1. Concept Testing Approaches Conjoint Analysis
Moving down.
Recall that last week, we talked about internal idea screening.
This week we’re going to continue screening, but now with consumer input.
Should finish early so that groups can meet for the case

2. Evaluating with Customers
Concept Testing
is used to help screen and refine new product ideas
Conjoint Analysis
used to determine the combination of attributes that maximizes appeal

3. Purposes of Concept Testing
To identify very poor concepts so that they can be eliminated.
To estimate (at least crudely) the sales or trial rate the product would enjoy (buying intentions, early projection of market share).
To help develop the idea (e.g. make tradeoffs among attributes).

4. Procedure for a Concept Test
Prepare concept statement
Clarify specific purposes
Decide format(s)
Select commercialization
Determine price(s)
Select respondent type(s)
Select response situation
Define the interview
Conduct trial interviews
Interview, tabulate, analyze

5. Concept Testing
A concept is composed of attributes and benefits for a particular usage situation
Attributes incorporate a specific product form and technology
Determine
Customer
Interest
see Page and Rosenbaum (1992), “Developing an Effective Concept Testing
Program for Durables,” J Product Innovation Mgmt

6. Concept Testing Cautions and Concerns
If the prime benefit is a personal sense (aroma, taste).
If the concept involves new art and entertainment.
If the concept embodies a new technology that users cannot visualize.
If concept testing is mishandled by management, then blamed for product failure.
If customers simply do not know what problems they have.

7. The Concept Statement FOR {the ideal customer}
The Customer Value Proposition:
FOR {the ideal customer}
WHO {have the following problem}
MY PRODUCT IS A {product category}
THAT {key differentiating benefit}
UNLIKE {the major competitor}
Product
Usage
Situation
Customer

8. The Concept Statement
Format

9. The Concept Statement
Format: Narrative

10. Mail Concept Test -- Narrative
Here is a tasty, sparkling beverage that quenches thirst, refreshes, and makes the mouth tingle with a delightful flavor blend of orange, mint, and lime.
It helps adults (and kids too) control weight by reducing the craving for sweets and between-meal snacks. And, best of all, it contains absolutely no calories.
Comes in 12-ounce cans or bottles and costs 60 cents each.
1. How different, if at all, do you think this diet soft drink would be from other available products now on the market that might be compared with it?
Very different ( ) ( ) ( ) ( ) Not at all different
2. Assuming you tried the product described above and liked it, about how often do you think you would buy it?
More than once a week ( ) ( ) ( ) ( ) ( ) ( ) Would never buy it

11. The Concept Statement
Format
Narrative
Drawing / Diagram

12. Mail Concept Test – Drawing / Diagram

13. The Concept Statement Format Narrative Drawing / Diagram
Model / Prototype
Information Acceleration

14. Information Acceleration

15. Developing Concepts to Test
Number of items
tested
More 1
Most
Preferred
Working Model
Prototype
Computer
Paper &
Pencil
Least
Preferred
Time to prepare
test materials
e.g.,

16. What is generally tested?
Does it solve
a “problem”?
yes
Is it
“believable”?
yes
Is it
“unique”?
yes
Would it be
bought at one
of several tested
price points?
yes
BUYER
Can measure potential customer reactions using:
(1) 5-pt “definitely not” - “definitely” scales
(2) sorting tasks

17. Considerations in the Concept Test
Core Idea vs. Positioning/Commercial Statement
New Brand vs. Old Brand vs. No Brand
Price
Picture
Category
Purchase Measure Decisions:
Buyer Intent
Frequency
Product Diagnostics
Attribute Diagnostics

18. Ask the right people... The Chasm Sales time Early Market
vs. Mainstream Market
and Innovators
Lead Users
time
Early Market
Mainstream Market
Technology
Enthusiasts
Visionaries
Pragmatists
Conservatives
See (1) Rogers (1995) Diffusion of Innovations
(2) Moore (1991) Crossing the Chasm
(3)

19. Ask the right questions...
How important is the product “experience”?
Does the customer have to “touch & feel” the product to understand the benefits offered?
“Simulate” the Experience

20. How can concepts be tested?
Focus Groups
One-on-One Personal Interviews
Mall Intercept
Phone Interviews
Postal Surveys
Internet Surveys
Hybrids (e.g., phon -phone)
Compare in terms of:
sample control, concept flexibility, cost
see: (1) Pope (1993), Practical Marketing Research
(2) McQuarrie (1996) The Market Research Toolbox

21. Typical Analysis Category or Industry Purchase Intent Concept Norm
Definitely Would Buy % %
Probably Would Buy
Top Two Box % %
Might or Might Not Buy %
Probably Would Not Buy
Definitely Would Not Buy

22. Sales Potential Estimation
Translating concept test results into sales estimates
Assumes awareness and availability
Translating “Intent” into sales potential:
Develop the “norms” carefully for a specific market and for specific launch practices
Examples:
Services: 45% chance that the “definitely would buys” actually will buy; 15% for the “probably will”s
Consumer Packaged Goods: 70-80% chance that the “definites” will buy; 33% chance for the “probably will”s
The “norms” depend on the type of product; how new it is; and whether any
incentive will be used at launch.
Durable vs. Non-durable
Incremental vs. Discontinuous/Radical
Service vs. Tangible
Goal: Translate Intent into a measure of sales potential

23. Sales Potential Estimation

24. Sales Potential Estimation
Translating Intent into Sales Potential
Example: Aerosol Hand Cleaner After examining norms for comparable existing products, you determine that:
90% of the “definites”
40% of the “probables”
10% of the “mights”
0% of the “probably nots” and “definitely nots” will actually purchase the product
Apply those %age to Concept Test results:
The “norms” depend on the type of product; how new it is; and whether any
incentive will be used at launch.
Goal: Translate

25. Sales Potential Estimation
Translating Intent into Sales Potential
Apply those %age to Concept Test results:
90% of the “definites” (5% of sample) = .045
40% of the “probables” (36%) = .144
10% of the “mights” (33%) = .033
0% of the last 2 categories = .000
Sum them to determine the %age who would actually buy: = .22
Thus, 22% of sample population would buy (remember: this % is conditioned on awareness & availability)
The “norms” depend on the type of product; how new it is; and whether any
incentive will be used at launch.
Goal: Translate

26. From Potential to Forecast
With Sales Potential Estimates:
To remove the conditions of awareness and availability, multiply by the appropriate percentages:
If 60% of the sample will be aware (via advertising, etc.) and the product will be available in 80% of the outlets, then:
(.22) X (.60) X (.80) = .11
11% of the sample is likely to buy

27. Summary of Concept Testing
Advantages
relatively easy to get customer input
can be used as an early screen for new product ideas
Limitations
not that helpful for the design and development of specific product forms
not as reliable for discontinuous innovations

28. Primary benefit in addition to (or in lieu of) concept tests:
Conjoint Analysis
Primary benefit in addition to
(or in lieu of) concept tests:
forces a trade-off

29. Conjoint Analysis
Can be used to quantify the relative importance of attributes
Can be used to help determine the combination of attributes that maximizes appeal
Relatively easy for incremental innovation
Requires experts or information acceleration for discontinuous innovations
see (1) Page and Rosenbaum (1987), “Redesigning Product Lines
With Conjoint Analysis,” J Product Innovation Mgmt
(2) {Sawtooth Software}

30. Major Assumptions
An offering is a bundle of attributes and benefits. An offering can be decomposed into a bundle of “features” for which “utility values” can be calculated.
The utility value of an offering is some simple function of the utilities of the offering’s “feature” levels.
Customers prefer the offering with the highest utility value.

31. Conjoint: Steps 1 and 2 Identify Relevant Attributes
Survey/Focus Group/Intuition
Salsa Example (Thickness, Color, Spiciness)
Identify Relevant Levels of Each Attribute
Thickness: Regular, Thick, Extra-Thick
Color: Red, Green
Spiciness: Mild, Medium-Hot, Extra Hot

32. Create Profiles for each Combination
3 thickness (reg., thick, extra-thick)
2 color (red, green)
3 spiciness (mild, med/hot, extra hot)
Leads to 3X2X3 = 18 Profiles

33. Conjoint: Step 3 Choose a Sample Considerations: Consumer Involvement
Typicality
Diversity (if multiple segments)
Expertise (if complex or discontinuous)

34. Conjoint: Step 4 Obtain Customer Judgements Rank Order
Sort into categories
Rank the profiles within each category
Pair-wise Comparisons
Use a computer package to quickly hone in on important attributes

35. Conjoint Analysis Input: Salsa Example
Figure 7.2

36. Conjoint: Step 5 Compute Individual Value Systems
Use MONANOVA for rank order data
Output in the form of standardized utilities

37. Conjoint Analysis: Graphical Output
Thickness Spiciness Color 2 1 -1 -2
UTILITY
Regular Thick Ex-Thick
Mild Medium-Hot Ex-Hot
Red Green

38. Conjoint Analysis: Relative Importance of Attributes%
Spiciness
Thickness
Color
59.8%
34.6%
5.6%

39. Conjoint: Step 6
Find the average utilities (part-worths) for each attribute
Intuition: Find the attribute with the biggest range in utilities across the different levels
Use graphs/calculations for importance measures
Be careful with averages
Segments may exist
Cluster Analysis can tell you

40. Let’s consider golf balls...
• distance and durability
• durability and price
• distance and control

41. Conjoint Analysis Average Average Price Driving Ball Life Distance
250 yards holes $3.00
220 yards holes $4.00
200 yards holes $5.00

42. Your “Optimal” Product Design
Driving Distance
of 200 yards
Average Ball Life
of 54 holes
$5/sleeve
See also Titleist’s Ball-Fitting and
Wilson’s Custom Fit

43. How can conjoint analysis be conducted?
One-on-One Personal Interviews
written or verbal concept descriptions
multimedia presentation of concepts
RTI’s TradeOff VR; Sawtooth’s Sensus TradeOff; MIT’s Information Acceleration
networked computer facilities
Moskowitz Jacobs
Mail
written concept descriptions
disk by mail
Internet
the future??

44. Summary of Conjoint Analysis
Advantages
the relative importance of product features can be quantified using customer input
only need to test a relatively small number of actual product designs
Limitations
output is usually not directly linked to actual purchase