1. Ashesi University COURSE TITLE : NEW PRODUCT DEVELOPMENT
SEMESTER 2 : SPRING, 2016
MODULE 6: Full Screen, Sales Forecasting Product Protocol

2. Learning Goals
Appreciate the need for full screening of concepts and be exposed to alternative scoring models for conducting full screen of concepts.
Build your capability to estimate the market potential and develop sales forecast for a new product
Appreciate the importance of product protocol, identify the components of a product protocol and develop one for the new product

3. The Phases of the New Products Process
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4. Concept/Project Evaluation
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5. Difficulties in Concept Selection
One of the biggest challenges of product management.
What if every concept/project under consideration has passed all the hurdles so far?
Lacking enough financial and human resources, the firm needs a good concept selection procedure, otherwise management must:
Guess (and select the wrong project)
Approve too many projects (and underfund everything).
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6. The Full Screen
Full Screen is the extended assessment of product concepts based on the use of multiple factors covering marketing, financial and technical to ascertain which concepts are worth taking into the development stage and putting technical and other resources behind them.
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7. The Full Screen
A step often seen as a necessary evil, yet very powerful and with long-lasting effects.
Forces pre-technical evaluation, and summarizes what must be done.
Uses score model involving multiple factors
Methods range from simple checklists to complex mathematical models.
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8. Purposes of the Full Screen
It helps the firm to decide whether it should go forward with a concept or quit
- Feasibility of technical accomplishment — can we do it?
Feasibility of commercial accomplishment — do we want to do it?
To help manage the process by sorting the concepts and identifying the best ones.
Recycle and rework concepts
Rank order good concepts
Track appraisals of failed concepts
To encourage cross-functional communication.
Full Screen is the extended assessment of product concepts based on the use of multiple factors covering marketing, financial and technical to ascertain which concepts are worth taking into the development stage and putting technical and monetary resources behind them.
Two crucial criteria are “Can we do it” i.e. do we have the technology up to the task, do we have it, and can we afford it? = Feasibility of Technical accomplishment or can produce something that will do what customers want?
Do we “Want to” i.e. will we get out of this project the profits, market share or whatever it is we are doing product innovation for? = Feasibility of commercial accomplishment or can we sell it the new product profitably?
Assessing these two types of feasibility through a scoring model is central to most full screen.
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9. Screening Alternatives
Judgment/Managerial Opinion
Concept Test followed by Sales Forecast
(if only issue is whether consumers will like it)
Scoring Models
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10. A Simple Scoring Model
Answer: Go boating.
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11. Source of Scoring Factor Models
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12. A Scoring Model for Full Screen
Note: this model only shows a few sample screening factors.
Factor Score (1-5) Weight Weighted Score
Technical Accomplishment:
Technical task difficulty
Research skills required
Rate of technological change
Design superiority assurance
Manufacturing equipment...
Commercial Accomplishment:
Market volatility
Probable market share
Sales force requirements
Competition to be faced
Degree of unmet need...
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13. The Scorers Scoring Team: Problems with Scorers:
Major Functions (marketing, technical, operations, finance)
New Products Managers
Staff Specialists (IT, distribution, procurement, PR, HR)
Problems with Scorers:
May be always optimistic/pessimistic
May be "moody" (alternately optimistic and pessimistic)
May always score neutral
May be less reliable or accurate
May be easily swayed by the group
May be erratic
People doing the scoring must undergo familiarization period during which they get acquainted with each proposal i.e. market, concept, concept test results etc. The people who are involved in the scoring come from marketing, technical or development, operations/manufacturing and finance etc.
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14. Industrial Research Institute Scoring Model
Technical success factors:
Proprietary Position
Competencies/Skills
Technical Complexity
Access to and Effective Use of External Technology
Manufacturing Capability
Commercial success factors:
Customer/Market Need
Market/Brand Recognition
Channels to Market
Customer Strength
Raw Materials/Components Supply
Safety, Health and Environmental Risks
Source: John Davis, Alan Fusfield, Eric Scriven, and Gary Tritle, “Determining a Project’s Probability of Success,” Research-Technology Management, May-June 2001, pp
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15. Alternatives to the Full Screen
Profile Sheet
Empirical Model/Project NewProd
Expert Systems
Analytic Hierarchy Process
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16. A Profile Sheet
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17. Project NewProd Screening Model
The idea is that by examining dozens of variables on real product successes and failures, one would be able to predict the likelihood of success of a new product at this early stage, and to identify weak spots that can be addressed before new product project approval.
Current practices splits the screening model into two groups: must-meet and should-meet criteria.
Must-meet are “yes-no” questions even one “no” screens the project out.
Should-meet are scales, and high scores offset (compensate for) any low scores.
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18. Manufacturing Firm Scoring Model (disguised)
Net Present Value
Internal Rate of Return
Strategic Importance of Project (how well it aligns with business strategy)
Probability of Technical Success
Note how in each of these examples, the model contains financial as well as strategic criteria.
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19. A Tool for Idea/Concept Evaluation
Strategic Fit
Does the concept fit with corporate vision?
Customer Fit
Does the concept allow the customer to better meet consumer needs?
Consumer Fit
Does the concept satisfy an unmet consumer need?
Market Attractiveness
Is the concept unique relative to competition?
Technical Feasibility
Is the concept feasible and protectable?
Financial Returns
Will the project break even soon?
Source: Erika B. Seamon, “Achieving Growth Through an Innovative Culture,” in P. Belliveau, A. Griffin, and S. M. Somermeyer, The PDMA Handbook 3 For New Product Development, Wiley, 2004, Ch. 1.
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20. Sales Forecasting and Financial Analysis
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21. Sales Forecasting
Sales forecasting is estimating the amount or quantity of product or new product that a company expects to sell during a specific period of time at a specific level of marketing activity

22. Commonly Used Forecasting Techniques
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23. Challenges of Forecasting: Forecasting the Demand For Satellite Radio
In 2000: forecast for 2007 was 36 million subscribers.
In 2001: forecast revised to 16 million.
By end of 2006: actual number of subscribers = 11 million.
Source: Sarah McBride, “Until Recently Full Of Promise, Satellite Radio Runs Into Static,” Wall Street Journal, August 15, 2006, pp. A1-A9.
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24. Considerations for Developing Sales Forecast
Product potential may be extremely high, but sales may not materialize due to insufficient marketing effort.
Sales will grow through time if the firm gets customers to try the product and convert many of these customers into repeat purchasers & greater demand encourages more dealers to stock the product
Sales will depend on our competitors’ strategies and programmes

25. Forecasting Sales Using Purchase Intentions
Use top-two-boxes scores obtained in concept testing, appropriately adjusted or calibrated.
Example: Recall for hand cleanser from Chapter 9:
Definitely buy = 5%
Probably buy = 36%
Based on history, calibrate as follows:
80% of “definitelies” actually buy
33% of “probablies” actually buy
Forecasted market share = (0.8)(5%) + (0.33)(36%) = 16%.
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26. Mail Concept Test — Sketch
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27. Forecasting Sales Using Purchase Intentions
Use top-two-boxes scores obtained in concept testing, appropriately adjusted or calibrated.
Example: Recall for hand cleanser from Chapter 9:
Definitely buy = 5%
Probably buy = 36%
Based on history, calibrate as follows:
80% of “definitelies” actually buy
33% of “probablies” actually buy
Forecasted market share = (0.8)(5%) + (0.33)(36%) = 16%.
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28. Forecasting Sales Using Purchase Intentions (continued)
The 16% forecast assumes 100% awareness and availability.
Adjust downwards to account for incomplete awareness and availability.
If 60% of the market is aware of the product and has it available, market share is recalculated to (0.6) (16%) = 9.6%.
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29. Forecasting Satellite Radio Sales Using Purchase Intentions
In 2000, 213 million vehicles in U.S.
95% availability, 40% awareness.
Market potential = 213 million x 95% x 40% = 81 million.
Assume half can afford satellite radio = 40.5 million.
Percentage that will be among the first to try the new technology = 16%.
Forecast for first year = 40.5 million x 16% = 6.4 million.
Projected yearly growth rate = 10%.
Assuming this growth rate, by end of 2006, expected total sales = about 10 million.
Note: not too far from the attained number = 11 million!
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30. Forecasting Sales Using A-T-A-R Model
Assume awareness = 90% and availability = 67%.
Trial rate = 16% (16% of the market that is aware of the product and has it available tries it at least once).
RS = proportion who switch to new product = 70%.
Rr = proportion who repeat purchase the new product = 60%.
Rt = Long-run repeat purchase = RS /(1+Rs-Rr) = 63.6%.
Market Share = T x Rt x Awareness x Availability =
16% x 63.6% x 90% x 67% = 6.14%.
The following bar chart shows this procedure graphically.
A : Awareness
T : Trial Rate
A : Availability
R: Repeat Purchase
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31. A-T-A-R Model Results:
Bar Chart Format
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32. Market Sales Potential
ESTIMATING MARKET SALES POTENTIAL
Variables used to estimate market sales potential:
Buyers (B)
The number of prospective buyers (B) who are willing and able to purchase an offering.
The quantity (Q) of an offering purchased by an average buyer in a specific time period, typically one calendar year.
Quantity (Q)
Price (P)
The price (P) of an average unit of the offering.
Market Sales Potential B Q P = × ×

33. ESTIMATING MARKET SALES POTENTIAL
Chain ratio method involves multiplying a base number by several adjusting factors that are believed to influence market sales potential:
Population aged 8 years and over × proportion of the population that consumes soft drinks on a daily basis × proportion of the population preferring cola-flavored soft drinks × the average number of carbonated soft drink occasions per day × the average amount consumed per consumption occasion (expressed in ounces) × 365 days in a calendar year × the average price per ounce of cola
Market sales potential for cola-flavored carbonated soft drinks in a country =

34. SALES AND PROFIT FORECASTING
A sales forecast:
Is the level of sales a single organization expects to achieve based on a chosen marketing strategy and an assumed competitive environment.
Is some fraction of estimated market sales potential.
Reflects the size of the target market(s) chosen by the organization and the marketing mix chosen for the target market(s).
Reflects the assumed number of competitors and competitive intensity in the chosen target market(s).

35. SALES AND PROFIT FORECASTING
Example of a sales forecast (chain ratio method):

36. WHAT IS A MARKET? Assess market share: = X%
Sales ($ or #) of a Firm, Product, Service, or Brand = X%
Sales ($ or #) of the Market

37. Product Protocol
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38. Concept/Project Evaluation
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39. Product Protocol
Also known as product requirements, product definition, deliverables, etc.
Actually is one of the top success factors distinguishing winning from losing projects.
Maybe because it involves more than technical aspects.
It is written by multifunction team
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40. Product Protocol
Product Protocol defines the benefits or performance that a product will deliver to the customer.
It is the functional specifications for a product.

41. Purposes of Protocol
It specifies what each department or function will deliver to the final product that consumer/customer buys.
To communicate essential to all players and integrate their actions, directing outcomes consistent with the full screen and financials.
To set boundaries on development process or cycle time.
To permit the development process to be managed (i.e., what needs to be done, when, why, how, by whom, whether).
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42. Contents of a Product Protocol
Target market
Product positioning
Product attributes (benefits)
Competitive comparison
Augmentation dimensions
Timing
Marketing requirements
Financial requirements
Production requirements
Regulatory requirements
Corporate strategy requirements
Potholes
Target : Needs to be spelt out quite specifically: Demographics, benefits sought both functional and emotional
Product Positioning: That clear, distinct and valued/desirable place the product seeks to occupy in the mind of consumer.
Product Attributes: Characteristics which consist of Benefits, Features and Functions of the product.
Competitive Comparison: Description of the competitive products and its marketing mix
Augmentation Dimensions: Warranty, Installation Service, Servicing etc.
Timing:
Marketing Requirements: Distribution, Sales force, pricing promotion
Financial Requirements: Margins, NPV, IRR
Production Requirement: Plant, Size of the plant or capacity etc.
Regulatory Requirements: Ghana Standards Board, Foods ad Drugs Board requirements etc.
Corporate Strategy Requirements
Potholes: Challenges that must be addressed to the project to materialise.
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43. Contents of a Product Protocol
Target : Needs to be spelt out quite specifically: Demographics, benefits sought both functional and emotional
Product Positioning: That clear, distinct and value/desirable place the product seeks to occupy in the mind of consumer.
Product Attributes: Characteristics which consist of Benefits, Features and Functions of the product.
Competitive Comparison: Description of the competitive products and its marketing mix
Augmentation Dimensions: Warranty, Installation Service, Servicing etc.
Timing:
Marketing Requirements: Distribution, Sales force, pricing promotion
Financial Requirements: Margins, NPV, IRR
Production Requirement: Plant, Size of the plant or capacity etc.
Regulatory Requirements: Ghana Standards Board, Foods ad Drugs Board requirements etc.
Corporate Strategy Requirements
Potholes: Challenges that must be addressed to the project to materialise.
Target : Needs to be spelt out quite specifically: Demographics, benefits sought both functional and emotional
Product Positioning: That clear, distinct and valued/desirable place the product seeks to occupy in the mind of consumer.
Product Attributes: Characteristics which consist of Benefits, Features and Functions of the product.
Competitive Comparison: Description of the competitive products and its marketing mix
Augmentation Dimensions: Warranty, Installation Service, Servicing etc.
Timing:
Marketing Requirements: Distribution, Sales force, pricing promotion
Financial Requirements: Margins, NPV, IRR
Production Requirement: Plant, Size of the plant or capacity etc.
Regulatory Requirements: Ghana Standards Board, Foods ad Drugs Board requirements etc.
Corporate Strategy Requirements
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44. A Sample Protocol: Trash Disposal System
Must automate trash disposal at factory cost not to exceed $800.
Clean, ventilated, odor-free, no chance of combustion.
Must be safe enough to be operated by children; outside storage safeguards against children and animals.
Size must be small enough to work as kitchen appliance, to provide easy access and eliminate need for double handling of trash.
Simple installation
Decor adaptable to different user tastes.
If design requires opening of exterior walls, structural integrity and insulation against elements must be maintained.
User-friendly, automatic operation, easy to maintain by technical servicepeople.
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