NEW PRODUCT DESIGN PROJECTPart B

Kara Buffardi, Tom Kerlin, Kevin MenardApril 27, 2010Prof. Durvasula

MARK 4060

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Table of Contents

Executive Summary 3Introduction 4

New Product Concept 4Copy of Qualtrics Questionnaire (Insert) Qualitative Description of Pretest 5Results of Product Survey 5

Demographics 6Q4: New Product Appeal 7Q5: New Product Dislikes 8Q6: New Product Price Expectations 9Q1: Product uniqueness 9Q2: Believability of Claims 10Q3: Purchase Intention 10Q7: Overall Liking for the New Concept 11Q8: Importance of Attributes/ Features 11Snake Plot of Mean Ratings for Video Game Consoles 12

Perceptual Map 12Selection of Design Features 14Product Positioning 14Forecast of Market Volume, Market Share & Profit 15

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Executive Summary

Survey An online survey was created through qualtrics.com. This survey contained questions related to our new product concept, and it measured the respondents perception of the product’s uniqueness, their desire to purchase, and their views on each of the product attributes. We administered the survey by creating a Facebook event which provided our friends and acquaintances on Facebook with a link to our Qualtrics survey. A total of 159 people responded, but only 118 were qualified to complete the survey based on their experience and knowledge of video game consoles. Of those who qualified, only 73 completed the survey.

Key ResultsIn regards to product uniqueness, about 84% of respondents said the Stealth 1000 was either a minor improvement from what is currently available or that there is nothing else like it on the market. Purchase intention of the Stealth 1000 is fairly balanced but somewhat skewed positively, meaning that more respondents said they would be likely to purchase the console as compared to the number of respondents that would not purchase the console. Overall, respondents liked the high graphics quality of Stealth 1000, but disliked the external aesthetics of the console. The graphics are seen as better than the competitors, but the Stealth 1000 is lacking in appeal for controller type. The other product attributes for the Stealth 1000 are seen as close to ideal in comparison to the competitors.

PositioningBased on the perceptual map, the Stealth 1000 is positioned close to ideal console in graphics quality, but is positioned as having low controller style. The Stealth 1000 is positioned similarly to the PlayStation 3 and Xbox 360.

Conjoint AnalysisThe conjoint analysis tells us that respondents desired a console that is priced at $299, small-sized and has downloadable games. Of our three designs, one that is medium-sized, has downloadable games and is priced at $299 provides the most total utility.

ForecastsOur likely sales volume is would be $670,176,000. With this sales volume, our market share would increase from 13.9% to 22.5%. Overall, Microsoft would be losing $151 on each unit, earning a loss of $338,450,041 for the year.

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IntroductionOur topic is on video game consoles. Our objective of this assignment was to research the market of United States video game consoles and to create a product concept that we think would sell in the market. After conducting market research through an online survey, we created a new product idea that we believe would fit the market. Below is the concept for Stealth 1000 which would be the new video game console by Microsoft.

New Product ConceptStealth 1000 is Microsoft’s newest video game console that is branded as a slick, cool, powerful console. The Stealth 1000 is the essence of innovation and versatility.

Many consumers associate the word “stealth” with ideas such as the Stealth Bomber, or being invisible or undetectable. The Stealth 1000 as a console is a combination of these ideas. The system is roughly the size of an Xbox 360 or PS3, and has high graphics quality that even surpasses the quality of PS3 and Xbox 360 graphics. It would be a powerful system as far as hardware capabilities, but would also remain quiet when running. The Stealth 1000 has very low operating noises which parallel its smooth and sleek external features. The console would have an under glow when turned on (similar to the glow of the underside of a street racing car), and the glow can be customized to any color.

Stealth 1000 has an easy-to-use interface which is similar to the Xbox 360 Media Center. The Media Center allows players to modify system settings, access the online store and connect to the online service, called the “StealthNet” network.

StealthNet is one of the most innovative features of the Stealth 1000. It would not only function as the online multi-player mode like Xbox Live, but it would also function as the system’s online store. Instead of purchasing a cartridge or disc, video games would be downloaded directly from StealthNet and written onto the small, portable, external drive called the Stealth Doc. The Stealth Doc allows the player to carry their games with them like they could with a hard-copy version. The Stealth Doc would prevent the worry about scratching discs or the need to keep track of multiple games. All your games can be stored onto one Stealth Doc, making access to your library of games much easier. With downloadable games, players would also be able to buy games from previous Xbox systems, which would enhance the versatility and compatibility of the console.

StealthNet as an online store would also enable players to purchase additional accessories, such as a rechargeable battery pack for controllers, extra controllers, etc. Stealth 1000 would have the option for up to 6 controllers (all wireless), and the controllers would be roughly the size of an original Xbox controller.

Another unique new feature about the Stealth 1000 is the option to buy games which can be played in 3D to enhance the realism of game play.

Users would be able to buy the system in-store or online. If bought online, users could customize their system with features like Blu-Ray, various under glow colors, more advanced hardware, etc.

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Qualitative Description of PretestBefore entering our survey into Qualtrics, we typed up a draft in a word document. For

pretesting, each group member gave the survey to 2-3 people. We told the participants of our pretest to review the survey and indicate if there were any unclear questions or statements or any errors that could be found. Based off of their suggestions, we modified our survey to get our final version.

First, we changed some of our questions to match the sample survey given to us. This way, no formatting was changed from the example.

We also changed one of the questions (Q3) to provide more direction to the respondent on how to answer. Before our pretest, the question read “The next time I plan on purchasing a new video game console:” We changed our question to read as follows: “Please check the statement that best described your next video game console purchase:” There is less ambiguity on what the respondent should do to answer.

Originally, for Q9 – Q13 (the questions where participants were to rate each feature for each competitor), we used a scale from “Extremely Bad” to “Extremely Good.” For our survey on Qualtrics, we used the scale “Extremely Low” to “Extremely High” because it matched the example survey and also seemed to prompt for the correct content. By matching our survey to the example, we avoided changing the meaning of the question in any way.

Finally, we changed the attribute “Number of Special Features” to “Video Game Type” for the conjoint analysis. We felt that “Video Game Type” was more objective than “Number of Special Features”. For example, the same number of special features could be considered “some” to one person but “a lot” to another.

Overall, we feel that the final version of our survey which we sent out was a good version that provided us with more accurate and reliable results.

Results of Product SurveyAt the beginning of our questionnaire, we had a question to filter out the people who did not have previous experience or knowledge with video game consoles. The participants selected “yes” if they had previous experience or knowledge and were able to take the rest of the questionnaire, while those who selected “no” where taken to the end of the questionnaire. The following results are based only on the participants who selected “yes.”

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Demographics

Gender

Out of all of the respondents who took the survey, approximately 55% were female and 45% were male.

Class

The results of the survey showed that of those who completed the survey, 49% had the class standing of a senior, 39% had the standing of a junior, 9% were sophomores, and around 4% were freshmen. The majority of respondents were upperclassmen.

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Q4: New Product Appeal

According to the results of our survey, around 38% of the respondents felt that high-tech graphics was the most appealing feature of the Stealth 1000. Other appealing features of the Stealth 1000 according to the respondents were as follows: the StealthDoc/downloadable games (19%), the StealthNet (16%), external aesthetics (14%), and special features (13%). External Aesthetics includes the underglow feature and the option for six controllers.

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Q5: New Product Dislikes

The feature of the Stealth 1000 that was disliked most by the respondents was the external aesthetics, namely the underglow feature; 41% of the repondents disliked the external aesthetics. Around 14% of the respondents did not like the fact that the Stealth 1000 was too similar to consoles that are currently available. Other disliked features of the Stealth 1000 were its expectation of a high price, expecation of the console being very difficult to use, the manufacturer (Microsoft), and downloadable games/StealthDoc. Around 15% of respondents stated that there was nothing that they disliked about the new system.

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Q6: New Product Price Expectations

A high percentage of respondents, around 39%, felt that the Stealth 1000 would cost somewhere between $251 and $350. The next most expected price range for the Stealth 1000 was between $351 and $450. 20% of the respondents chose this price range. The least expected price range for the Stealth 1000 was between $125 and $250, with only around 13% of the respondents expecting this price range.

Q1: Product Uniqueness

The first question of the survey tested the respondents’ opinions of the uniqueness of the Stealth 1000. A large portion of the respondents, around 48%, said that the Stealth 1000 was just a minor improvement to what is currently available. 36% said that they would really like to try the Stealth 1000 because there is nothing else like it currently available. The rest of the respondents

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said that the Stealth 1000 is the same as current video game consoles on the market or agree that current video game consoles serve them better.

Q2: Believability of Claims

Of our respondents, over 75% said that the claims of our product are either believable or very believable. Only about 3% of respondents found the product to be unbelievable.

Q3: Purchase Intention

Purchase intention of the Stealth 1000 is fairly balanced but somewhat skewed positively. 26.76% said they probably would or probably would not consider purchasing the new video game console, and 28.17% said they might or might not. About 14% said they would definitely

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consider purchasing the new console, and only about 4% would definitely not consider purchasing it.

Q7: Overall Liking for the New Concept

Overall, most respondents (68%) said they somewhat like the new concept and about 24% like it very much.

Q8: Importance of Attributes/Features

Of our listed features, graphics quality, controller style and special features are the most important to our respondents. All of the features received a mean rating above 4, so all features are viewed as important.

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Snake Plot of Mean Ratings for Video Game Consoles

The results indicate that the new product attribute ratings are somewhat close to the importance scores relative to the other video game console brands. The controller style attribute rating for Stealth 1000 is significantly lower than the importance score for controller style. Also, the console design is much higher for Stealth 1000 than the importance score.

Perceptual MapMean Values:

Ideal Stealth1000

Playstation3 Xbox360 Nintendo Wii

Means

Controller Style

6.01 4.79 4.69 5.04 5.58 5.222

Graphics Quality

6.24 6.14 5.85 5.72 4.64 5.718

The overall mean controller style rating across all brands is 5.222.The overall mean graphics quality rating is across all brands is 5.718.

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Adjusted Means:Ideal Stealth100

0Playstation3 Xbox360 Nintendo

WiiController Style

0.788 -0.432 -0.532 -0.182 0.358

Graphics Quality

0.522 0.422 0.132 0.002 -1.078

The adjusted mean rating of Stealth 1000 on controller style is 0.432, and the adjusted mean rating of graphics quality is 0.422.

Mean Adjusted

The perceptual map shows that the ideal video game console is high in both graphics quality and controller style. The Stealth 1000 is very close to the ideal in terms of graphics quality, but is low in controller style as compared to the ideal. The other video game console brands are positioned very closely to the Stealth 1000 except for the Nintendo Wii which has a high controller style and a very low graphics quality.

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Selection of Design Features

Utility Values:

Design 1 Features: $299, Medium, CDDesign 2 Features: $399, Small, DownloadableDesign 3 Features: $299, Medium, Downloadable

Total utility scores for each feature combination:Design 1: 5.71 (for $299) + 1.29 (for medium) + 1.49 (for CD) = 8.49Design 2: 3 (for $399) + 1.55 (for small) + 1.53 (for downloadable) = 6.08Design 3: 5.71 (for $299) + 1.29 (for medium) + 1.53 (for downloadable) = 8.53

Survey results indicate that Design 3 provides greater satisfaction to consumers than either Design 1 or Design 2.

Product PositioningThe snake plot and perceptual map from our survey results tell us that Stealth 1000 had a graphics quality close to the ideal system, but the controller type is much less than ideal. Therefore, it may be a better choice to make smaller controllers or incorporate some kind of motion sensor to become more similar to the Wii’s controller type; the Wii’s controller type is ranked close to the ideal. As for the other attributes, Stealth 1000 is close to ideal so we should keep those the same as in our original product concept.

Based on the conjoint analysis, we found that the design that has the most utility of our options includes the following attributes:

1. Size - Medium2. Price - $2993. Game Type - Downloadable

This combination of attributes may produce a high level of sales, but it may not be very feasible. A price of $299 would be very difficult to have while still making profits, at least for the first year. Microsoft’s R&D and manufacturing operations would be expensive and burdensome in the beginning; however, profits may increase given time. Other than the price, having a medium

Price $299 $399 $499 Feature Imp

Feature Imp %

5.71 3 0.05 5.66 66.8Size of Console

Small Medium Large1.55 1.29 0.02 1.53 18.1

Video Game Type

Downloadable CD Cartridge1.53 1.49 0.25 1.28 15.1

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console with downloadable games is very feasible and it would be possible to produce such a product.

Aside from the above features, we would position our product in the market through some of our marketing tactics including viral marketing. We would produce a viral video, which would showcase Stealth 1000’s most distinguishable features to reach the industry’s most promising customers which are becoming more dependent on the Internet.

Forecast of Market Volume, Market Share & ProfitThe trial purchase probability of Stealth 1000 is 17.9% which is found from the formula of (.14)(.70) + (.27)(.30). It was found in our survey that about 14% of respondents would definitely consider purchasing our product, and 27% would probably consider purchasing our product. We are assuming that 70% of people who responded “definitely consider” actually do buy and 30% of respondents that said “probably consider” do buy. The total US Game Console market currently generates about $7.8 billion in revenues a year, so the estimated initial sales volume would be $1,396,200,000. It would not be possible to achieve a 100% awareness level, but an 80% awareness level is more realistic. Also, we wouldn’t sell our product in all distribution channels. Instead, we would target retailers such as Wal-Mart and Best Buy. These retailers have a wide spread distribution system and large customer base. Overall, we will assume a distribution intensity of 60%. With these assumptions, our likely sales volume would be (.80)(.60)($1,396,200,000) = $670,176,000.

Currently, Microsoft’s market share is at 13.9% which would mean they are making about $1,084,200,000 in revenue. If we make an estimated revenue of $1,396,200,000 from Stealth 1000, assuming no brand cannibalism, the Stealth 1000 would increase Microsoft’s market share to about 22.5% (Taking the current revenues of Microsoft plus the new revenues from Stealth 1000, divided by total industry revenues).

As indicated by the questionnaire results, customers favor downloadable games for a medium sized system at a low price of $299. Based off of the sales volume and price, we would sell about 2,241,391 total units. Initially, Microsoft would be losing money during the first year because it would cost us more than $299 to produce (approximately $450). If Microsoft is losing $151 on each unit, we would be at a loss of $338,450,041 for the year. The hope is that over time, we would start making positive profits because of accessories and gaming software.