the degree to whichparticipants are able to comprehend the type of product which is envisioned.
  3. 3. c°Taubman, 2006 ELEC3017: Marketing Tools Page 3One way to facilitate this is to create a mock-up (non-functional prototype)of the product to act as a talking point. Sketches can also be useful. Note,however, that it is important to inform participants that they should not feellimited by the particular forms they are shown. Finally, it is important for the facilitator to pose good questions to the focusgroup. Here is a list of some questions that you might consider using. 1. “What would you expect (or be prepared) to pay for a product like this?” 2. “Would this product save you time?” 3. “Would this product save you money?” 4. “What aspects of existing, similar products do you find most annoying?” 5. “What lifetime would you expect the product to have?” 6. “How important is reliability for this product?” 7. “How accurate does the product need to be?”2.3 InterviewsInterviews run in a very similar way to focus groups. The key difference is thatparticipants are interviewed individually, rather than participating in a largergroup discussion. One advantage of this is that you might get more informa-tion from individuals who would otherwise feel inhibited in a group setting.As a result, you might get more information per customer, which is valuableconsidering that they are being payed. On the other hand, more resources perparticipant are required to conduct interviews, and interview participants donot have the opportunity to hear and reflect on other customers’ thoughts.2.4 Observing Products in UseRather than just discussing products, a lot can be learned by observing cus-tomers interacting with existing similar products. By video taping and lateranalyzing the ways in which a large body of customers interact with products,you may learn some important weaknesses that your own product can address.Of course, such interaction can be coupled with an interview or done in focusgroups. Unfortunately, this method of market research applies only to estab-lished product types, where examples already exist.3 Secondary Market IntelligenceIn this section, we are concerned with secondary market information. Thisis indirect information about the market at large, gained from from companyprofiles, pre-compiled statistics and the like. As an example, suppose you are
  4. 4. c°Taubman, 2006 ELEC3017: Marketing Tools Page 4considering the design of a professional product for body hair removal. To deter-mine the size of your potential market (i.e., the number of potential customers)you would naturally be interested in statistics such as the number of salons inyour target geographical region, the number of customers they have, the numberof companies that sell similar products and so forth. As another example, sup-pose you are developing an aid for the blind. One of the first things you wouldbe interested in is how many blind people there are in your target geographicalregion (e.g., in Australia). Broadly speaking, market intelligence can be classified into four categories,as follows. 1. Understanding who your potential customers are: How many of them are there? Where are they? etc. 2. Understanding your competitors: What are their strengths and weaknesses? What are their business strate- gies? What is their market share? 3. Understanding the state of your industry: Is it growing or shrinking? Are new technologies being introduced or being developed? 4. Understanding the socio-political and economic environment: Are there any relevant social changes taking place (e.g., increasing aware- ness of environment impact)? Are there any relevant legislation changes (e.g., new safety legislation)? Are there any factors or trends affecting people’s spending habits or spending power (e.g., changes in exchange rates)? Sources of secondary market information include: • government census data; • the internet; • newspaper articles; • trade journals; • company annual reports; • stock market/analyst reports; and • reports compiled by marketing firms — you may have to purchase these.
  5. 5. c°Taubman, 2006 ELEC3017: Marketing Tools Page 54 Needs Assessment and Requirements Analy- sisAs mentioned in Chapter 2, we prefer to use the term needs assessment to referto the process of identifying needs which are not met by existing products. Assuch, needs assessment does not need to be coupled to the design of a specificproduct and may precede the decision to undertake a specific design effort. Es-sentially, the question you are trying to answer is: “Is there a need for a newproduct in this area?” One way to answer this question is to observe potentialcustomers using existing related products, or ask potential customers what frus-trates them about existing products. This may be done through focus groupsor interviews, as discussed in Section 2. Where a need is identified, the extentof that need (e.g., number of people likely to share the same need) might beestimated with the aid of secondary marketing information. The need for newproducts might also arise in connection with socio-political changes identifiedthrough market intelligence. For example, changes in road safety legislationmight give rise to the need for new types of bicycle lighting/warning systems. The term needs assessment is often used interchangably with requirementsanalysis. For the purpose of these notes, however, we prefer to use the termrequirements analysis to refer to the process of discovering the set of require-ments and features for a specific product which we have already decided todesign (at least tentatively). By and large, the raw input to the requirementsanalysis phase comes from primary marketing tools such as those discussed inSection 2, but a survey of your competitors products and business strategies(i.e., secondary market intelligence) may also help to identify what features areconsidered important.4.1 Organizing and Prioritizing RequirementsThe information collected from primary marketing sources should consist ofrecorded statements from potential customers. It is important that you resistthe temptation to rephrase or reinterpret these statements in the first instance,since this runs the risk of superimposing your own expectations on the rawresponses you collect. The next step is to organize, interpret and priortize the raw response data,in order to derive customer requirements. The techniques here are basicallyapplied common sense, but the following suggestions should nevertheless proveuseful. • Start by organizing customer responses into categories. There are many ways you can do this, and the most appropriate way will ultimately depend on the product. As an example, you might create categories corresponding to price, reliability, usability, performance, interoperability and so forth. • Within each category, try to capture the essence of the views expressed by your potential customers with a single requirements statement. One useful
  6. 6. c°Taubman, 2006 ELEC3017: Marketing Tools Page 6 guideline when doing this is to try to express requirements using positive language only. For example, some customers might have told you that the product should not be bulky, but this can be positively rephrased as a requirement that the product be small or light weight. Looking at other responses in the same category may help to identify whether the objective is to reduce size or weight or both. As another example, customers might have told you that the product should not make annoying noises. This can be rephrased as a requirement for quiet operation. The reason for doing this is that design objectives should be positive attributes of the product. • When interpreting customer input within each category, be careful to ex- press what the product should do, rather than how it should do it. For example, a customer might have said that they would like to hear a loud beep when the machine has finished doing its work. It would be bet- ter, however, to express this as a requirement that the machine provides a means for alerting users that it has completed its work. The actual alerting mechanism is too specific at this stage. • If you have a lot of categories of response data, try to organize them into a hierarchy. You might build such a hierarchy by starting with broad classes such as functional requirements and non-functional requirements. Here, non-functional requirements might include aspects such as appear- ance, price, size and weight. Other broad categories of requirements which you might find useful include user interface requirements, performance requirements, requirements for the product’s inputs and requirements for the product’s outputs. In the end, finding creative ways to organize the re- quirements will help you later on with the problem statement and concept generation phases. • Based on your primary market research, try to identify the relative impor- tance of the various requirements. As discussed in Chapter 1, some stated requirements are really just desirable features, while others are critical to consumer acceptance of the product. You may later find that some requirements cannot be satisfied together without excessive cost; in this case, you will need to know which ones are the safest to drop. Although the above tips are nothing but common sense, it is importantto think of such things as early as possible. If you do not consider the needto prioritize requirements at the time when you are conducting interviews orfocus groups, you may not ask sufficient questions to help you to do so lateron. Similarly, if you do not make an effort to clarify customer responses duringinterviews or focus groups, you may not be able to reliably reinterpret a negativestatement in terms of a positive requirement for the product later on. You don’tneed to remember a thousand things at once here. You just need to bear inmind that: a) not all requirements are equally important; and b) the purposeof gathering customer input is to come up with actual design objectives for theproduct.
  7. 7. c°Taubman, 2006 ELEC3017: Marketing Tools Page 75 Price and Sales Volume InformationTwo important functions of marketing are: 1) to determine a suitable pricefor the product; and 2) to estimate the number of products that you will beable to sell. These are, of course, connected. In many cases, lowering the pricewill result in an increased number of sales and vice-versa, although this is notalways the case. If the price is too low, customers may view your products aslow quality or sub-standard in some other respect, causing the sales volume todrop. Understanding the interaction between price and sales volume helps youto make important design decisions later on. If a feature has a large impact onmanufacturing cost, it may reduce profit margins to unacceptable levels or elsepush the price up to a point where sales volume drops. This must be balancedagainst the impact of the feature on product desirability and competitivenessin the marketplace.5.1 Sales Volume EstimationIf your company is already selling products similar to the one you intend todesign, it may be possible to estimate sales volume for the new product basedon sales history of your existing products. More generally, you could collectstatistics on the total number of products of this type which are sold annuallyin your target market segment (Australia, or perhaps the world), multiplyingthis figure by your estimated market share. For new products, the situation is much more difficult. One way in which youcould estimate the sales volume for a new product is to start by identifying eachof the individual market segments (i.e., types of consumers) for your product,estimating the number of consumers in each market segment, the frequency ornumber of units which they would need to purchase, and the likelihood thatthey will buy your product rather than that of a competitor. This approach isgenerally known as the build-up method. The build-up method is best illustrated with an example. Suppose you arecontemplating the design of a new ionizing food sterilization product. Thereare no products of this form currently in the market, or so your research tellsyou. You begin by identifying key segments of the market that would be mostinterested in such a product. You consider hospital kitchens, large hotel chains,cafés, sandwich shops, airline food caterers and other major food preparationbusinesses. Later, you consider the broader market of hiegene-consious con-sumers preparing packed lunches in the home. In each case, you use secondarymarketing information to estimate the number of entities in each identified mar-ket segment (e.g., number of hospitals, number of hotels, and so forth). Youseparately estimate the number of products each entity in each type of marketsegment would be likely to purchase in a year, multiplying this by the percent-age of these purchases you can expect to be from your company’s products (i.e.,your market share). Even for a new product, it is usually reckless to assume a100% market share. One reason for this is that good ideas are often conceivedsimultaneously by multiple organizations around the world. As second reason is
  8. 8. c°Taubman, 2006 ELEC3017: Marketing Tools Page 8that a successful new product may soon be reproduced by other manufacturers,unless you have effective intellectual property protection (see Chapter 16). Fundamentally, the build-up method is a bottom-up approach, accumulat-ing sales estimates from the invidual market segments at the periphery of thedistribution hierarchy. The build-up method is most appropriate for specializedproducts, where the number of distinct market segments is manageable andeach market segment may have different purchasing behaviour. The informa-tion required to assess purchasing frequency within any given market segmentmay be obtained by primary marketing tools — e.g., interviewing representativesfrom that market segment. For the example described above, this may meaninterviewing hospital kitchen managers, hotel chefs, sandwich shop managersand so forth. Another approach to sales volume estimation is the break down approach,also sometimes known as the work back method. This is a top-down approachwhich starts with the entire population in your target market (e.g., the entirepopulation of Australia) as a potential consumer base. This initial consumerbase is progressively narrowed by chaining a sequence of more specific estimates.Again, this is best estimated through an example. Suppose we are trying toestimate sales for a new electronic entertainment product. For the sake of thisexample, we consider our geographical target market to be Australia and startwith the population of Australia as our initial consumer base — say 20 millionpeople. We next estimate the fraction of the population which falls within ourtarget demographic group — 20 to 50 year old consumers in middle to highincome brackets. Let’s say that this group represents 30% of the population.Next, we estimate the frequency with which these consumers would purchase anew electronic entertainment product — say once every 3 years, or a frequency of1/3 per annum. Then we try to assess the likelihood that the product of choiceby these consumers is the one we are planning on designing (our market share).This last piece of information is estimated from focus groups for the purpose ofthis example, and found to be 10%. However, we also allow for the fact that ourcompetitors may come up with similar products in a similar timeframe to us.Allowing for this, we reduce our estimate to 2% of the market for new electronicentertainment products, yielding a sales volume estimate of ¡ ¢ 1 20 × 106 × 0.3 × × 0.02 = 40000 units / annum 3 Obviously, there are many related ways to apply the break down approach.For example, rather than starting from the entire population of Australia, wecould have started with more specific census data relating to our target de-mographic. We could also have started with sales statistics for the consumerelectronics industry and progressively narrowed this down to consumers inter-ested in the type of product we have in mind. Regardless of the specifics, thekey feature of the break down method is its top-down procedure. This approachis most suitable for generic products where sales are expected to be uniformlydistributed across the target population. In addition to the build-up, break-down and sales history based methods
  9. 9. c°Taubman, 2006 ELEC3017: Marketing Tools Page 9described above, other strategies for sales volume estimation can be identified.One notable additional method is that of trialing your product within selectedcommunities. Such trials have been used to assess consumer uptake of smartcards, advanced mobile telephony services and other novel products. Unfortu-nately, test marketing of this form is very expensive and requires the availabilityof highly functional versions of the product under consideration. Since no method for sales volume estimation is particularly reliable, the bestapproach is to try multiple methods and compare their predictions.5.2 Setting a Selling PriceIn the previous sub-section, we considered the problem of sales volume estima-tion without reference to product features, product performance and productprice, which will inevitably impact sales. We can understand the effect of thesefactors in terms of market share. A high priced product might have many fea-tures, but still yield a lower market share due to the availability of cheaperproducts on the market. An important function of marketing is to establish atarget selling price for the product, preferably in the very early stages of design.We will being by considering two simplified methods, known as the cost plusand target price methods. The cost plus method starts with the cost of manufacturing the product, sayC $/unit, and then adds a margin M to yield a selling price of P = C (1 + M ) $/unit.In most cases, retail chains are involved, which add their own markups R, sothat the selling price to the customer becomes P = C (1 + M ) (1 + R) $/unit.Typical retail markups for consumer products may be 100% (i.e., R = 1) ormore. The manufacturing margin M may also be on the order of 100% (i.e.,M = 1). The manufacturing margin is developed through experience to coverproduct development costs (including the development of products which do notmake it to market for one reason or another), organization overheads and, ofcourse, company profit. One major drawback of the cost plus method is that it may set the price toohigh for the product to sell. This is connected with the fact that the productmust be substantially designed before manufacturing costs can be calculated,so that product features are set without reference to the price consumers arewilling to pay. This tends to result in the design of great products, which maybe too expensive for consumers to afford. While selling price can be reduced atthe expense of the margin M , there is a limit to how small M can be beforethe product becomes unprofitable to produce — remember that M contributesto product development expenses as well as profit. At the other end of the scale lies the target price method. The target pricemethod sets the selling price based on what consumers are prepared to pay,
  10. 10. c°Taubman, 2006 ELEC3017: Marketing Tools Page 10 Target price method: based on Volume the price consumers are willing (units/year) to pay (i.e., before price starts hurting volume) Price ($/unit) Profit ($/year) Cost-plus method: based on the price you need to charge to make a good Optimal price: may be margin somewhere between cost-plus and target price methods Price ($/unit) Figure 1: Relationship between volume, price and profit.without regard for manufacturing cost. In this case, the selling price is deducedfrom primary and/or secondary marketing tools alone. Surveys, interviews andfocus groups may be used to discover what people would expect or be preparedto pay for a product like the one envisioned. Secondary information such asthe selling price of competing products may also play an important role. Theobvious drawback of the target price method is that it might not be possible todesign a product which can be sold at the target price while making a profit.Nevertheless, the target price method is gaining popularity over cost plus formost consumer products. As mentioned, the cost plus and target price methods are best understood assimplified approaches to the problem of setting a selling price. A more rigorousapproach involves the determination of a volume-price curve, such as that shownin Figure 1. This figure also helps us to see that the target price and cost plusmethods as providing two extreme points in a continuum of options, neither ofwhich is generally optimal. The volume-price curve is generally derived usingthe primary marketing tools of surveys, interviews and focus groups. Potentialcustomers are asked to indicate the price they would pay for an envisaged prod-uct. Based on input from a large number of potential customers, the dependenceof sales volume on price is deduced. For example, if only 10% of surveyed con-sumers indicate that they would pay more than $1000 for a product, the salesvolume at that price is estimated by multiplying the sales predictions derivedin accordance with Section 5.1 by 0.1. If 50% of customers indicate that theywould pay $500 for the product, the sales volume at that price is estimated tobe 5 times higher. As suggested by Figure 1, the target price method may be interpreted as set-ting the selling price as high as possible without severely impacting the expectedsales volume. From price and volume, a second curve can be derived which re-flects expected total profit as a function of price. This curve is also depicted in
  11. 11. c°Taubman, 2006 ELEC3017: Marketing Tools Page 11Figure 1. The expected total profit is essentially just the product of the salesvolume and the difference between the selling price and the manufacturing cost.That is, Profit = V (P ) × (P − C)Where the selling price includes a retail markup R, this equation must obviouslybe modified to µ ¶ P Profit = V (P ) × −C . 1+RWhen the price is low, volume will be high but per-unit profit low. When theprice is high, per-unit profit will be high but volume low. Somewhere betweenthese extremes lies the price which maximizes the total profit. Noting that thecost plus method is concerned principally with making a good per-unit profit,while the target price method is focused primarily on maintaining high volume,we should not be surprised to find that the optimum selling price lies somewherebetween these two extremes. Of couse, the above analysis is overly simplistic. One difficulty is that vol-ume should depend not only on price, but also on the features which are offered.Secondly, the manufacturing cost, required to determine profit, cannot be ad-equately estimated until the design is substantially complete. This highlightsthe need to revisit price and volume estimates at various stages in the designprocess, as more information becomes available. This, in turn, means that themarketing tools used to assess consumer price sensitivity will have to be appliedat multiple phases in the design process.6 Market PositioningSo far, we have considered marketing tools to inform the process of design,gathering information on consumer needs, product requirements, the price con-sumers would be willing to pay and the sales volume we could expect. In thissection, we consider a set of broader issues which relate to how we intend toposition our product in the marketplace. We must recognize that the market-place is continually changing; our competitors are also developing new products,so our sales predictions might be based on false assumptions. This leads us toconsider two important questions: 1. “What will differentiate our product from those of other manufacturers?” or, equivalently, “What are our product’s unique selling points?” 2. “What is our company’s competitive advantage?” or, equivalently, “If de- signing this product is such a great idea, why isn’t everyone else doing the same thing?”6.1 Unique selling pointsUnique selling points (USPs) are the things which will differentiate your productfrom those of its competitors. USPs will be the focus of promotional material,
  12. 12. c°Taubman, 2006 ELEC3017: Marketing Tools Page 12 Total Product Tangible Product Service Non-essential Credit Brand features Name Technical Product core benefits Package Industrial design Delivery Warranty InstallationFigure 2: Components of the total product in which unique selling points (USPs)might be found.such as newpaper and television advertisements. USPs should be readily un-derstood by consumers, or else extra effort will be required by the productpromotions team to educate consumers about the product’s benefits. Given therelationship between USPs and product promotion, it is helpful to think aheadof time of how your product might be advertised to consumers. The most obvious USPs to engineers are technical features or performanceattributes of the product. Examples include high precision, high resolution, lowpower, high efficiency, light weight, multi-standard support, multiple operatingmodes, long range, user interface features, and much more. From the consumer’sperspective, however, there may be many equally important non-technical fea-tures such as packaging, credit financing, service options and so forth. Figure2 illustrates how technical and non-technical attributes relate to the completeproduct. USPs can potentially be found in each of these areas. Nevertheless, for the purpose of your ELEC3017 design project, the USPsthat you should focus on are those which are technical in nature. Within thiscourse, it is pure fantasy to differentiate your design project from that of othersbased on non-technical features such as band recognition, line of credit, warran-tees and the like.6.2 Competitive AdvantageWhen embarking on a new business venture of any type, including the designof a new consumer product, you should ask yourself what differentiates you (oryour business) from others who could do the same thing. People naturally seebusiness opportunities in products or services which they would like themselves,but cannot obtain. People also see business opportunities in areas where other
  13. 13. c°Taubman, 2006 ELEC3017: Marketing Tools Page 13 st co ren m gt strong pe h tit of io n weak high Window of opportunity product attractiveness low low ability to exploit high Figure 3: Window of opportunity for new product success.businesses appear to be operating very successfully with large profit margins.The nature of competition is that obvious needs tend to get filled and profit mar-gins get forced down by newcomers to the market, unless there are substantialbarriers to entry. Barriers to entering a market may include the need for a high degree of tech-nical competence, the need for complex partnerships, the need for sophisticatedproduct distribution channels, the need for highly sophisticated manufacturingfacilities, financial barriers and intellectual property protection (patents). Com-petitive advantage arises from your particular ability to overcome such barriersto entry. Certainly, having a great technical idea is a competitive advantage,but there may be other barriers which prevent you from exploiting it. A classicexample is the Xerox corporation, whose PARC (Palo Alto Research Centre)engineers invented ethernet, the mouse, windows-based graphical user interfacesfor personal computers, and many other massively popular technologies today.Xerox was not able to exploit any of these technologies because their core busi-ness was photocopying machines. The company’s core business determines itsdistribution channels, manufacturing capabilities, management skills and otherfactors critical to product success.6.3 Window of OpportunityA useful way to visualize the combined effect of unique selling points and com-petitive advantage is in terms of the so-called window of opportunity.As shown inFigure 3, a window of opportunity opens up when at least three factors coincide: 1. You have a product concept which is inherently attractive to consumers, based on its unique selling points, ability to address real needs, and ac- ceptable selling price.
  14. 14. c°Taubman, 2006 ELEC3017: Marketing Tools Page 14 2. Your organization has the technical competence, critical mass of relevant personnel, manufacturing and product distribution channels required to realize and deliver the product to the marketplace. 3. Competition in the proposed product area is relatively weak. The larger the window of opportunity, the more likely you are to be success-ful both with the specific product in question, and later with the introduction ofa family of related products. The window of opportunity changes dynamicallywith technological advances, consumer needs and the entry of new competitorsinto the marketplace. Most high technology products only maintain their win-dow of opportunity for a small number of years before low cost competitorsenter the picture, forcing technology-oriented organizations to be constantly onthe lookout for future technological breakthroughs.6.4 Screening Criteria for New ProductsOne useful way to summarize the preceding sub-sections is to consider the fol-lowing questions. These should form part of the “go/no go” decision processin determining whether to proceed with the design and development of a newproduct. 1. Is there adequate demand for this type of product by consumers? 2. Is the proposed product compatible with environmental and social stan- dards? 3. Is the proposed product legal and ethical? 4. How will this product be differentiated from others on the market? 5. Does the product fit into the company’s current marketing structures? 6. Is the product compatible with existing production facilities? 7. Does the product fit in with the company’s image and long term objec- tives? 8. Is sufficient financing available to design, promote and distribute the prod- uct? 9. Are the necessary technical and managerial skills available to carry out the proposed product design? 10. Is the proposed product development likely to be profitable?