Performsworse thancompetition butacceptableDeal Breaker: Performsworse than competitionand unacceptableAttribute MapTwitter: @Brionejawww.Brioneja.comAttribute Map forSmartphoneTwitter: @Brionejawww.Brioneja.comConjoint Analysis Conjoint analysis is a technique used to determine how people value different attributes of aproduct or service. It works by having respondents choose between different hypothetical products or servicesthat are described by their attributes. The attributes and their levels are selected by the researcher. For example, a conjoint study of cars might
Thanks everyone who participated in this webcast from The Association of International Product Marketing and Management (AIPMM).
Dr. Jose Briones discusses a few examples of companies selling products based on value. Quantification of value is critical to a successful product introduction and this presentation provides a basic overview of the tools to measure it.
The concept of a Value Box is introduced to visualize the value proposition of a product concept and guide the creation of a pricing strategy. An introduction to value co-creation is also discussed.
A few case studies are discussed to highlight methods for quantifying product value. These will include: B2C products like the Gillette Fusion razor, 3M's command strips, hybrid cars, pharmaceutical products, the Segway, iPad apps and B2B products like industrial adhesives and corrugated paperboard.
Key takeaways from this webinar:
• Understand a practical definition of product value and value in use.
• Learn different methods for product value quantification and when to use them
• How to commercialize a product based on the value proposition and not on price.
• A new tool, the “Product Value Box” for communication and understanding of the product value proposition
This webinar is for Product Managers, Product Marketers, Brand Managers, Product Owners, Directors of Product Management and Product Marketing, Marketing Managers, Business Development Managers, Innovation Managers and other product team professionals
About the Speaker:
Dr. Jose A. Briones is the General Manager of SpyroTek Performance Solutions, a supplier of Innovation Management and Training Services. He has 20 years of commercial and technical experience in the manufacturing and technology industries, holding positions in the areas of marketing, innovation, sales, engineering and R&D.
About AIPMM
The AIPMM is the hub of all things product management. It is where product professionals go for answers. With members in over 65 countries, it is the worldwide certifying body of product team professionals.
It is the world's largest professional organization of product managers, brand managers, product marketing managers and other product team professionals who are responsible for guiding their organizations, or clients, through a constantly changing business landscape.
AIPMM's certification programs are internationally recognized because they allow product professionals to demonstrate their expertise and provide corporate members an assurance that their product management and marketing teams are operating at a high competency level.
Visit www.aipmm.com.
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Similar to Performsworse thancompetition butacceptableDeal Breaker: Performsworse than competitionand unacceptableAttribute MapTwitter: @Brionejawww.Brioneja.comAttribute Map forSmartphoneTwitter: @Brionejawww.Brioneja.comConjoint Analysis Conjoint analysis is a technique used to determine how people value different attributes of aproduct or service. It works by having respondents choose between different hypothetical products or servicesthat are described by their attributes. The attributes and their levels are selected by the researcher. For example, a conjoint study of cars might
Similar to Performsworse thancompetition butacceptableDeal Breaker: Performsworse than competitionand unacceptableAttribute MapTwitter: @Brionejawww.Brioneja.comAttribute Map forSmartphoneTwitter: @Brionejawww.Brioneja.comConjoint Analysis Conjoint analysis is a technique used to determine how people value different attributes of aproduct or service. It works by having respondents choose between different hypothetical products or servicesthat are described by their attributes. The attributes and their levels are selected by the researcher. For example, a conjoint study of cars might (20)
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7. Jose A. Briones, Ph.D.
SpyroTek Performance Solutions
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AIPMM Webinar April 19, 2013
8. Background
In this chapter of the Beyond Stage Gate
series we describe to how use value-based
innovation for new product introductions to
increase the probability of commercial
success
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Pricing of a New Product
There are multiple ways to approach pricing for
a new product
Cost-plus
Competition-driven pricing.
Customer-driven pricing
Minimum Return on Investment (ROI)
Cost in use analysis
Value in use analysis
We must move away from cost-based pricing to
value-based pricing
10. Definition of Value
Value is
A measure of the magnitude of how much an unmet need
is met
○ Desirability
○ Functionality
Innovation is not a measure of the change you
make. It is a measure of the need you
address
Maslow's hierarchy of needs
Physiological
Safety
Love and Belonging
Esteem
Self-actualization
Self-trascendence
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Value and Innovation
Innovation exists at the intersection of
invention and value
If your new product/invention/service does
not offer value, it is just new - not innovative.
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How Do We Capture Value?
Value is captured through
Pricing
Market share
Brand awareness
In order to capture value, we must first be
able to measure value
14. Value in Use Analysis
Clayton Christensen: Customers do not
buy products, they hire products to do a
job.
Define the job your product is hired to do
and the benefit your customer gets from it
Absolute price/unit is irrelevant. We
must compare cost in use and value in
use.
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15. 3 Types of Voice of the
Customer
Unmet needs
Job to be done
Product features
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16. Gillette’s Custom Plus Disposable
Amazon’s price of 3
Pack with 10
razors/pack: $10.61
Cost/razor: $0.35
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18. Gillette’s Custom Plus vs. Fusion
Price of product
$10.61 vs. 16.95
Fusion package is 50% more expensive
The custom plus package has 30 units vs. 8 for the
Fusion
Cost in use
$2.12. vs $0.35 per razor.
Fusion has a unit product cost 6 times higher than
Custom Plus
The customer believes that the additional value in use
that the Fusion provides justifies the additional cost in
use
Durability of blade
Comfort
Less irritation Twitter: @Brioneja
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19. 3M Scotch® Tape
Amazon price: $1.00
300’ length
Cost per inch: $0.003
Cost to hang a poster:
$0.01
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20. 3M Command® Strips
Amazon Price: $1.95
12 strips
Cost per strip: $0.15
Cost to hang a poster:
$0.60
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21. Scotch Tape vs. Command
Strips
Price of product
$0.99 vs. $1.95
Scotch tape sells for half the price of Commander strips
Using Scotch tape, the user can hang 75 posters vs. 3 for the
command strips
Cost in use
$0.01 vs $0.60 to hang one poster
Commander strips have a product cost twice as high as
Scotch tape but 60 times the cost in use to hang up a
poster.
Why would a customer choose to buy a product that has a cost in
use 60 times higher?
The customer believes that the additional value in use that
Commander provides justifies the additional cost in use
○ Less damage to walls
○ Simplicity to remove
○ Durability
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22. Economic Value Definition
Reference Value (RV): The cost of the competing
product that the customer views as the best alternative
to our product
Differentiation Value: (DV) The value to the customer
(both positive and negative) of any differences between
our offering and the reference product.
Economic value (EV): The price of the customer best
alternative (reference value) plus the value of whatever
differentiates the offering from the alternative
(differentiation value).
EV=RV+DV
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23. Economic Value Analysis
Step 1: Identify the cost in use of the competitive
product or process that the customer views as the
best alternative
Step 2: Identify all factors that differentiate your
product from the competitive offering
Step 3: Determine the value to the customer of these
differentiating factors. Sources of value can be
subjective or objective.
Step 4: Add up the reference value and the
differentiation value to determine the economic value.
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The Concept of “Hard” vs. “Soft” Value in
Use
Hard or objective value in use is value which can be readily
quantified by the customer: “cash out the door”
○ Raw material savings
○ Energy savings
○ Reduction in spare parts cost
○ Product Features
Soft or subjective value in use are benefits that, while real, can not
be quickly quantified or monetized immediately by the customer.
○ Improved safety
○ Improved quality
○ Environmental/Green benefits
○ Ease of use
○ User Experience (UX)
25. Value Split
Value must be shared between seller
and customer
Customer will not switch from alternative
technology unless new offering carries
enough value to make the switch
worthwhile
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28. Value Maximization
In order to maximize value, we must determine the value
in use associated with our product by using mapping
tools
There is no “perfect” value analysis technique. All
techniques will have advantages and disadvantages.
The value captured by of your product will also depend
on the number of players in the value chain that will split
the value of the product
Stop talking about attributes and start talking about
benefits
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30. Market Perceived Quality Profile
(MPQP)
Rank the importance of attributes on a 1-10
scale or by distributing a fixed number of
points (i.e. 100)
Rank comparative performance of each
attribute
Multiply performance by weight to obtain
overall product rating
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35. iPad MPQP vs. Competition
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36. MPQP Issues
Advantages
Good for a first discussion with the customer and to generate
a basic list of requirements when little is known about the
market
Provides overall product rating comparison
Disadvantages
No clear differentiation between important variables
“Everything is important”
“We want everything”
Hard to quantify usability/ease of use
We need further differentiation of the importance of
attributes to achieve sub-segmentation based on real
customer needs
Kano Analysis
Attribute Map
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37. Kano Analysis
Kano analysis is a tool which can be used to classify and prioritize
customer needs.
Customer needs are not all of the same kind, not all have the same
importance, and are different for different populations
Kano stated that there are four types of customer needs, or
reactions to product characteristics / attributes:
1. The 'Surprise & Delight' factors. These really make your product stand
out from the others. Example, a passenger jet that could take off
vertically
2. The 'More is Better'. E.g. a jet airliner that uses a little less fuel than the
competition.
3. The 'must be' things. Without this, you'll never sell the product. E.g. A jet
airliner that cannot meet airport noise regulations.
4. Finally, there are the 'dissatisfiers', the things that cause your customers
not to like your product. E.g. a jet airliner that is uncomfortable to ride in.
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39. Attribute Map
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Attribute of Product or Service, Relative to Competing Offerings
Basic Discriminator Energizer
Positive
Non Negotiable:
Performs at least as
well as the
competition
Differentiator: Performs
better than competition
where it counts
Exciter: Performs better
than competitors
Negative
Tolerable:
Performs no worse
than the
competition
Dissatisfier: Performs
below the level of
competitors
Enrager: Must be corrected
at any cost( to capitalize on
competitor's negatives)
Neutral
So What?: Does
not affect the
purchasing
decision in a
meaningful way
Parallel: Influences
segment attitudes but is
not directly related to
product or service
performance
40. Limitations of Attribute Map and Kano
The Kano model and the Attribute Map can be used to
help identify customer segments, based on the relative
priority of each segment's requirements.
Disadvantages
Kano analysis determines value of individual product
attribute but does not provide value of specific level within
the attribute
Customers choose products based on the overall
profile of properties, rarely on one single property.
Ranking of combination of properties may differ from
individual property rankings
Conjoint analysis may be needed for breaking ties
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41. Conjoint Analysis
Rather than directly ask customers what they prefer in a
product, or what attributes they find most important,
Conjoint Analysis employs the more realistic context of
respondents evaluating potential product profiles with
different combinations of attributes.
By varying the combinations attributes and observing
the responses we can determine the real value of each
attribute and the magnitude of the value within each
attribute
Forces the customer to make choices of what they are
willing to trade-off
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42. Types of Conjoint Strategies
Conjoint Value Analysis (CVA)
○ Full-profile approach: Useful for measuring up
to six attributes
Adaptive Conjoint Analysis (ACA)
○ Respondents do not evaluate all attributes at
the same time, which helps solve the problem
of "information overload"
Choice-based Conjoint (CBC)
○ Respondents are shown a set of products on
the screen (in full-profiles) and asked to
indicate which one they would purchase
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43. Conjoint Techniques Application
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ACA CBC CVA
Six or fewer attributes X X X
More than six attributes X X(a)
More than nine levels
per attribute X
Computerized
questionnaire X X X(b)
Paper questionnaire X(c) X
Interactions X
Small sample size X X
Individual-level utilities X X
44. CVA Conjoint Analysis Example
Attributes Product A Product B Product C
Durability, years 2 2.5 1.5
High Temperature
Resistance, C
240 220 260
High Quality,
Impurities/lb
0.05 0.1 0.07
High Water Resistance,
hrs.
24 48 64
Price, $/lb 1.25 0.95 1.40
Customers’ Rating 8 7 9
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The exercise is repeated for multiple combinations and the
analyst or the computer can statistically deduce what product
features are most desired and which attributes have the most
impact on choice
48. Value Box for PaperBoard
Example
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Price
Time
Cost of Production
100% Full Value in Use Capture
25% Value Capture Pricing
$5/lb
$2.5/lb
$1.3/lb
50% Split Value in Use Pricing
$1/lb
49. iPad Value Box
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Price
Time
iPad’s Cost of Manufacture
Kindle DX Price
Dell’s Mini 10 Netbook Price
$489
$399
Kindle’s Price
$270
$279
$259
Archos Droid Tablet Price
iPad’s 16G Price
$499
50. Pharmaceutical Pricing
Return on Investment
Price must compensate for entire investment
in R&D, trials – Well above cost of
production
$700 MM to bring a new drug to market
The fewer patients a drug helps, the more it
costs
Value in Use Pricing
What is the cost of alternative treatment?
Pill vs. Surgery
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52. Hybrids vs. Non-Hybrids
Is buying a hybrid car worth it?
Gas savings vs. higher monthly payment
Depends on
○ Gas mileage difference
○ Price of gasoline
○ Mileage driven/yr
○ Price differential of comparable models
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54. Value Co-Creation Case
Study
Value is co-created with customers when a
customer is able to personalize his/her
experience using a firm’s product-service
proposition to a level that is best suited to
get his/her job(s) or tasks done. – Wim
Rampen
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55. Augmented & Alternative
Communication
Augmentative and Alternative
Communication (AAC) refers to
methods and devices that
supplement or replace speech and
writing when these are temporarily
or permanently impaired
Until a few years ago AAC
communication devices consisted
of bulky electronic boards costing
over $7 K each
Best known example:
Stephen Hawking
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56. Disruptive Innovation: iPad and
AAC
iPad apps are being used by
special needs children, such
as those who have speech
impediments as a
communication tool
New apps give a person the
ability to communicate basic
needs and interests through
the use of pictured images
and corresponding audio.
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57. Features vs. UX/UI
Features
Images & Symbols
Can add more images
# of Audio Voices
Can Record Voices
Create phrases
Can add categories
Text to speech
Quality of audio
Automatic conjugations
Word prediction
In-App expansion
UX/UI
Usability/Navigation (UI)
Customization
Communication capability
Visual appeal
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58. Customization
Customization to the individual’s
communication level and needs is
critical for usability
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59. AAC Apps – Features
Analysis
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Features
Images & Can add # of Audio Can Record Create Can add Text to Quality of Automatic Word in-App
Symbols more images Voices Voices Phrases categories Speech Audio Conjugations Prediction Expansion
TouchChat 10,000 Y 3 Y Y Y Y High Y Y Y
Proloquo2Go 8,000 Y 3 Y Y Y Y High Y Y N/A
Expressive 650 Y 2 Y Y Y N/A High N/A N/A N/A
One Voice 100 Y 4 Y Y Y Y High N/A N/A N/A
iComunicate 10,000 Y 1 Y N/A N/A Y Low N/A N/A N/A
Grace 100 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
60. UX/UI
How easy is it to use,
navigate?
How much knowledge is
required about programming
or manuals?
How simple and intuitive is to
setup and customize to the
individual’s communication
level and needs?
What is the level of
communication capability
that the app can provide?
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61. UX/UI Capability Ratings
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User Experience
Usability Setup Communication Visual
Navigation Customization Capability Appeal
TouchChat Complex Complex Advanced Medium
Proloquo2Go Complex Complex Advanced Excellent
Expressive Easy Easy Medium Excellent
One Voice Medium Easy Low Excellent
iComunicate Easy Minimal Entry Level Low
Grace Easy Minimal Entry Level Good