Session 4: Product (Designing for Customers) � Product development process – a

marketing perspective � Features to customer needs � Stew Leonard � Puritan Bennett

� Market response prediction � Traditional � Web-based

15.810 Marketing Management

Product and service design are important!

� Barco � more than scan rate � find new markets and satisfy their needs � have a means to stay close to the customer

� Calyx and Corolla � fresh, reliably on time, quality, long-lasting,

easy to order, etc. � delivery and telephone service part of “product”

15.810 Marketing Management

Product (Designing for Customers)� Product development process – a

marketing perspective� Features to customer needs � Stew Leonard � Puritan Bennett

� Market response prediction � Traditional � Web-based

15.810 Marketing Management

Southwest Airlines – hints

� Segmentation

� Run the numbers before making a recommendation

� Watch out for a factor of 10

15.810 Marketing Management

Choose your target carefully

� Positioning! Differentiation! � Which customers are you serving? � What benefits are you delivering (relative to

competition)? � Product and service a means to deliver benefits? � Image and promotion delivers perceptual benefits. � Does this match your company skills?

� Benefits Æ product features � Must first listen � “Lens” model � House of Quality � Test it with customers

15.810 Marketing Management

Product development funnelO

ppor

tuni

ty

Iden

ti fi c

a tio

n&

Idea

Gen

era t

ion

15.810 Marketing Management

Concepts Design & Engineer Testing Launch

OPPORTUNITY IDENTIFICATION Target Customers

DESIGN Customer Needs

TESTING Product Benefit Testing

INTRODUCTION

LIFE CYCLE MANAGEMENT 4Ps 5Cs

GO NO

GO

GO

GO

NO

NO

NO

REPOSITION

Idea Generation

Customer Response Positioning Feature Selection Segmentation Company Skills

Advertising Testing Test Marketing

marketing mix

Product (Designing for Customers)� Product development process – a

marketing perspective� Features to customer needs � Stew Leonard � Puritan Bennett

� Market response prediction � Traditional � Web-based

15.810 Marketing Management

Stew Leonard video

� One way to incorporate customer needs into

the design of a service

� Watch for underlying need and how that need

was satisfied

� Watch also for strategy

� Who does Stew Leonard serve and how does this

differ from competition

� What is the “niche” (local monopoly)

15.810 Marketing Management

Customers don’t always speak “company-ese”: need to understand the lens!

Customer Product Team

Cleans my dishes Surfactants, bubbles

Quick Response Number of rings, time on phone, transferred

Easy to read Pixels, refresh rate, size, interlaced?

15.810 Marketing Management

“Lens” Model

Product Features

Advertising, etc.

Preferences

Price

Perceptions

ChoiceAvailability,

15.810 Marketing Management

Success is more likely if physical product

Success Rate

122 Firms

66 strategic • Low Budget& Conservative

variables

• High Budget & Shotgun

• Weak Technology

• Position right,

fulfills benefit positioning.

product fulfills position

Percent of Company Sales from New

Products

• Technology Driven

Listen to customer and communicate within the organization

Failed Product Successful Product

Product Use Product Use

Politics Politics

Needs Needs

Delivery Delivery

Segments Segments

Competition Competition

Marketing Marketing

Prices Prices

Physical Physical

0 1 2 3 0 1 2

Amount of communication

15.810 Marketing Management

3

Core team communications at Ford

Overall*

Within Functions*

Between Functions*

To Management

0 2 4 6 8 10

Phase-Review House of Quality

Communications per week* Significant at the 0.05 level.

House Of Quality

Customer Needs(25 strategic needs)

Product is affordable

Easy to hold

Easy to clean

Convenient-sized output . . .

Relationships between Customer Needs and

Design Attributes

Costs and Feasibility

Design Attributes

100

72

86

86 . . .

PB SM WA

Customer Perceptions

Poor Great

Importances “Engineering”

Measures

(Print advertisement from Puritan Bennett with the headline, "Practice safe spirometry.")

Example at Puritan Bennett: medical device

Puritan Bennett dominated the market, but

1. Puritan Bennett relies on sales to hospitals and large practices. Price $4,500.

2. Welch-Allyn introduces a reduced-function medical device (spirometer,) but at $1,995.

3. 40% share in first year. Penetrates private practice.

How should Puritan Bennett respond?

1. Cutting costs with reduced functionality? Price $3,000. 2. World-class service to hospitals and large practices? 3. Redesign?

15.810 Marketing Management

Begin with customer needs� Basic � Provides accurate readings and

� affordable eliminates technician variability � attractive appearance � diagnostic information meets � portable needs � reliable � easy to interpret diagnostic � quality output information

� Ease of Use � effective data storage and � set up first time retrieval � easy to operate � output easy to read � fast to use � Good patient interface � easy to calibrate

� easy to hold � Service and support

� right size for the patient � quick response time

� sanitary � available quickly

� easy to clean � good training and education � low cost of repairs, service � low-cost of supplies

� environmentally safe

15.810 Marketing Management

Product (Designing for Customers)� Product development process – a

marketing perspective� Features to customer needs � Stew Leonard � Puritan Bennett

� Market response prediction � Traditional � Web-based

15.810 Marketing Management

Pretest marketing, prelaunch forecasting, information acceleration � Methodologies developed initially at MIT by Glen

Urban and Al Silk (former Deans)

� Basic idea � simulated store � expose to marketing materials � expose to product� observe purchase in a store-like environment

� Trial and repeat for consumer packaged goods

� Intentions (vs. a control) for durable goods

15.810 Marketing Management

$0

Observed Sales

TrialRepeat Purchase

Need to observe both trial and repeat

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

bM

rM

yJ

rA

pOc tnF u l vD

gS

n J eca p a oeJa euu NA

15.810 Marketing Management

Durable “Assessor”� Marketing materials – TV

advertising, simulated WOM, newspaper advertising, simulated Consumer Reports

� Product placement and experience

� “Intentions” to purchase vs. control

� Diffusion into market (in customer lecture)

Stated intentions can predict actual purchase behavior

Prob

abili

ty o

f Tria

l

50%

40%

30%

20%

10%

0% Definitely not Probably not Might Probably Definitely

Non-durable Products

Durable Products

Intention to Buy 15.810 Marketing Management

Example pre-test market accuracy

Share Points

Typical Market Share 7.2

Pre-test vs. Market

Bias 0.6 Mean Error 2.0

Adjusted Difference

Bias -0.01 Mean Error 0.8

15.810 Marketing Management

Virtual Customer methods

� Virtual Concept Tests

� Securities Trading of Concepts

� Information Acceleration

15.810 Marketing Management

Skitzo

Silver Bullet Ep ic

RimGrip

Gearhead TRS

2wister

Gecko clone

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

Mar

ket S

hare

Verbal Web Static

Web Animated Physical Prototypes

Virtual methods compare well to physical product tests

C y

Securities Trading of Concepts

15.810 Marketing Management

Summary

� Product development process – a marketing perspective � listen to customer needs � “Lens” model

� Features to customer needs (HOQ) � Stew Leonard � Puritan Bennett

� Market response prediction � Traditional Pretest, Prelaunch, IA � Web-based Virtual Customer methods

15.810 Marketing Management

“Our process as we “Our process as it hassay we should do it.” happened.”

Idea Generation

Design and Positioning

Testing

Launch and Management

Exultation

Disenchantment

Confusion

Search for the guilty

Punishment of the Innocent

Distinction for the Uninvolved

15.810 Marketing Management