Anaging The Development Process Development To Commercialization
P ODC DE ELOPMEN
If the product concept passes the business test, it moves to R&D or engineering to be developed into a physical product. Up to now it has existed only as a word description, a drawing, or a prototype. This step involves a large jump in investment that dwarfs the costs incurred in the earlier stages. At this stage the company will determine whether the product idea can be translated into a technically and commercially feasible product. If it cannot, the accumulated project cost will be lost except for any useful information gained in the process.
The job of translating target customer requirements into a working prototype is helped by a set of methods known as quality function deployment (QFD). The methodology takes the list of desired customer attributes (CAs) generated by market research and turns them into a list of engineering attributes (EAs) that the engineers can use. For example, customers of a proposed truck may want a certain acceleration rate (CA). Engineers can turn this into the required horsepower and other engineering equivalents (EAs). The methodology permits measuring the trade-offs and costs of providing the customer requirements. A major contribution of QFD is that it improves communication between marketers, engineers, and the manufacturing people.22
The R&D department will develop one or more physical versions of the product concept. Its goal is to find a prototype that consumers see as embodying the key attributes described in the product-concept statement, that performs safely under normal use and conditions, and that can be produced within the budgeted manufacturing costs.
Developing and manufacturing a successful prototype can take days, weeks, months, or even years. Designing a new commercial aircraft takes several years of development work, yet sophisticated virtual reality technology is speeding the process. By designing and testing product designs through simulation, for example, companies achieve the flexibility to respond to new information and to resolve uncertainties by quickly exploring alternatives.
■ ■ B At Boeing, the all-digital development of the 777 aircraft made use of a computer-generated "human" who would climb inside the three-dimensional design on-screen to show how difficult maintenance access would be for a live mechanic. Such computer modeling allowed engineers to spot design errors that otherwise would have remained undiscovered until a person began to work on a physical prototype. By avoiding the time and cost associated with building physical prototypes at several stages, Boeing's development process has acquired the flexibility to evaluate a wider range of design options than previously thought possible.23
Even developing a new taste formula can take time. Maxwell House discovered that consumers wanted coffee that was "bold, vigorous, and deep tasting." Its laboratory technicians spent over four months working with various coffee blends and flavors to formulate a corresponding taste that turned out to be too expensive to produce. The company cost-reduced the blend to meet the target manufacturing cost. The change compromised the taste, and the new brand did not sell well in the mar-Developing ket.
Marketing With the rise of the World Wide Web, there is a need for more rapid prototyping
Strategies and more flexible development processes. Michael Schrage, research associate at MIT's need to supply lab people with information on what attributes consumers seek and how consumers judge whether these attributes are present.
When the prototypes are ready, they must be put through rigorous functional tests and customer tests. Alpha testing is the name given to testing the product within the firm to see how it performs in different applications. After refining the prototype further, the company moves to beta testing. It enlists a set of customers to use the prototype and give feedback on their experiences. Beta testing is most useful when the potential customers are heterogeneous, the potential applications are not fully known, several decision makers are involved in purchasing the product, and opinion leadership from early adopters is sought.25 Here are some of the functional tests that products go through before they enter the marketplace:
■ a I At Shaw Industries, temps are paid $5 an hour to pace up and down five long rows of sample carpets for up to eight hours a day, logging an average of 14 miles each. One regular reads three mysteries a week while pacing and shed 40 pounds in two years. Shaw Industries counts walkers' steps and figures that 20,000 steps equal several years of average wear.
■ A C Apple Computer assumes the worst for its PowerBook customers and submits the computers to a battery of indignities: It drenches the computers in Pepsi and other sodas, smears them with mayonnaise, and bakes them in ovens at temperatures of 140 degrees or more to simulate conditions in a car trunk.
■ G At Gillette, 200 volunteers from various departments come to work unshaven each day, troop to the second floor of the company's South Boston manufacturing and research plant, and enter small booths with a sink and mirror. There they take instructions from technicians on the other side of a small window as to which razor, shaving cream, or aftershave to use, and then they fill out questionnaires. "We bleed so you'll get a good shave at home," says one Gillette employee.26
Companies that position products on the basis of their durability even incorporate functional product testing into their advertising:
■ C D a High durability was the focus of some unusual adver tising for Corning's Consumer Products Division's Corelle dinnerware. On five city buses in Phoenix, out-of-home media network TDI constructed a special Plexiglas cage, four feet long by one foot high, that housed a Corelle plate. Within the cage, the plate was free to roll back and forth as the bus accelerated, decelerated, and took turns.27
Consumer testing can take a variety of forms, from bringing consumers into a laboratory to giving them samples to use in their homes. In-home placement tests are common with products ranging from ice cream flavors to new appliances. When DuPont developed its new synthetic carpeting, it installed free carpeting in several homes in exchange for the homeowners' willingness to report their likes and dislikes about the carpeting.
When testing cutting-edge products such as electric cars, marketers must be as creative as the product designers and engineers: Rügen, a small island in the Baltic Sea, has become the testing ground for the cars of the future. Fifty-eight residents of the former East German island have gone from driving decrepit gas-guzzling cars to sleek new electric models manufactured by BMW, Daimler Chrysler, and Audi. The Rügen tests have made the auto manufacturers aware of several problems: Rügen drivers have found that trips of any length must be carefully mapped out because of the batteries' limited life. Recharging the batteries can consume anywhere from a half hour to an entire evening.28
Developing Consumer preferences can be measured in several ways. Suppose a consumer is
Marketing shown three items—A, B, and C, such as three cameras, three insurance plans, or three
Strategies advertisements.
■ The rank-order method asks the consumer to rank the three items in order of preference. The consumer might respond with A > B > C. Although this method has the advantage of simplicity, it does not reveal how intensely the consumer feels about each item nor whether the consumer likes any item very much. It is also difficult to use this method when there are many objects to be ranked.
■ The paired-comparison method calls for presenting pairs of items and asking the consumer which one is preferred in each pair. Thus the consumer could be presented with the pairs AB, AC, and BC and say that she prefers A to B, A to C, and B to C. Then we could conclude that A > B > C. People find it easy to state their preference between two items, and this method allows the consumer to focus on the two items, noting their differences and similarities.
■ The monadic-rating method asks the consumer to rate liking of each product on a scale. Suppose a seven-point scale is used, where 1 signifies intense dislike, 4 indifference, and 7 intense like. Suppose the consumer returns the following ratings: A = 6, B = 5, C = 3. We can derive the individual's preference order (i.e.,
A > B > C) and even know the qualitative levels of the person's preference for each and the rough distance between preferences.
MA KE E ING
After management is satisfied with functional and psychological performance, the product is ready to be dressed up with a brand name and packaging, and put to a market test. The new product is introduced into an authentic setting to learn how large the market is and how consumers and dealers react to handling, using, and repurchasing the product.
Not all companies undertake market testing. A company officer at Revlon, Inc., stated: "In our field—primarily higher-priced cosmetics not geared for mass distribution—it would be unnecessary for us to market test. When we develop a new product, say an improved liquid makeup, we know it's going to sell because we're familiar with the field. And we've got 1,500 demonstrators in department stores to promote it." Most companies, however, know that market testing can yield valuable information about buyers, dealers, marketing program effectiveness, and market potential. The main issues are: How much market testing should be done, and what kind(s)?
The amount of market testing is influenced by the investment cost and risk on the one hand, and the time pressure and research cost on the other. High investment-high risk products, where the chance of failure is high, must be market tested; the cost of the market tests will be an insignificant percentage of the total project cost. High-risk products—those that create new-product categories (first instant breakfast drink) or have novel features (first fluoride toothpaste)—warrant more market testing than modified products (another toothpaste brand). Procter & Gamble spent two years market testing its new no-calorie fat substitute, Olestra. While the Food and Drug Administration approved the new product in 1996, a very small percentage (estimated at 2 percent) of consumers experienced stomach problems and the indelicately named side effect, "anal leakage." The company made a slight change in the formula, but even after test marketing has proved that this side effect does not occur, the FDA requires that every package containing food made with Olestra bear a label that reads: "This product contains Olestra. Olestra may cause abdominal cramping and loose stools. Olestra inhibits the absorption of some vitamins and other nutrients. . . . "29 But the amount of market testing may be severely reduced if the company is under great time pressure because the season is just starting or because competitors are about to launch their brands. The company may therefore prefer to face the risk of a product failure to the risk of losing distribution or market penetration on a highly successful product.
Next we describe consumer-goods market testing and business-goods testing.
Continue reading here: Consumer Goods Market Testing
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