New Products Management

Chapter 7

Analytical Attribute Approaches:

Trade-Off Analysis and Qualitative Techniques

Trade-Off (Conjoint) Analysis

• Put the determinant attributes together in combinations or sets.

• Respondents rank these sets in order of preference.

• Conjoint analysis finds the optimal levels of each attribute.

What is Conjoint Analysis?

A way to incorporate the structure of customer preferences into the new product design process. It helps evaluate how customers make tradeoffs between various product attributes (a decompositional approach).

The basic outputs of conjoint analysis are:

A numerical assessment of the relative importance each customers attaches to attributes of a product set.

The value (utility) provided to each customer by each attribute option.

Use of Conjoint Analysis

Designing new products that enhance consumer utility.

Forecasting sales/market share of alternative product concepts.

Identifying market segments for which a given concept has high value.

Identifying the “best” concept for a target segment.

Pricing products/product bundles.

Product line management.

Positioning new products to different segments.

Product Design: Conjoint Analysis

The approach derives customers’ utility values for attributes and attribute options based on customers’ stated overall preferences for different bundles of attributes. The following example shows Memory and Price bundles.

PriceMemory $1,000 $1,500 $2,000

8 Mb 4 2 116 Mb 7 5 324 Mb 9 8 6

9 = Most preferred•••

1 = Least preferred

Simplified Part-Worth(Utility) Calculation

Price Part- Memory $1,000 $1,500 $2,000 Worth

8 Mb 4 2 1 7/3 2.316 Mb 7 5 3 15/3 5.024 Mb 9 8 6 23/3 7.7

20/3 15/3 10/3

Part-Worth: 6.7 5.0 3.3

9 = Most preferred•••

1 = Least preferred

How to Use inDesign/Tradeoff Evaluation

Example: 24 Mb vs 16 Mb = 7.7 – 5.0 = 2.7 units

$1,000 vs $1,500 = 6.7 – 5.0 = 1.7 units

So: 8 Mb is worth more than $500 to this customer.

2.7 ( ––– (1,500 – 1,000) $795)

1.7

Can use to assess value to customer of non-product (service) attributes.

Thickness Spiciness Color Actual Ranking*

Ranking as Estimated by Model

Regular Mild Red 4 4 Regular Mild Green 3 3 Regular Medium-Hot Red 10 10 Regular Medium-Hot Green 6 8 Regular Extra-Hot Red 15 16 Regular Extra-Hot Green 16 15 Thick Mild Red 2 2 Thick Mild Green 1 1 Thick Medium-Hot Red 8 6 Thick Medium-Hot Green 5 5 Thick Extra-Hot Red 13 13 Thick Extra-Hot Green 11 11 Extra-Thick Mild Red 7 7 Extra-Thick Mild Green 9 9 Extra-Thick Medium-Hot Red 14 14 Extra-Thick Medium-Hot Green 12 12 Extra-Thick Extra-Hot Red 17 18 Extra-Thick Extra-Hot Green 18 17

* 1 = most preferred, 18 = least preferred.

Conjoint Analysis Input: Salsa Example

Figure 7-2

Regular Thick Ex-Thick

UT

ILIT

Y

2

1

0

-1

-2

Mild Medium-Hot Ex-Hot Red Green

Thickness Spiciness Color

0.161 0.913 -1.074 1.667 0.105 -1.774 -0.161 0.161

Conjoint Analysis:Graphical Output

Figure 7-3

Conjoint Analysis:Relative Importance of Attributes

0 20 40 60 80 100 %

Spiciness

Thickness

Color

59.8%

34.6%

5.6%

Figure 7-3(cont’d.)

Some Qualitative Attribute Analysis Techniques

• Dimensional Analysis

• Checklists

• Relationships Analysis– There are many others.

A Dimensional Attribute List• Weight

• Rust resistance

• Length

• Color

• Water resistance

• Materials

• Style

• Durability

• Shock resistance

• Heat tolerance

• Explosiveness

• Flammability

• Aroma

• Translucence

• Buoyancy

• Hangability

• Rechargeability

• Flexibility

• Malleability

• Compressibility

Figure 7-4

An Idea Stimulator Checklist• Can the dimensions be changed? (larger, smaller, longer, shorter,

thicker...)

• Can the quantity be changed? (more, less, combine, fractionate...)

• Can the order be changed?

• Can the time element be changed?

• Can the cause or effect be changed?

• Can there be a change in character? • Can the form be changed? (animated, speeded, slowed, attracted...)

• Can the state or condition be changed?

• Can the use be adapted to a new market?

Figure 7-5

Relationships Analysis• Force combinations of dimensions (features, functions, and

benefits) together.

• Techniques:

– Two-dimensional matrix

– Multidimensional (morphological) matrix

• Household cleaning products example used six dimensions:

– Instrument used, ingredients used, objects cleaned, type of container, substances removed, texture or form of cleaner

Other Methods: Lateral Search Techniques

• Free association

• Stereotype activity

• Lateral thinking -- avoidance

• Creative stimuli words

• Studying “big winners”

• Use of the ridiculous

• Forced relationships

Some Creative Stimuli Words• Guest stars

• Alphabet

• Truth

• Outer space

• Charity

• His and hers

• Style

• Nation

• Family

• Videotape

• Photography

• Testimonials

• Decorate

• Fantasy

• Hobbies

• Holidays

• Weather

• Calendar

• Push button

• Snob appeal

Designing Courtyard by Marriott

Problem for Marriott

Early 1980s:Running out of good sites for typical full service MarriottHotels (missing low-end business traveller segment).

Idea:New chain for low-end business and/or pleasure travellers. Business travellers? (6+ trips/mid-week). Pleasure travellers? (2+ trips/stay in hotels/motels).

Hotel Chain should: Offer good value for the money. Have minimal cannibalization of Marriott’s other facilities. Have market position with competitive advantage.

Overall Study Design

50 attributes, 2–8 levels/attributes.

Hybrid conjoint task.

Price elasticity, using ELASTICON model.

Positioning analysis: scaling, clustering to deal with demographics, attitudes and hotel usage.

263 mid-week business travellers,83 high-end business travellers,255 non-business travellers

in Atlanta, Dallas, San Francisco, Chicago.

Optimal Hotel Design Features

1. External factors: building shape

landscape design

pool type and location

hotel size

2. Rooms: room size & decor

type of heating & cooling

location/type of bathroom

3. Food-related services: type/location of restaurant

room service

vending services/stores

in-room kitchen

4. Lounge facilities: location

atmosphere

type of people (clientele)

Optimal Hotel Design Features cont’d

5. Services: reservations registration/checkout limo to airport bellman message center secretarial service car rental maintenance

6. Leisure facilities: sauna exercise room racquetball courts tennis courts game room children’s playroom &

yard

7. Security factors: security guards smoke detectors 24 hour video

What combinationof features

and services?

Supplementarytasks and

background data

What type of location

to select?

Attitude andpreference

scaling

Preference for location

types

Recommendationfor type oflocation

What pricing strategy

to follow?

ELASTICON

Price/demandresponse

Pricing recommendation

What is the best competitive

position?

Hybrid conjoint analysisand simulation

Multifact evaluation of

complete offering

Cross-validation

Is the conceptviable

Self-explicatedevaluation

Simulation

Guidelines for product design,

positioningand advertising

Overall Study Design and Analysis

Management Question

Model

Respondents’Tasks

Additional Modeling and

Validation

Output

Additionalguidelines forsegmentation,

positioning andproduct design

Cross-validation

50 Factors and 167 Levelsthat Describe Hotel Features

External Factors Pool type Corridor view

Building shape No pool Outside access/restricted view

L-shaped w/landscape Rectangular shape Enclosed access/unrestricted view/

Outdoor courtyard Free form shape balcony or window

Landscaping Indoor/Outdoor Hotel size

Minimal Pool location Small (125 rooms, 2 stories)

Moderate In courtyard Large (600 rooms, 12 stories)

Elaborate Not in courtyard

Rooms Size Sink location Bathroom features

Entertainment Small (standard) In bath only None

Color TV Slightly larger (1 foot) In separate area Shower Massage

Color TV w/movies at $5 Much larger (2.5 feet) In bath and separate Whirlpool (Jacuzzi)

Color TV w/30 channel Small suite (2 rooms) Size of bath Steam bath

cable Large suite (2 rooms) Standard bath Amenities

Color TV w/HBO, Quality of Decor Slightly larger/sink Small bar soap

movies, etc. Budget motel decor separate Large soap/shampoo/

Color TV w/free movies Old Holiday Inn decor Much larger bath w/ shoeshine

Entertainment/Rental in room New Holiday Inn decor larger tub Large soap/bath gel/

None New Hilton decor Very large/tub for 2 shower cap/sewing kit

Rental Cassettes/Atari New Hyatt decor Heating and Cooling Above items + toothpaste,

Rental Cassettes/Stereo Wall unit/full control

Rental Movies/Betamax Wall unit/soundproof/full control

Central H or C (seasonal)

Central H or C/full control

50 Factors and 167 Levelsthat Describe Hotel Features

Food Restaurant nearby Store Vending

Restaurant in hotel None No food in store None

None (coffee shop next Coffee shop Snack items Soft drink machine only

door) Fast food Snacks, refrigerated Soft drink and snack

Restaurant/lounge combo, Fast food or coffee shop items, wine, beer, machines

limited menu and moderate restaurant liquor Soft drink, snack, and

Coffee shop, full menu Fast food or coffee shop Above items and sandwich machines

Full-service restaurant, and good restaurant gourmet food items Above and microwave

full menu Room Service In-room kitchen facilities available

Coffee shop, full menu None None

and good restaurant Phone-in order/guest to Coffee maker only

Free continental pick up Coffee maker and

None Room service, limited menu refrigerator

Continental included in Room service, full menu Cooking facilities in room

in room rate

Lounge Type of people Lounge nearby

Atmosphere Hotel guests and friends None

Quiet bar/lounge only Lounge/bar nearby

Lively, popular bar/ Open to public— Lounge/bar w/

lounge general appeal entertainment nearby

Open to public -

many singles

50 Factors and 167 Levelsthat Describe Hotel Features

Leisure Racquet ball courts Children’s playroom/

Sauna None playground

None Yes None

Yes Tennis courts Playground only

Whirlpool/Jacuzzi None Playroom only

None Yes Playground and playroom

Outdoor Game room/Entertainment Pool extras

Indoor None None

Exercise room Electric games/pinball Pool w/slide

None Electric games/pinball/ Pool w/slides and

Basic facility w/weights Ping-Pong equipment

Facility w/Nautilus Above + movie theater, Pool w/slides, waterfall,

equipment bowling equipment

Security Smoke detector Sprinkler system

Security guard None None

None In rooms and throughout Lobby and hallways only

11 a.m. to 7 p.m. hotel Lobby/hallways/rooms

7 p.m. to 7 a.m. Alarm button 24-hours video cameras

24 hours None None

Button in room Parking/hallway/rooms

50 Factors and 167 Levelsthat Describe Hotel Features

ServicesLimo to airport Cleanliness/upkeep Special Services

Reservations None Management skill None

Call hotel directly Yes Budget motel level Information on

800 reservation number Bellman Holiday Inn level restaurants, theaters, etc.

Check-in None Non-convention Hyatt Arrangements and

Standard Yes level reservations

Pre-credit clearance Message service Convention Hyatt level Travel problem

Machine in lobby Note at front desk Fine hotel level resolution

Check out Light on phone Laundry/Valet Car maintenance

At front desk Light on phone and None None

Bill under door/leave key message under door Client drop off and Take car to service

Key to front desk/bill by Recorded message pick up Gas on premises/bill to

mail Secretarial services Valet pick up and drop room

Machine in lobby None off Car rental/Airline reservations

Xerox machine Self service None

Xerox machine and typist Car rental facility

Airline reservations

Car rental and airline

reservations

Room Price per Night is $44.85

Building Size, Bar/LoungeLarge (600 rooms) 12-storey hotel with:

quiet bar/lounge, enclosed central corridors & elevators, and all rooms have very large windows

Landscaping/CourtBuilding forms a spacious outdoor courtyard:

many trees & shrubs, the swimming pool plus a fountain, and terraced areas for sunning, sitting & eating.

FoodSmall, moderately priced lounge and restaurant for hotel guests/friends:

limited breakfast with juices, fruit, Danish, cereal, bacon & eggs,

lunch: soup & sandwiches only, and evening meal: salad, soup, sandwiches, six hot

entrees including steak.

Hotel/Motel Room QualityQuality of room furnishings, carpet, etc., is similar to:

Hyatt Regencies, and Westin “Plaza” Hotels.

Room Size & FunctionRoom 1 foot longer than typical hote;motel room:

space for comfortable sofa-bed & 2 chairs, large desk & coffee table, and coffee maker & small refrigerator.

Service StandardsFull service including:

rapid check-in/check-out systems, reliable message service, valet (laundry pick-up/delivery), bellman, someone (concierge) arranges reservations,

tickets, generally at no cost, and cleanliness, up-keep, management similar to

Hyatts & Marriotts .

Leisure Combination indoor-outdoor pool, enclosed whirlpool (Jacuzzi), and well-equipped playroom/playground for kids.

Security Night guard on duty 7 pm to 7 am, fire/water sprinklers throughout hotel, and all rooms have very large windows.

Would stay there Would stay there Would stay there Would rarely Would not almost all the time on a regular basis now and then stay there stay there

This full profile description of a hotel offering is one of the 50 cards developed by a fractional factorial design of the seven facets each at the five levels (developed by the Marriott’s development team). Each rpondent received five cards following a block design.

Result

“Courtyard by Marriott”

not

“small Marriott”

Marriott–13