Estimating Potential For New To Market Products 201002


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Describes challenges in estimating potential and demand for "new-to-market" products and services. Outlines approaches and tools that yield more valid (e.g., more accurate) conclusions.
Dr. Phil Hendrix, immr

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Estimating Potential For New To Market Products 201002

  1. 1. New-to- New-to-Market Products - immr Perspectives on Estimating Demand, Sizing Markets February 2010 Dr. Phil Hendrix Contact: Director, immr 1 (770) 612-1488 1 Permission granted to cite, copy and distribute with attribution - Dr. Phil Hendrix - immr -
  2. 2. “Missing the Mark” in New Product Research Costly Failure, Disappointment Type 1 Error: Overly Optimistic Projections Significant – Premature Investment Projected Demand Moderate from Market Research Missed Opportunity Limited Type 2 Error: Underestimate Demand – Client Sits “on Sideline” Few Slow to Adopt, Sales “Take Off,” Buy Sales Costly Viral Demand What Customers Actually Do 2 Permission granted to cite, copy and distribute with attribution - Dr. Phil Hendrix - immr -
  3. 3. New-to-Market Product Research is Challenging Resulting Errors Challenge Explanation Type 1 Type 2 (Overestimate) (Underestimate) Adequately Ø Brief, partial description requires respondents to “fill-in-blanks” ü ü Describing Concepts Ø Drawbacks not mentioned, shown, or made explicit ü ü Ø Text-only description fails to convey aesthetic, design features ü ü Ø Respondent unable to experience, assess user experience ü ü Consumers’ Ø Respondents pay less attention, devote less effort to tasks ü ü Understanding Ø Key FAQs unanswered (in both research and real world) ü ü Measurement Ø Reliability of single measures weak ü ü Ø Expected time of purchase not explicitly measured ü ü Purchase probability (stated/actual) depends on scenarios Scenarios Ø (features, pricing, availability, and other key aspects) ü ü Tested Ø Scenarios tested fail to take into account competition, constraints ü ü Motivation Ø Respondents not motivated to be thoughtful, “accurate” ü ü Hurdles Ø Impact of hurdles in Conversion Funnel not taken into account ü ü Market Ø Actual product differs from product(s) tested ü ü Conditions Ø Actual competitive offers differ from the offers tested ü ü Ø Actual shopping, deciding requires more effort than in research ü ü Ø Projections fail to take into account network, viral effects ü ü 3 Permission granted to cite, copy and distribute with attribution - Dr. Phil Hendrix - immr -
  4. 4. Why It’s Difficult to Succeed with New-to- Market Products 4 Permission granted to cite, copy and distribute with attribution - Dr. Phil Hendrix - immr -
  5. 5. New-to-Market Products, Services are Different Category Examples of New-to-Market Products Characteristics of New-to-Market Products Health HSAs - A tax-advantaged Insurance spending and savings account 1. Customers’ first reaction is often that can be used to pay qualified “what is it?” medical expenses. 2. Usually do not readily fit into Media Amazon Kindle - existing product categories A new type of portable reader that can wirelessly download 3. Often deliver benefits that are books, newspapers, magazines, new, different from existing and blogs. 4. Frequently described by features Consumer MIDs (Mobile Internet that are new, unfamiliar Electronics Devices) - A new class of lightweight (1-3 lbs), handheld 5. Awareness low, familiarity with PC’s with 5-9” displays, powerful features and benefits even lower enough to run many applications 6. Prospects unsure of questions to Transportation Zipcar - Provides cars that ask, criteria, options to consider members in urban locations can rent by the hour. 7. Limited adoption reduces opportunity to learn from others Entertainment IPTV - Delivers TV 8. Effort required by prospects to broadcasts and video over the Internet, using a broadband learn about, evaluate, and decide connection. 9. Standards, features expected to Medical Stresseraser - An FDA- mature, and prices drop over time regulated medical device that relaxes the body and calms the 10. To adopt, customers must often mind using clinically proven change, learn new behaviors biofeedback training. 5 Permission granted to cite, copy and distribute with attribution - Dr. Phil Hendrix - immr -
  6. 6. New-to-Market Products Challenging for Prospects Newness Product Newness: Incremental New-to-Market Score Does NP fit into an existing Fits into Spans Fits into a Ease of Existing Multiple Category all Categorizing category, a new category, or Category Categories its Own span multiple categories? 1 2 3 4 5 Does the NP deliver benefits Delivers Delivers Comparability Established New comparable to those of existing Benefits Benefits products, or new benefits? 1 2 3 4 5 Familiar Unfamiliar Understandable Are NP’s features familiar or Features Features unfamiliar to customers? 1 2 3 4 5 Is the NP evaluated primarily Objective Combination Subjective Measurable Attributes Attributes Attributes on objective or subjective attributes? 1 2 3 4 5 Compatibity Does the NP require customer No Moderate Significant Change in Change Change in to change behavior (e.g., to Behavior Behavior purchase, install, or use)? 1 2 3 4 5 Trialability Can the NP be experienced Low Cost/ Moderate High Cost/ Effort Cost/Effort Effort easily, or does it require significant effort, commitment? 1 2 3 4 5 < 12 “Me Too” New Products Newness 13-18 Innovative New Products Total Newness Score Ü Score 19-30 New-to-Market Products 6 Permission granted to cite, copy and distribute with attribution - Dr. Phil Hendrix - immr -
  7. 7. Few Prospects for NTM Products Actually Buy Typical Scenario Prospects Holy Grail Need not Significant, compelling or compelling urgent Need Status Quo Dissatisfied with Acceptable Status Quo Conversion Might Funnel Aware of Need, Recognize Need, Solution, Brand, Solution and Messaging Understands some Understands Features, Unsure Key Features, about Benefits Benefits Skeptical Believes of Claims claims Trial, Purchase Trial, Purchase Difficult Easy Perceived Risks, Risks minimized; Inertia, Competitors Buyers Incentives, Offers Delay Purchase Trigger Purchase 7 Permission granted to cite, copy and distribute with attribution - Dr. Phil Hendrix - immr -
  8. 8. Biggest Hurdle Ü Understanding Features, Benefits Conversion Funnel Chasm For New-to-Market Products Conversion ... Understanding Funnel narrows Key Features sharply at... and Benefits 8 Permission granted to cite, copy and distribute with attribution - Dr. Phil Hendrix - immr -
  9. 9. New-to-Market Chasm Slows Market Penetration... ... and dramatically drives up the cost of customer acquisition. Prospects Conversion Funnel As the ...Time and Cost to Buyer-to-Prospect Acquire Customers ratio shrinks... Increase Buyers 9 Permission granted to cite, copy and distribute with attribution - Dr. Phil Hendrix - immr -
  10. 10. NTM Chasm Dramatically Reduces Odds of Success Likelihood of Success New to 40-55% 5% Company 25-40% New Product’s NTM Chasm Relation to Adjacent 50-60% Company’s Prospects slow to Existing purchase, new-to- Products market product stalls Overlaps Existing 60-75% 10% “Me too” Innovative New-to-Market Product Newness Source: immr analysis; Framework adapted from George Day, Is it Real? Can We Win? Is it Worth Doing? HBR, Dec. 2007 10 Permission granted to cite, copy and distribute with attribution - Dr. Phil Hendrix - immr -
  11. 11. Insights about Doing Research on New-to-Market Products 11 Permission granted to cite, copy and distribute with attribution - Dr. Phil Hendrix - immr -
  12. 12. Expectations, Hype Heighten the Challenge For Companies Ü Expectations often unrealistically high within client team, among executives Introducing New-to- Market Products Ü Considerable speculation, even hype, among industry analysts and observers Ü Significant investments, big bets, and reputation often at stake Ü Launch and results closely watched within the company and in the press For Customers of Ü For “really new” products, understanding, even classifying, difficult New-to-Market Products Ü Information about NTM products often fragmented and conflicting Ü Understanding features and benefits, comparing options onerous Ü Initially, availability may be limited, requiring extra effort to purchase Ü Being an “early adopter” can be risky Ü Customers expect prices to drop over time Ü more costly to buy early “Marketing often exaggerates the likely growth for a "Unlocking [the potential] is proving more difficult technology or service - adoption typically takes longer.” than early entrants might have thought." John Carey, CITI Joe Laszlo, Jupiter Research "Predictions are hard, especially when they are about the future." Yogi Berra 12 Permission granted to cite, copy and distribute with attribution - Dr. Phil Hendrix - immr -
  13. 13. Rigorous, Disciplined Approach Improves Validity Learning Approach/Tool Description – Examples Available Upon Request Present 1 Concept Elaboration Adequately describe and explain concept, features so that respondents Concepts understand, can evaluate, and reliably decide (see p. 15) Clearly, 2 Storyboards, Use storyboards and multimedia, as appropriate, to describe the Adequately Multimedia concept, explain key features, and highlight benefits 3 Virtual Prototypes Especially when usability is “suspect,” develop virtual prototypes that allow consumers to interact with, “use,” experience product 4 faqfind™ Make additional information about concept readily accessible, track how consumers access and use as they “shop” and decide 5 Qualitative Pretest Verify “usability” of concept descriptions, materials, and research tasks Obtain Valid, 6 Incentive Compatible Motivate respondents to be “truthful” in answering “will you buy?” Robust 7 Visualization Prompt respondents to visualize whether, when, how they might use Measures 8 Robust Choice Models Match choice methodology to objectives, task, competitive realities 9 User-friendly Choice Create “highly usable” choice tasks using IA (Information Architecture) Tasks principles (navigation, iconography, format, colors, etc.) 10 Timing measures Measure when respondents are most likely to adopt 11 Adoption Barriers Uncover barriers to adoption (e.g., contract, switching costs, etc.) Calibrate 12 Correct for bias Correct for bias in Choice, Diffusion modeling Models 13 Disaggregate models Estimate models at segment level (a priori and derived) Validate 14 Post-hoc Qualitative Conduct post hoc qualitative research to answer “why?” more fully Findings 15 Track Behavior, Track measures, update model as competitive conditions change Measures 13 Permission granted to cite, copy and distribute with attribution - Dr. Phil Hendrix - immr -
  14. 14. Elaborating Concepts for Testing is Critical Goals of Ü Describe and explain concept concisely, in plain terms easily understood by Concept the average provide consumer Elaboration Ü Provide enough information so that respondents can reliably evaluate Ü Guide development, selection of images and multimedia that can efficiently communicate and reinforce the textual description Concept Elaboration – Key Elements to Specify Name* A descriptive name that captures/conveys the essence of the concept Tagline A memorable phrase that captures/conveys the key benefit(s) Target Description of who is likely to find it most useful? Why? "How would I know it's for me?" Description* With as few words as possible, describe the concept. In as few sentences as possible, describe what "job" it does. In quantitative research, make a more complete description available to respondents throughout survey as pop-up (accessed by clicking ▲). Explanation In as few words as possible, explain how the concept works. Answer the question, “Why should I believe the claim(s)?” Benefits* What are the key benefits? What problem(s) does the concept solve? Reference How is it similar to/different from what I'm familiar with, accustomed to, currently using, etc.? Requirements What do I have to do to purchase, install, or use the service? (e.g., equipment required; where the service can be used; any drawbacks or limitations that need to be considered?) * Required; other elements optional, but likely to be useful in developing other materials (especially illustrations, faqfind) 14 Permission granted to cite, copy and distribute with attribution - Dr. Phil Hendrix - immr -
  15. 15. Quantifying Demand for NTM Products – Toolkit Adoption Model for Adaptive CBC Demand “Very New Products” (Choice-based Conjoint) Model Develop questions, hypotheses Develop, present sets of Estimate model to predict: using theory of characteristics offers to respondents by • Market Potential that influence adoption: varying product and service • Time to adopt • Need(s), priorities features (including price) • Demand under various • Awareness, familiarity Use adaptive approach to assumptions, scenarios • Curiosity, skepticism distinguish “must haves” from • Price elasticity, impact of • Ability/willingness to pay features willing to “trade-off” other key drivers Better Measures, Understanding Accurate “What if” Predictions Business Case Projections Storyboards and Prospect faqfindTM Segmentation Virtual Prototypes Use storyboards, virtual Develop, present user-friendly Identify segments using LC/ prototypes so that respondents set of FAQs to respondents ummixing. Profile in terms of: can: • Size, potential As respondents access FAQs, • “Experience” product/service track information accessed, • Purchase probability viewed by each respondent • Adoption triggers • Understand its benefits • Demographics • Assess usability/user experience Summarize, relate FAQs to • Optimal Positioning • Envision usage scenarios choices, adoption, WTP Realistic Interaction, Responses Reveals “Need to Knows” Pinpoint Real Opportunities 15 Permission granted to cite, copy and distribute with attribution - Dr. Phil Hendrix - immr -
  16. 16. About the Author Dr. Phil Hendrix is the founder and director of immr, a research and consulting firm focused on “very new” product and market opportunities. He specializes in helping organizations identify, verify, and capitalize on opportunities for products that are new-to-customers and very often new-to-market. Dr. Hendrix has developed perspectives and research-based tools to uncover customers’ unmet needs, reveal hurdles slowing adoption, trigger interest and accelerate purchase, and determine features and pricing to maximize market penetration. He has extensive experience adapting and applying research approaches, both qualitative and quantitative, to amplify weak market signals and help clients Dr. Phil Hendrix innovate successfully. Director, immr Phil has led significant engagements with numerous startups (such as and multiple business units of Fortune 100 clients in telecommunications (AT&T, Verizon, Sprint, Sony Ericsson, +1 (770) 612-1488 and others), financial services (American Express), transportation (UPS), insurance (Allstate, United Healthcare), healthcare (US Oncology), and others. He has worked closely with senior management and client project teams on issues ranging from “traditional marketing” (segmentation, positioning, branding) to innovation, user experience, and customer retention. Over the course of his career, Phil has helped clients conceive and successfully launch dozens of new products, businesses, and brands. He has extensive experience in B2C and B2B (SMB) markets. He is also a frequent speaker at industry and academic conferences. Phil brings a unique combination of academic rigor, strategic perspective, and hands-on experience to his work. Before founding immr, Phil was a partner with DiamondCluster (strategy and technology consultancy), founder and head of IMS (Integrated Measurement Systems), and a principal with Mercer Management Consulting. He has held faculty and research positions at Emory University and the University of Michigan, where he taught courses in research design and analysis, buyer behavior, and marketing strategy, and the Survey Research Center at U. of Michigan. After receiving his PhD in marketing from the University of Michigan, Dr. Hendrix completed post-doctoral studies in applied statistics and mathematical psychology. 16 Permission granted to cite, copy and distribute with attribution - Dr. Phil Hendrix - immr -
  17. 17. immr’s Focus – Research on New-to-Market Products • Inspiration (principals/inventors) • Opportunity to leapfrog • R&D/Technology enablers • Market (size, growth, potential, • Customers addressable market) - Unmet needs • Competitive advantage(s) Source - Feature fatigue (significance, duration) - Lead users Ideas • Access to technology/IP • Ideation/brainstorming • Scenario analysis - Worst customers • Risk profile - Worst competitor • Lead markets What new markets can we pursue, exploit? • Open Innovation/ Global sourcing Research Which Unlock How do we Vet win the prize? that opportunities Demand can we own? Opportunities Answers • Build or buy • Perpetual beta What must we do to win? • Market experiments • Features (must haves, tipping (learn and scale fast) points) and WTP† • Real options Craft • Platform implications • Doubling down Winning Value • UI/UE (user experience) • Leveraging network effects • Time-to-market • Unlocking demand Proposition • Alliance and channel partners • Triggering viral effects • Business model innovation • Avoiding the new-to-market chasm †Willingness-to-pay • Positioning 17 Permission granted to cite, copy and distribute with attribution - Dr. Phil Hendrix - immr -
  18. 18. Recent Publications 18 Permission granted to cite, copy and distribute with attribution - Dr. Phil Hendrix - immr -