Case synopsis----quick finish in 4 hours

GENERATING, SCREENING, AND DEVELOPING IDEAS WITH MARKETING INPUTS

LECTURE 3

GENERATING, SCREENING, AND DEVELOPING IDEAS

FINDING MORE RECEPTIVE BATTLEFIELDS

> The impact of product and market characteristics on the survival of independent start-ups

Source: Hay, Verdin, and Williamson, “Successful New Ventures: Lessons for Entrepreneurs and Investors,” Long Range Planning 26 (5), 1993, 31-41

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GENERATING, SCREENING, AND DEVELOPING IDEAS

FINDING MORE RECEPTIVE BATTLEFIELDS

> The impact of product and market characteristics on the survival of corporate ventures

> Source: Hay, Verdin, and Williamson, “Successful New Ventures: Lessons for Entrepreneurs and Investors,” Long Range Planning 26 (5), 1993, 31-41

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GENERATING, SCREENING, AND DEVELOPING IDEAS

WAYS TO EVALUATE SPECIFIC VENTURE IDEAS

> After the positioning,

Do I have the right offering and positioning?

> Bring the product to market?

− Costly

− Not an efficient way to use resources

> Adaptive Testing

− Try options before committing to one

− Commit scarce resources in the best way possible

− Used in all aspects of marketing and marketing tactics

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GENERATING, SCREENING, AND DEVELOPING IDEAS

WAYS TO EVALUATE SPECIFIC VENTURE IDEAS

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Ways for adaptive testing:

Dry Tests, Crowdfunding, Concept Testing (& A/B test)

GENERATING, SCREENING, AND DEVELOPING IDEAS

DRY TESTS

> A dry test:

− An order is asked for and a credit card number is obtained

− then inform that the product won’t be ready for a while, and the credit card is not charged

− Offered some premium to thank buyers for their confidence

> Most valid way of getting real consumer demand without actually sell a new product or service instantly

− Some ethical issues involved

− Negative feelings

− Negative public impacts (small scale though)

− Prematurely letting their competitors know their new product

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GENERATING, SCREENING, AND DEVELOPING IDEAS

CROWDFUNDING

> Use online platforms (Kickstarter, indiegogo)to sell products in advance of production.

> The platform accepts the money in advance for the new products but will only release the funds to the venture after certain goals have been achieved

− Reduce the risk of many ventures.

− Used to test many aspects of the offering, positioning, and marketing

− One of the most cost-efficient means to perform valuable marketing research

− Limitations?

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GENERATING, SCREENING, AND DEVELOPING IDEAS

VICTORIA’S SECRET USES THEIR STORES AS TEST BEDS FOR NEW PRODUCTS AND BRANDS

> Background: Victoria’s Secret (VS) own stores – perfect for testing

> Consumer segmentation study showed a need for a younger line for a more casual lifestyle - The VS brand Pink

− Introduced in only 10 representative stores

− Modified to reflect the consumer feedback

− Rolled out to 30 stores, modified again

− Rolled out to 100 stores, modified again

− Rolled out to all stores.

> A $500 million revenue product line in less than two years

− Testing new products is almost always a productive use of the company- owned distribution channels

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GENERATING, SCREENING, AND DEVELOPING IDEAS

TESTING PURCHASE INTENTION: THE CONCEPT TEST

> If you cannot realistically perform validating of your idea, the next most valid information to obtain is purchase intention

> Purchase intention: an indication of how likely to buy the product after being exposed to the concept

> The concept test checks whether a prospective purchaser

− understands the offering

− feels that it answers a need

− would be willing to purchase

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GENERATING, SCREENING, AND DEVELOPING IDEAS

HOW TO DO CONCEPT TESTING?

1. What should be in the concept statement?

2. Who should be exposed to the concept?

3. What kind of information specifically should be collected from respondents?

4. What are the best modes of data collection?

5. How should the questions be asked?

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GENERATING, SCREENING, AND DEVELOPING IDEAS

HOW TO DO CONCEPT TESTING?

> What should be in the concept statement?

− Closely and realistically mimic how the respondent would be exposed to the product and its attributes

− Look like product brochures, print ads, or web pages.

− Also includes purchase channel and all the benefits.

− The price of the product should be an integral part

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GENERATING, SCREENING, AND DEVELOPING IDEAS

HOW TO DO CONCEPT TESTING?

> What should be in the concept statement?

Example: Logo diaper concept statement

Product Concept: Futurewear is a line of designer diapers that feature university and professional sports team logos. One of the diapers has the University of Pennsylvania “Penn Quaker” logo, both on the tape and bottom (“tush”) of the diaper. This diaper is made of premium materials and is functionally equivalent to a good disposable diaper. It is a fun, novelty item, which will typically be purchased as a gift (for example, baby shower, Christmas) rather than as an everyday item by parents. The diapers will be white, will be packaged in a very nice gift box of 19 that also has the Penn Quaker logo, and will be priced at $11.95. The diaper will be available at most stores that have other University of Pennsylvania logo merchandise, as well as online stores that sell baby merchandise. What a nice, fun, way to help a loyal Penn alumnus start his or her child showing their support of Penn! The perfect gift for anyone who is a Penn supporter!

A few more examples similar to a concept statement.

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GENERATING, SCREENING, AND DEVELOPING IDEAS

HOW TO DO CONCEPT TESTING?

> Who Should Be Exposed to the Concept?

− The simple answer is “Your target market”

− The users only?

− How about decision makers and influencers?

− Be inclusive (the cost is typically small compared to the opportunity cost of missing a market segment)

− Qualitative questioning needed before

• find out how these types of decisions are typically made.

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GENERATING, SCREENING, AND DEVELOPING IDEAS

HOW TO DO CONCEPT TESTING?

> What Kind of Information Specifically Should Be Collected from Respondents?

− Purchase intention

| definitely would buy | probably would buy | might or might not buy | probably would not buy | definitely would not buy |

− People want to “be nice,” risky to interpret absolutely

− Ask intention first before all other questions

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GENERATING, SCREENING, AND DEVELOPING IDEAS

HOW TO DO CONCEPT TESTING?

> What Are the Best Modes of Data Collection?

− It depends: trade-offs of costs versus validity

− Depending on the segmentation targets

− E.g., Telephone interviews if concepts are easily understood over the phone

− E.g., Contract with a local market research firm

− E.g., Uni students for their group assignments 

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GENERATING, SCREENING, AND DEVELOPING IDEAS

HOW TO DO CONCEPT TESTING?

> How Should the Questions Be Asked?

− Single evaluation (monadic testing) or joint evaluation (paired comparison)

• If no particular competitor, little external search needed (SE)

• If a strong/obvious competitor available (JE)

− For a joint comparison the scale used: definitely prefer A | moderately prefer A | toss-up | moderately prefer B | definitely prefer B

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GENERATING, SCREENING, AND DEVELOPING IDEAS

BEST PRACTICES AND USES FOR CONCEPT TESTING

> Concept Screening

− Testing on influencers to help screen candidate product ideas

− Card sorting and evaluation

> Avoiding the “Nice Bias”

− Include a concept that describes the existing product in the same form.

− The purchase intent scores on the existing product can then be a base from which to compare the intent scores on the new product.

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GENERATING, SCREENING, AND DEVELOPING IDEAS

BEST PRACTICES AND USES FOR CONCEPT TESTING

> Forecasting Trial

− A formula for predicted trial from the concept test intent

− 70% of the “top box” (definitely would buy) purchase intent and add it to 20% of the second box (probably would buy)

− Multiplied by f1 × f2 × f3

• f1:the fraction of the target population(s) that will be aware of the new product.

• f2, the fraction of those who are aware understand and perceive the attributes and benefits of the product

• f3, the odds that members of the target market(s) will be able to easily purchase the product

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GENERATING, SCREENING, AND DEVELOPING IDEAS

BEST PRACTICES AND USES FOR CONCEPT TESTING

> Follow-Up Questioning

− After the purchase intent question!

− How well the potential consumer understood the concept

− What they liked and didn’t like about the product

− How interested they are in the product

• High interests – low intent??

− For which Situations the respondent sees the product as useful

− Problems the product might solve

> Price Testing

− Varying price, see effects on intention

− Each respondent is exposed to only one price

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GENERATING, SCREENING, AND DEVELOPING IDEAS

BEST PRACTICES AND USES FOR CONCEPT TESTING

> Using Crowdfunding for Concept Testing

− With real commitments from the market – more valid

− Change price along the process – Price sensitivity

> Caveats for Concept Testing

− Products have to deliver the benefits stated (disconfirmation paradigm)

− Changes in the product  changes in intentions

− “Nice Bias”

− Can only predict initial purchase

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GENERATING, SCREENING, AND DEVELOPING IDEAS

A/B TESTS

> A/B testing is a method of comparing two versions of a concept/idea/design against each other to determine which one performs better

> An experiment where two or more variants of design are shown to users at random

> Statistical analysis is used to determine which variation performs better

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GENERATING, SCREENING, AND DEVELOPING IDEAS

A/B TESTS

Why use A/B Test

> A/B testing allows careful changes to concept design and collecting real data on the results.

> To learn better why certain elements impact customer responses

> Can be used consistently to continually improve a given concept or idea

> Testing one change at a time helps pinpoint which changes had an effect

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GENERATING, SCREENING, AND DEVELOPING IDEAS

A/B TESTS

Steps

> Identify Objective:

− Purchase intention or behaviour

> Generate Hypothesis

− Variations better than the current version a list of ideas

> Create Variations

> Run Experiments

− Customers randomly assigned to either the control or one variation

> Analyse Results

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GENERATING, SCREENING, AND DEVELOPING IDEAS

SUMMARY

> After positioning

> Finding More Receptive Battlefields

> Evaluate Specific Venture Ideas

− Dry Tests

− Crowdfunding

− Concept Testing

− A/B Test

> In Tutorial 3 (week 4) you will have a chance to design a concept test

> You also need to create and conduct a concept test for your group assignment

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