JOURNAL

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PART THREE
CONCEPT/PROJECT EVALUATION

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Chapter 8
The Concept Evaluation System

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The Evaluation System

Figure 8.1

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Concept/Project Evaluation

Figure III.1

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Planning the Evaluation System: Four Concepts

• Rolling Evaluation
• Potholes
• People
• Surrogates

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Rolling Evaluation (or, "Everything is Tentative")

• Project is assessed continuously (rather than a single Go/No Go decision).
• Financial analysis is built up continuously.
• Not enough early data for complex financial analyses.
• Risk: killing off too many good ideas early.
• Marketing begins early in the process.
• Key: new product participants avoid "good/bad”. Mindsets & premature closure.

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Potholes

Know what the really damaging problems are and focus on them when evaluating concepts.

Examples:

• Campbell Soup focuses on manufacturing cost and taste.
• Drug companies focus on FDA approval.
• Software developers focus on customer willingness to learn complex software.

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People

• Proposal is hard to stop once there is buy-in on the concept.
• Need tough, demanding hurdles - especially late in new products process.
• Personal risk associated with new product development.
• Need system that protects developers and offers reassurance (if warranted).

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Surrogate Questions

Give better answers to the real questions.

Real Question Surrogate Question

Will they prefer it? Did they keep the prototype product we gave them after the concept test?

Will cost be competitive? Does it match our manufacturing abilities & costs?

Will competition leap in? What did they do last time?

Will it sell? Did it do well in field testing?

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The A-T-A-R Model: Definitions

• Buying Unit: Purchaser or department/buying center.
• Aware: Purchaser is aware of the new product with some characteristic that differentiates it.
• Trial: A purchase or consumption of the product.
• Available: Percentage of purchasers who have access to buying the product.

Repeat: The product is purchased at least once after trial.

Figure 8.6

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An A-T-A-R Model of Innovation Diffusion

Profits = Units Sold x Profit Per Unit

Units Sold = Number of buying units

x % aware of product

x % who would try product if they can get it

x % to whom product is available

x repeat measure (what is the average number of units bought per person per year, including repeats)

x Number of units repeaters buy in a year

Profit Per Unit = Revenue per unit - cost per unit

Figure 8.5

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A-T-A-R Model Application

10 million Number of owners of video cellphones

x 40% Percent awareness after one year

x 20% Percent of aware owners who will try product

x 70% Percent availability at electronics retailers

x 1.20 Measure of repeat (20% of customers buy a second phone)

x $50 Price per unit minus trade margins and

discounts ($100) minus unit cost at the

intended volume ($50)

= $33,600,000 Profits

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