Designing new products

LESSON 5
Christensen jobs to be done video
What job is the consumer hiring the
product to do
Starting point
Consumer understanding & need identification
how consumers evaluate current offerings
need gaps
Done in various ways
observation - ethnographic studies
depth interviews
focus group discussions
conjoint analysis
This process is followed by ideation
New product development stages
Idea generation
Concept development
Feasibility screening
Concept testing
Product development
Product testing
Market testing
Go - no go decision
Idea generation
Customer analysis - usage and needs, attitudes and attribute importance
focus groups
conjoint analysis
observing customers using prototypes, mockups, products
Competitor analysis
Active search of new technology, products and processes
Examining broader changes - social, technological & possible impact on category
Brainstorming
Feedback, ideas and suggestions from
existing customers, lapsers
sales team
internal and external R&D
Use outside help through specialised companies like IDEO
Most important - recognising a good idea when you see it!
 PRODUCT DESIGN DECISIONS
1. Business objectives 3. Consumer considerations
1. Gain market share 1. Ease of use
2. Blunt a competitive initiative 2. Cost benefit of additional features e.g. cars
3. Participate in an emerging category or segment
3. Perceived advantage over current choice
4. Bring excitement to or refresh an outdated
offering
2. Commercial considerations
1. Performance vs. Cost vs. Consumer price vs.
Profit tradeoff
2. Using idle plant capacity overheads accounting
decisions
3. Volume vs. Value strategy
CANNIBALIZATION: PLANNED SELF
DESTRUCTION
1. Destroy your own business before someone else does
2. Retain the customer Reinvent the product / service
3. Create your own competition and pre-empt outside competition
4. Cost of retaining a customer always lower than the cost of regaining one
5. Support the new launch aggressively
6. If net sales & profit are projected to be higher than launch the new product
ESTIMATING CANNIBALIZATION
IMPACT
CURRENT NEW PRODUCT NEW PRODUCT 2
PRODUCT 1(NP1) (NP2)

PROJECTED SALES 2000 (without new 600 1000

Units products)

CANNIBALIZATION 20% 35%

COMPANY SELLING 5 6 5
PRICE PER UNIT

COST PER UNIT 1 2 2

Determine which new product will give the highest Net Unit Sales, Net Value
Sales and Net Profit after considering the cannibalization impact
 Results
Table 1 Table 1-1

NP1 NP2

Original base 2000 New product 600 Total Original base 2000 New product 1000 Total
product sales sales product sales sales

Cannibalisation (20% 120 Cannibalisation (35% 350

of new product of new product
volumes from base) volumes from base)

Base product sales 1880 Base product sales 1650

post cannibalisation post cannibalisation

Value @Rs.5/unit 9400 Value @Rs.6/ 3600 13000 Value @Rs.5/unit 8250 Value @Rs.5/ 5000 13250
unit unit
Cost 1880 1200 3080 Cost 1650 2000 3650
Profit 9920 Profit 6600 3000 9600
CLEAN SPRITZ
KEY ISSUES & CHALLENGES
1. What consumer trends are impacting the Clean Spritz business?
2. Discuss the industry factors that are changing
3. Which environment issues are of significance to Clean Spritz?
4. Define the options management is evaluating and comment on the
advantages and risks for each option
who are the various stakeholders whose reactions have to be taken
into account
5. What is the financial payoff for each option?
6. Which option should you as Beaton recommend? Why?