J2638 product and pricing research by solutions 2 (imperial college) - oct20141 (1)

Research Methods to Support Product Development

The Smart Entrepreneur

www.solutions-2.be +32(0)9 242 50 40 Leernsesteenweg 225 B-9800 Bachte-Maria-Leerne

solutions-2

Intro to quantitative and qualitative methods with case studies

Copyright of Nicole Huyghe

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Services70.2%

• We strongly believe that customer data and insight is at the heart of today's most successful businesses

• 3 relevant questions:

What product/service should we put in the market?At what price? And for whom?

• Voice of customer


ProductPricing

Portfolio

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PRICE PRODUCT

POSITIONING


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Step 4: Product optimisation + price setting (conjoint + other research)

Step 2: Needs generation. Brainstorm on what benefits consumers are looking for (qual research)

Step 1: Decide on market positioning (desk research)

Step 3: Narrowing down needs list through quantification(max diff research)


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Volume maximisation

Penetration pricing

MASS MARKETMaximum volumeLow pricesDemand highly elasticLarge decrease in cost when volume increasesMass appealTreat of competition

Skim pricing

NICHELow volumeHigh pricesDemand relatively inelasticLarge cost savings not expected at high volume

Profit/Margin

maximisation

Step 1: Deciding on Positioning Before the customer voice



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No idea about where to position yourself in the market (i.e. an A brand vs. B brand)?

Þ identify gaps in market (desk research/market studies)

Why is it important?

Þ It helps to identify which consumers to talk to when doing research (mass market vs. targeted market)


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Step 2: Understanding the Market Needs:

Understanding which features/product benefits might be of useBut how do we get to a list of features to test?


http://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&docid=FqJ9DSTBvrjw1M&tbnid=JBzpFeLHT7VheM:&ved=0CAUQjRw&url=http://www.harmanelectrical.co.uk/home-control-automation.html&ei=y6foU4m_EOu_ygPE6YGwBg&bvm=bv.72676100,d.bGQ&psig=AFQjCNF4DW-zIOMTQfUEBnNpPSNDmymP6w&ust=1407842009343885

http://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&docid=T_iUP8_bQZlUhM&tbnid=DpssHietDuYKzM:&ved=0CAUQjRw&url=http://www.electro-vds.be/nl/niko-home-control&ei=o6foU5ezCoW_ywPu2ILYAQ&bvm=bv.72676100,d.bGQ&psig=AFQjCNF4DW-zIOMTQfUEBnNpPSNDmymP6w&ust=1407842009343885

http://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&docid=2TtwT6epnhuRxM&tbnid=KW-2olLSbQmhFM:&ved=0CAUQjRw&url=http://www.wonenwonen.nl/domotica/165&ei=5KfoU4_jJaXMyAPdrYDQBw&bvm=bv.72676100,d.bGQ&psig=AFQjCNF4DW-zIOMTQfUEBnNpPSNDmymP6w&ust=1407842009343885

http://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&docid=t92dHu2h3AwabM&tbnid=znUOL3_h_jlAgM:&ved=0CAUQjRw&url=http://www.niko.eu/enus/niko/realisations/subprojectdetail/excellent-quality-for-price-offered-by-niko-home-control-was-the-deciding-factor&ei=GqjoU92bCoLnyQOm04CwBw&bvm=bv.72676100,d.bGQ&psig=AFQjCNH1xyUvMTU1eaMrqa_OuaKBCPDQjw&ust=1407842699996008

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Qualitatitive research

Focus groups

In Dept interviews

Online communities

Co creation

Traditional Research: Use of Big Data

Online conversations

Twitter

Blogs, Forums

Facebook

ACTIVE BRAINSTORMING PASSIVE BRAINSTORMING

Designed data Organic data



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LIMITED NUMBER OF PEOPLE (< 30)

VERY RICH INFORMATION BASED ON A FEW PEOPLE

to understandwhy, what

QUAL RESEARCH QUANT RESEARCH

WIDER SET OF PEOPLE(> 30 – 1000s)

LIMITED INFORMATION FROM MANY PEOPLE

to understand how many

The starting point - generating a list Narrowing down and quantifying

Step 3: Narrowing Down the Needs List Through the Quantification



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• extended battery life• superior materials (eg glass/metal)• faster processing• clearer voice quality• more connectivity (Wi-Fi, 3G, HDMI)• large apps library• large music & movies catalogue• easy connectivity to TV• lighter weight• ergonomic design• secure back up service• greater internal memory• personal data encryption• wireless charging• simple cloud access• enhanced screen quality (Amoled,

Retina etc.)

• sharper screen resolution• brighter screen colours• better navigation / GPS• open system platform for more choice• stronger reception• more responsive touchscreen• better front camera (eg for

photographing self)• better rear camera (eg for

photographing others)• console quality graphics• enhanced ease of use• water-proofing • dustproofing• shock-proofing• simple connectivity to car audio

Another example – The Smartphone

Many potential features


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On the next few screens, we are going to ask you what features are important to you when you are choosing a Smartphone. The features that will be shown are based on a list of things that other people have said are important to them.On each of the screens, you will see 5 features. Each time we will ask which of the 5 features is most important to you and which feature is least important when you are choosing a Smartphone.There will be 12 of these screens. Please note that you will see the same features on several screens, though in different combinations.

maximum differential approach


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hotspotshigher internet speed

discounted smartphonefamily discount

extra sim for tabletloyalty program

smartphone insurancenorton security

cloud applicationgeek squad

setup aid smartphonemusic streaming

call centre privilegesmobile chat

266237

193121

9993

807069

4340

3532

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high interest

interest

(Average score)

low interest

Interest in Mobile Phone Services


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Simple Methods for Price Setting

Willingness To Pay (WTP)PSM•Gabor GrangerMonadic Price Testing

Step 4: Product Optimisation and Price Setting


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Willingness To Pay (WTP)

The most simple quantitative methodology:

Present/demonstrate the product and ask “how much would you be willing to pay for this?”

> mainly used:

1) for a radically new product, with no idea of what the customer will accept

2) for bargaining products (i.e. where bargaining is allowed, e.g. second hand products)

> In other situations: most often too low prices

> Often overestimation of price sensitivity


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The respondent is asked 4 questions (after having seen the concept):

- At what price on this scale (a wide range) would you consider product X as good value (inexpensive or cheap)

PSM (Price Sensitivity Meter)

- At what price on this scale would you say product X is beginning to get expensive, but you would still consider buying it? (expensive)

- At what price on this scale would product X be so expensive you would never consider it? (too expensive)

- At what price on this scale would product X be so inexpensive that you would doubt its quality? (too cheap)


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PSM

Two underlying motivations:

1. Theory of reasonable prices: Given a product, consumers can somehow form an impression of what they would expect it to cost, or at least a range

2. Psychological pricing effects: too low a price signals bad quality and turn people off

So the “reasonable price range” does have a lower end


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PSM

50 75 100

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% Looks inexpensive% Too cheap% Looks expensive% Too expensive

Price

% R

esp

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den

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optimum price or penetration price

perceived normal price

defines acceptable price range

highest reasonable price

lowest reasonable price


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Gabor Granger

Customers are shown different prices (about 4 – 5)For each price, they are asked their willigness to buy at different price point (yes, no or 5-point scale).Extension: if no, ask why “Too expensive” or “Too cheap”

•Different ways:-Purely random selection-Random start price, then increase or decrease depending on previous answer


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Gabor Granger

50 75 100 125 150 175 200 225 250 275 300

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Price

% R

esp

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Too Expensive

Yes

Too Cheap

Ideal price range



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Monadic design

•A very simple methodology

•Respondents are presented with a product concept at a specific price and asked how likely they would be to purchase the product at the specific price.

•Independent groups of respondents do get to see differerent prices

•But each groups only sees one price

Gives more accurate estimation of price sensitivity (than WTP, PSM, GG) but need for more respondents


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Conjoint Research

Conjoint research is about

“Which product characteristics do matter?” “What is the willingness to pay?”

Optimises product composition and pricing in one combined method

Assume the product composition is already known and fixed (e.g. a car has been designed and developed, a pharmaceutical drug is ready to be launched, …), but you need identify the ideal price level (i.e. the price leading to biggest revenue)


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Conjoint is based on the trade-off principle:

you can’t have the best product for the lowest price


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Brand

Price

Feature 1

Feature 2

Feature 3 Feature 4 Feature 5

First of all, conjoint analysis will lead to understanding which impact each of the tested elements (attributes) has on the purchase consideration

Example


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Impact Of or On Competition?

Example: when Tesco gives a Samsung Galaxy as free handset, the share of brand X will go down to 6.3% (from 8.8%), while Tesco will grow from 4.4% to 17.1%

MARKET SCENARIO 1 MARKET SCENARIO 2



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Value of features?

Assume current share of volume is 20%, which refers to the current product in the market including a Sony Ericcson handset. The price of this product is £6.50. If we were to offer a Samsung handset (instead of a Sony Ericsson handset), we can increase the price of the product to £11.50 without loosing any share. So consumers are prepared to pay more if we offer the Samsung handset.

Similar charts (or tables) can be used to determine the value of each feature

£0 £5 £10 £15 £20 £25 £30 £35 £400%

10%

20%

30% Samsung Galaxy Y

Blackberry 9300

HTC One V

Samsung Galaxy S II

Nokia C1-01

Sony Ericcson Xperia Ray

HUAWEI Titan

SIM only

Tested bundle prices

Share

of

volu

me

£6.50

£11.50

Price sensitivity of an attribute (handset included in bundle)


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Product / portfolio optimisation?

TOP 5 BEST PRODUCTS

FULL LIST OF ALL PRODUCTS


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PEOPLE PRODUCT PRICE

Segmentation Product development

Market Segmentation


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CORE OFFER

PREMIUM OFFER

VALUE OFFER

volume

pri

ce


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The Benefits of Segmentation

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0 5 100

5

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Cost

Convenience

Main Principle


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What is Segmentation?It’s not this… It’s this…

It’s possible to segment the same group in multiple ways!



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Eco-Display Room temperature control

Integrated door communication

Movement detector

Touchscreen

Burglarly alarm

6,500 €

TO BE CONVINCED

ENERGY-COST SAVERS

HOME CONTROL LOVERS

35%

11,500 €

41%

24%


J2638 product and pricing research by solutions 2 (imperial college) - oct20141 (1)

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Transcript of J2638 product and pricing research by solutions 2 (imperial college) - oct20141 (1)