CONCEPT EVALUATION
Wooseong Kang
Why New Products Fail?
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There are no basic need for the item, as seen by
intended users
The new product did not meet its need, considering
all disadvantages
The new product idea was not properly
communicated (marketed) to the intended users
→ Keep these factors in mind as you see how an
evaluation system is constructed
The Evaluation System
Criteria for Early Stage Screening Assessment

Uniqueness: Is the idea original? Is it easily copied by
competitors?
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Need fulfillment: Does it meet a customer need?
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Feasibility: Can we develop and launch it?

Impact: How will our firm be affected?
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Scalability: Can we become more efficient in production?
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Strategic fit: Does it match with corporate strategy and culture?
Sample Idea Screening Technique: Unilever

Unilever requires that a brief be written for each new idea under
consideration, including:
 Customer need
 Technical specifications
 “Idea solution” (benchmarks and standards)
 “Must-haves” (minimum requirements)
 “Killers” (what might cause it to fail)
 What is already known
 Budget and timeline
The Evaluation System


Need to think in terms of a portfolio of products
and evaluate new product projects in terms of how
well they would fit with corporate strategy
What evaluation occurs at any one point (how
serious, how costly) depends greatly on what
happens next, how much will be spent, or what
points of no return are passing
Cumulative Expenditures Curve
% of
expenditures
Many high-tech
products
Many consumer
products
Time
Launch
Risk/Payoff Matrix at Each Evaluation

Cells AA and BB are “correct” decisions.

Cells BA and AB are errors, but they have different cost and probability dimensions.

Usually BA (the “go” error) is much more costly – but don’t forget opportunity costs!
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Consider how “new-to-the-world” the product is as that has an impact on the risk level.
New Product Risk: Generic Risk Strategies
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
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Avoidance: Eliminate the risky project, but possibly incur
opportunity costs.
Mitigation: Reduce risk to acceptable level (redesign product;
increase product reliability).
Transfer: Move responsibility to another organization (joint
venture or subcontractor) better equipped to handle risk.
Acceptance: Develop contingency plan now, or deal with risks as
they come up.
A-T-A-R Model of Innovation Diffusion

Diffusion of Innovation: For a person or a firm to
become a regular buyer/user of an innovation, there
must first be awareness that it exists, then there must
be a decision to try that innovation, the person must
find the item available to them, and finally there must
be the type of happiness with it that leads to
adoption, or repeat usage
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: 1+ (% repeaters x # units bought by repeaters)
Profit Per Unit = Revenue per unit - cost per unit
A-T-A-R Model: Definitions
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Buying Unit: Purchase point(e.g., person, home or buying center etc.)
Aware: Has heard about the new product with some characteristic
that differentiates it (i.e., sufficiently informed & knowledgeable
enough to stimulate trial)
Available: If the buyer wants to try the product, the effort to find it
will be successful (e.g., % of outlets carrying the product)
Trial: Usually means a purchase or consumption of the product &
Requires some expense to get the trial supply, and enough time to
decide whether the product was any good.
Repeat: The product is bought at least once more, or (for durables)
recommended to others – measure of how successful the trial was
and how pleased the buying unit is
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
Points to Note About A-T-A-R Model
1. Each factor is subject to estimation.

Estimates improve with each step in the development phase.
2. Inadequate profit forecast can be improved by
changing factors and doing a “what-if” analysis.
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If profit forecast is inadequate, look at each factor and see
which can be improved, and at what cost.
In our example, could retail margins be increased to increase
distribution? Could more advertising spending lead to more
awareness?
Consider qualitative issues as well (advertising theme or
execution).
CONCEPT EVALUATION:
CONCEPT TESTING
Wooseong Kang
Many Ideas Are Eliminated Before
Concept Testing


PIC eliminates most new product ideas even before they are
developed into concepts.
Ideas of the following types are excluded:
 Ideas requiring technologies the firm does not have.
 Ideas to be sold to customers about whom the firm has no
close knowledge.
 Ideas that offer too much (or too little) innovativeness.
 Ideas wrong on other dimensions: not low cost, too close to
certain competitors, etc.
What Is a Product Concept Statement?
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A statement about anticipated product features (form
or technology) that will yield selected benefits relative
to other products or problem solutions already
available → It states a difference and how that
difference benefits the customers
Example:
“This new refrigerator is built with modular parts;
consequently, the consumer can arrange the parts to best
fit a given kitchen location and then rearrange them to fit
another location:
 “A new electric razor whose screen is so thin it can cut
closer than any other electric razor on the market.”
 “A copier that has twice the speed of current models”

Purposes of Concept Testing
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To identify very poor concepts so that they can
be eliminated.
To estimate (at least crudely) the sales or trial
rate the product would enjoy (buying intentions,
early projection of market share).
To help develop the idea (e.g. make tradeoffs
among attributes).
Concept Test — Verbal Description
New Diet Soft Drink
Here is a tasty, sparkling beverage that quenches thirst, refreshes, and makes the mouth
tingle with a delightful flavor blend of orange, mint, and lime.
It helps adults (and kids too) control weight by reducing the craving for sweets and
between-meal snacks. And, best of all, it contains absolutely no calories.
Comes in 12-ounce cans or bottles and costs 60 cents each.
1. How different, if at all, do you think this diet soft drink would be from other
available products now on the market that might be compared with it?
Very different ( )
( )
( )
( ) Not at all different
2. Assuming you tried the product described above and liked it, about how often
do you think you would buy it?
More than once a week ( )
( )
( )
( )
( )
( ) Would never buy it
Concept Test — Sketch
Concept Test – Other Types
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Focus group with early-batch production or 3D-printed prototype
 Two or three different versions of a new package can be 3D
printed, then passed around at focus groups to obtain reactions
and preferences
Virtual reality (VR)
 Steelcase uses VR to build three-dimensional images of office
furniture concepts and allow customers to walk around rooms
and visualize from any angle
Analyzing Research Result
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Top-two-boxes score
Benefit segmentation
Conjoint Analysis
BASES
Mail Concept Test — Sketch
Top-twoboxes score
Identifying Key Segments: Positioning Maps
Example: pain relievers
Gentleness
Customer
Ideal Point
. . ..
........ . .
. .
.
.
..
.
.
.
.
.... ........ .
............
.
Generic
Acetomin.
.
.
Anacin
.
Segment cluster 3
Age: 20-40
Use: aches
Effectiveness
Bayer
.
.
.
Advil
Bufferin
Segment cluster 2
Age: 60-80
Use: arthritis
.
. ...
.......
. .
Datril
.
.
.
.
Tylenol
.
Generic
Aspirin
Segment cluster 1
Age: Children
Use: Fever
.
.
.
.
.
Benefit Segmentation: Car Industry
From
factor
analysis
Customer
profile
Market Research to Support Concept
Testing: BASES
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Developed by A.C. Nielsen
Concept testing + A-T-A-R model → (early) Sales prediction
BASES: Nestle Refrigerated Foods
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300 adult female respondents surveyed.
75% top-two-boxes score (24% definitely + 51% probably
would buy).
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Split respondents into favorable (the 75% in the top two boxes)
and unfavorable.
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Median top-two-boxes score for this category: 61%.
Both groups liked the same things: product is natural, offers variety, is
fresh, saves time, is easy to prepare.
Most common negative: price.
BASES tried three positioning statements (Homemade, Pasta
Dinner, and Superior; Superior was found to have more likes
and fewer dislikes and was selected.
BASES (continued)
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Obtain adjusted trial through rough rule of thumb:
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Assuming 48% awareness and 70% availability, we get :
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target households x trial rate = 77.4 million x 11.6% = 9 million
To get an estimate of Repeat, use:
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AW x T x AV = 0.48 x 34.5% x 0.70 = 11.6%
Total number of trial households:
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80% of the “definitely” + 30% of the “probably” will actually buy,
or: (0.8 x 24%) + (0.3 x 51%) = 34.5%
Repeat for similar products = 39%
Average customer repeat = 2.5 times
No. of units bought per purchase occasion = 1.4
Repeat estimate = 39% x 2.5 x 1.4 = 136.5%
Sales prediction: 9 million x 136.5% = 12.3 million