The document discusses two product management case studies:
1) The first case analyzes forecasting the adoption of e-books using the Bass diffusion model. The model predicts higher e-book sales volumes than actually occurred, likely due to inaccuracies in calculating total consumers and alignment of parameters.
2) The second case examines Johnson & Johnson's pre-launch testing of a new hair conditioner called Enhance using the ASSESSOR method. ASSESSOR effectively measured customer needs, product concepts, and positioning of Enhance relative to competitors. However, further concept testing was not described.
The document discusses two product management case studies:
1) The first case analyzes forecasting the adoption of e-books using the Bass diffusion model. The model predicts higher e-book sales volumes than actually occurred, likely due to inaccuracies in calculating total consumers and alignment of parameters.
2) The second case examines Johnson & Johnson's pre-launch testing of a new hair conditioner called Enhance using the ASSESSOR method. ASSESSOR effectively measured customer needs, product concepts, and positioning of Enhance relative to competitors. However, further concept testing was not described.
The document discusses two product management case studies:
1) The first case analyzes forecasting the adoption of e-books using the Bass diffusion model. The model predicts higher e-book sales volumes than actually occurred, likely due to inaccuracies in calculating total consumers and alignment of parameters.
2) The second case examines Johnson & Johnson's pre-launch testing of a new hair conditioner called Enhance using the ASSESSOR method. ASSESSOR effectively measured customer needs, product concepts, and positioning of Enhance relative to competitors. However, further concept testing was not described.
The document discusses two product management case studies:
1) The first case analyzes forecasting the adoption of e-books using the Bass diffusion model. The model predicts higher e-book sales volumes than actually occurred, likely due to inaccuracies in calculating total consumers and alignment of parameters.
2) The second case examines Johnson & Johnson's pre-launch testing of a new hair conditioner called Enhance using the ASSESSOR method. ASSESSOR effectively measured customer needs, product concepts, and positioning of Enhance relative to competitors. However, further concept testing was not described.
Heriford " Case 1 Forecasting the Adoption of E-books (505063-PDF-ENG):
A vital component of product management involves making predictions of the specific products penetration into the market. The 1990s projected that e-books would replace physical books, magazines, and other forms of literatures. The first task of the forecasting of e-books involves using the Bass model, which will forecast the initial sales (year 2000) and predict the long-run total adoption of e-books (parameter m). After implementing key statistics (shown below), the total number of potential consumers for e-books in the year 2000 is estimated as 24,700,042.
Total number of potential consumers calculation table:
In order to predict the total number of potential consumers for year 2000, the total U.S. population in 2000 needed to first be found. The 2000 U.S. Census resulted in a population of 281,421,906 (census.gov). The key statistics provided in the document appeared to be the U.S. reading literature population and Internet penetration. This data is the most concrete, which must be included in the calculation. The Internet user likely to buy music online targets the consumers whom are innovators and trusting of the current technology, as well as online purchasing. Finally, the last important key statistic of user penetration of cell phones provides a percentage that will simulate the penetration of a new form of technology amongst the U.S. population. All of these percentages were multiplied into the total U.S. population, again producing the total number of potential consumer for e-books at 24,700,042
The next step involves selecting the ps (effect of advertising) and qs (effect of word of mouth). In order to predict these values, all of the products estimated ps and qs were averaged. Each product provides a different aspect in the prediction of these values. For example, the CD player provides the traveling convenience side; cable television service relates to Amazon.com or any other e-books providers service; home personal computer relates to the innovative side; cellular telephone to convenience and travel; handheld organizer relates to another area of innovations; and final the mp3 player to the portability. All of these different products were involved in producing a p-value of 0.056 and a q-value of 0.415.
Heriford # Effect of advertising and effect of word of mouth calculation table:
Once the m (total number of potential consumers), the ps (effect of advertising) and qs (effect of word of mouth) are calculated, these values will be inputted into the final part of the Bass model to forecast the volumes for the e-books over the first five years (2001 to 2006). The formula Sales = (Probability)(Remaining Consumers) will be used, but more specifically: !"#$%&'( ! ! !! ! !!! !! ! !!! !!!
All of the values: m = 24,700,042, p = 0.056, and q =0.415 will be inputted into this equation, keeping in mind that N is number of years. A trend in the Bass model is that as sales increase, total number of remaining consumers decreases. Another aspect is since there is no word of mouth during the first year; this value is disregarded in year 1.
Using Excel the forecast volumes for the first fives years was calculated. The Excel equation for year one was =($G$18+($G$19*((0)/D20)))*(D20-(0)) and for year two and on =($G$18+($G$19*((B21)/$D$20)))*($D$20-(B21)), in which each specifically referenced a cell. After running the equation, the total cumulative sales for the first five years resulted in 8,461,795 with a remaining market of 16,238,247. Each specific year and graph depicting the sales is displayed below.
Heriford $
After running the Bass diffusion model using the key statistics and estimation of the effect of advertising and effect of word of mouth, a difference can be draw between the estimation and the actual volumes calculated. The estimated sales per year using the Bass diffusion model predicted much higher volumes. During 2004 specifically, the e- book titles sold were 421,000 1Q2004, using my predictions (assuming all quarters sold equally) it would be about 716,188 sales. The reasoning behind the higher volume estimates using the Bass diffusion model may include a wrong calculated total number of consumers and wrong alignment with previously calculated ps and qs. The Bass diffusion model is the most accurate was to forecast product sales, but the values inputted need to be thoroughly research and thought through.
Case 2 - Johnson Wax A (583046 PDF ENG):
The Johnson Wax A case covers the future launch of Enhance, the new instant hair condition, produced by S. C. Johnson & Company. The case covers the importance of executing an in-depth pre-test-market testing procedure, which is commonly performed through the ASSESSOR measurement. Firstly, it is important to briefly understand the roles of: product, advertising copy, advertising budget, and price in determining sales in the market; the roles will then be compared to the case of S. C. Johnson & Company. Each of these components roles will first be individually defined before determining how well ASSESSOR measured the impact of these marketing program elements for Enhance.
The role of the product is to meet someones needs, which is defined as the desired end state that propels a consumer to action. Maslows hierarchy of needs specifically defines the needs of a being, from most important to least, as: physiological, safety, love/belonging, esteem, and self-actualization. The needs are then brought into a product through the process of brainstorming, depth interviews, focus groups, and the modern form of information pump. In the Johnson Wax A case, the need for an instant hair conditioner that solves dry and damaged hair became noticeable through lab research, marketing research, and consumer contact (displayed in Incidence of Problems). Once a product idea forms, concept generation is the next step.
Determining the concept of the product is another step in the role of the product. The concept testing can be used to get a products diagnostics and product concept. A perceptual map is a method in order to find the correct position a design group wants to place their product. The method lists two different attributes on a y-axis and x-axis and the current brands are placed throughout the map. Main attributes of Enhance intend to fight against oily/greasy looking hair and appeal towards women ages 25-45 years old, as well as conditioning vs. clean and conditioning vs. effects). S. C. Johnson & Company decided that Enhance fits into this area on the perceptual map, which is later tested in ASSESSOR. Though not discussed in the case, the methods of House of Qualities and functional decomposition look further into a concept creation and possibilities. Heriford % Once the concepts are determined, two different steps aid in defining the importance of each of the products attributes. Regression analysis allows a researcher to analyze the relationships between a dependent and independent variables (attributes). The most important independent attribute is displayed, given a dependent variable. The other step is a conjoint analysis, which shows multiple concepts to a participant and asks for their overall preference towards the group of products. The products differ by offering different attribute levels. Once completed, the most important attribute and attributes level can be analyzed. This is one of the final steps in determining the attributes and their levels that will aid in determining sales volume in the market.
Once the product role is understood, S. C. Johnson & Companys ASSESSOR test can now be analyzed. The needs and concepts were effectively determined using this testing method in the first step of Market Structure. Different concepts such as conditioning, clean, manageability/effects, and fragrance were ranked on relative importance. This step also suggested that Enhance should to enter the market using more than once concept in order to gain market share against the competitors. The ASSESSOR test produced product maps that placed Enhance slightly more conditioning on each map. This draws a better picture of the consumers concept view of Enhance. Although the concepts were not tested further, such as regression and conjoint analysis, the ASSESSOR should only initially indicate these attributes.
Advertising copy is the next step that aids in determining sales volume in the market. The channel must complement the products consumer segment, strategy, and market mix. The copy aims to follow the process of AIDA (attention, interest, desire, and action) in the consumers purchasing step. The ELM model also aids by deciding whether the communication should follow the central route (i.e. Dell) or peripheral route (i.e. Heinz). The learning effect is another important aspect considered in during which channel to distribute and market the product. Once determined, the company needs to decide whether to create a line extension, brand extension, or co-brand. Enhance decided to sell the proposition, that the addition of this oil, especially for people with oily hair, caused the hair to look oily, greasy, and limp soon after shampooing, to fit into their brand extension of instant-conditioners.
Conducting the ASSESSOR leads S. C. Johnson & Company in a better direction for their advertising copy. As previously stated, the advertisements must display more than one concept in order to create an interest in the consumer. The ASSESSOR stated Agree and Breck Crme Rinse have achieved the clean position, while Clairol Condition has succeeded in differentiating itself as the conditioning brand. The preference on specific attributes also helps to lead the marketing department in selecting the top attributes to offer to their consumer base. ASSESSOR effectively gives a better insight in catching the attention of the consumer by stating the consumer views of each brand.
The advertising budget plans take into account the costs for the consumer to first become and interested as well as create a desire to purchase. The budget must be correctly established in taking an acceptable market share percentage to meet the companys target. Heriford & Unaided and aided recall of the product also affects the advertisement budget. As for Johnson Waxs Enhance, it received an awareness from advertising at .70, which is similar to Agrees 0.70. In order to effectively advertise, they must pass their own product, possibly cannibalizing sales. Sherman must take this into consideration.
In regards to the advertising budgets, ASSESSOR provides a helpful analysis in the market share prediction trail/repeat model chart. All of the given data will aid S. C. Johnson & Company in deciding the ideal budget to set aside for advertising. Although, these values just resemble a prediction of the market versus Agree. The ASSESSOR provides helpful insight in this area, but the advertising budget will constantly change due to competitors, environment, time, season, and etc.
The last part involves pricing, which can be done by cost-based, competition-based, or value-base pricing. Cost-based takes into account the direct costs and overhead heads. Competition-based pricing considers the going rate or a sealed bid strategy. Finally, the value-based pricing takes in the perceived value and the perceived price. As for Johnson & Company, they seemed to take the competition-based approach by determining if they purchased Enhance using a $2.25 certificate.
The trail estimation through ASSESSOR allowed a better look into how the consumers feel towards the price of Enhance. During this step, 307 respondents made a purchase in the store that contained Enhance and Agree, in which Enhance achieved a 23% trail rate and Agree resulted in a 33% trail rate. This test suggested that consumer seem to be more likely to purchase Agree, when presented at the same price. A minor flaw in this test may include that consumers are more likely to purchase a shampoo before a conditioner. In review, this test needs to be taken into consider when setting an official price. Enhance also lacked in repeat purchases both in the lab and after trail.
Looking back on the roles of determining sales volume in the market and the ASSESSOR results, it seems as if Enhance does not create a large enough need for the consumers. This is expressed in the results that the base share for Enhance is 3.8% and the base share for Agree is 8.4%. The reasoning for this is explained in multiple areas during the ASSESSOR test. If John Sherman wonders, Why did I only get about half the share points I need, it can be attributed to several factors. The first factor involves the similar consumers view of Enhance vs. Agree.
The perceptual map displays these similar factors in the perceptual mapping of conditioning vs. clean and conditioning vs. effects. Enhance ranked similarly on both maps, only appearing to be more conditioning than either clean or effects. Agree ranked higher on clean and about .6 points less than Enhance on conditioning. Although condition is more important attribute (33%), clean (27%) is not ranked far behind. The higher ranking of clean attribute seems to be taken into larger consideration during the consumers purchase.
Another aspect of the lack in share points involves the pricing and awareness. During the trail estimation, as previously mentioned, consumers purchased Agree at a ten percent Heriford ' higher trail rate that Enhance. The awareness from advertising for both Enhance and Agree equaled 0.70, but some aspects must be taken into consideration after review of the consumers trail purchase of the product. Consumers seem to more likely purchase a shampoo, Agree, than a conditioner. It may be possible that consumers are not as aware of Enhance than Agree.
The last important factor in the lack of share points involves the advertising recall of Enhance. The main reason for the product is to condition the hair (33% of relative importance), with the other aspect of curing dry as a lesser-stressed attribute. During the ASSESSOR recall, 50% recalled Enhance was for dry hair and the conditioning received a lower recall rate. Consumers did not recall that conditioning is the main important attribute/need that Enhance contains. The advertising recall contributed to the lack of share points.
In review of this case, the ASSESSOR methodology seemed to result as an appropriate tool for John Shermans situation. Although it did not produce the results desired, it can ultimately bring in a better understanding of the launch of Enhance. Consumers do contain the need of conditioning their hair based on the relative importance of each attribute. Also, the ASSESSOR proved that only a couple other brands offered the attribute of conditioning. Looking back from today on the ASSESSOR test, since it took place in 1978, provides a plan of action S. C. Johnson & Company should have taken on the launch of Enhance.
The ASSESSOR test basically ran against S. C. Johnson & Companys shampoo product Agree, which now is place in a whole different product category. Since consumers first need in hair care is a wash, the conditioning comes second. Creating trail estimation against Agree skewed the results did show that a shampoo is more desirable when given a budget. One suggestion on the launch of the product should include joint-sales (package sale) so no cannibalization occurs.
Case 3 Braun Syncro Shaver (DMI017 PDF ENG)
The Braun Syncro Shaver case provides an interesting look into the product development processes. The case looks into the issue of Braun losing market share to Nationals washable shavers and Philips Reflex Action top shaver. Braun led the market as the leading innovator for years, but now trails in the wake of the competitors. The product development team must produce a shaver that will compete against the competitors, appear the most innovative, satisfy consumers, and regain the market leader. In doing so, they develop the Flex Integral: 6017 and the cleaning center concept.
The company culture at Braun seems to wish for these opportunities such as the 6017 and cleaning center, due to their willingness to experiment and take risks. Some companies seem to fear such events, but Braun embraces them. This can be accounted by Brauns cross-functional product development teams, which accounts for their readiness in such times. These teams include both a formal process and an information process during the product development stages. The formal process tends to keep ideas on track. Heriford (
During the formal process, product generation and innovation (PG&I) follows fives phases. The first phase includes blue sky, which is the idea generation stage. Phase two discusses product ideas, consumer needs, benefits, business potential, and design/technical/financial considerations through a team that consists of roughly six people. Phase 3 consists of engineering experiments, models, and marketing research that make facts. Phase 4 involves proto-typing, tool, revamping the models. Phase 5 is launch, shipment, and project review. The top management at Braun comprised these phases and cross-functional teams to allow fast-paced, effective, product design. The informal process complements the formal processes described.
The informal process explains another reasoning for Brauns willingness to experience and take risks. The informal process takes place outside of regular meetings. Brainstorming technically happens everyday, not specifically during designated time slots. Also, it is estimate in the case that 80% of the design decisions were made collectively and intuitively. The teams also should consist of designers whom have been on various projects, so that innovative ideas and synergy exist throughout the team. Braun prepares and enjoys these events of risk taking through formal and informal processes.
The final important factor that relates to Brauns readiness and willingness to take risks includes Schneiders description of their preparation product development. Braun constantly prepares themselves for product, such that Braun get(s) an idea even if its only part of a project and develop it; thats advanced design. The team constantly keeps ideas within the company, whether they relate to the current project or not. Project teams are constantly prepared with numerous ideas, and Schneider states if someone really believes in it, hell continue working on it. Throughout the Braun Syncro Shaver case, Brauns willingness to experiment and take risks rings throughout the paper.
This product developments aggressiveness plays a big part in the development of Braun products. They are always brainstorming new concepts, whether they relate to the current project or not. The willingness keeps the cross-functional product development team on their toes. Schneider describes product development as aiming ahead in order to reach the final product. The willingness and risk taking places Braun above their competitors in idea generation.
In order to compete with their competitors, Braun developed the Flex Integral 6017. Throughout the development process, the team brainstormed different concepts and attributes that need to be placed on the new dry shaver. To gain a better understanding of the consumer preferences, a concept test must be initiated. This will determine the reaction to a product concept by a sample of the target segment on specific quantitative measure. In this survey, four different types of feedback need to be asked.
The first step is to determine the purchase measures of the Braun dry shaver. This question helps in screening consumers for their likelihood of purchasing the product, if priced within their expectations. The annual sales can then be calculated by (number of Heriford ) annual purchases)(awareness x availability)(probability of purchase). Another possible screening question determines the frequency of purchase. For Brauns shaver, these questions can be easily worded into a survey.
The second step involves the product diagnostics. Theses look into the physical product and the perception of the consumer. The testing methods may be initiated through face- to-face, telephone, mail, e-mail, and the Internet. The physical product of Brauns shaver includes: separation of head from body, grip, movability of head, washable, etc.
The third step involves the attribute diagnostics. This section of the concept test surveys the performance on specific attributes and benefits and the perception of the delivery of the attributes. The attributes to be tested in the Braun case may be the ease of use, closeness of shave, cleanliness, comfort, etc. Brauns 6017 must beat out the other competitors in the tough market through customer satisfaction. This part of the concept test must be initiated thoroughly.
The final step in the concept test is segmenting variables. The part digs into the possible demographics, psychographics, purchase details, and satisfaction with current brands. After completing this portion of the concept test, the consumers may be segmented into different groups. Braun understands they are losing market share to Nationals washable shavers and Philips Reflex Action, so it is important to dig into the consumers reasoning to purchase the competitors products. This portion of the test provides insight of their competitors customers.
After conducting the concept test, conjoint analysis is the next step Braun should take towards the product development of the Flex Integral 6017. The conjoint analysis contains multiple concepts that differ on attributes and levels, which are then placed in groups of two for the respondent to select their preferred. In the case of the Braun shaver, the attributes and levels may include: Price Level: o $60 - $89 o $90 - $119 o $120 - $149 Thumb Switch: o Yes o No
Cleaning method: o Cartridge (Puck) o Brush Movement: o None o Oscillating Grip type: o Soft Rubber o Teflon o Rubber Bumps
Testing the consumer based on these levels will provide a better insight into which attributes are more important to the consumer. Also, for each attribute, the highest- ranking level will provide an insight into the consumer preferences.
Further into the product development stage includes the communication strategy. The objectives of initiating a successful communication plan is such that it will create an Heriford *+ awareness, inform consumers, persuasion, and to reinstate the innovation of Braun. The goal is to implement the AIDA model into the market. In the case of Brauns Flex Integral 6017, the ELM model of central processing creates a basis for the communication strategy.
Since Braun remained on top for years, consumers already contain an awareness of the brand. Recently, Braun slacked in competing with the dry shavers and washable shaver market. In order to maintain the top position in the market, Braun has developed the innovative Flex Integral 6017. The communication to the consumers must show the uniqueness and modern technology used in a dry shaver. As stated in the case, Braun is renown in the market for their German Engineering. They must simply reinstate their technological solutions for everyday shaver usage.
Once the marketing/communication strategy is developed then next step involves the distribution strategy. Since Braun already maintains vast distribution connections, due to the combination of Oral-B and Gillette, this step may not be as difficult compared to other companies. One important factor to consider is how the product will go from the manufacturer to the retail stores. Implementing a wholesaler or a retailer in between these steps will reduce the transactions costs to the to reduction in the touch points. Intermediaries will also economize the shipping since Braun, Oral-B, and Gillette all exist together.
A negative aspect of an intermediary involves channel conflict, which is when each member of the channel may not behave accordingly to the desires of the manufacturer. One specific occurrence out of channel conflict is double marginalization, which is when each channel marks up the price higher lowering the end demand. In order to combat this issue a two-part tariff may be implementing for the manufacturer and retailer. This allows the manufacture to place an upfront fee to the retailer in order to complement their low selling costs. The manufacturer, in this case Braun, covers their profit loss due to the two-part tariff and the retailer will sell at lower costs, creating a higher demand.
Braun must decide on what two-part tariff to place on their new dry shaver. In the final section of the case Michael Hansen, director of business management, mentions the pricing of the shaver to hover around $150. It is difficult to fully decide the price and costs associated since no references are supplied in the case. To explain this calculation of price, the Braun shaver will be priced at $123.75 and manufacturing costs will hover around $70.00 per product (including direct and indirect costs).
Table Projecting Potential Pricing Scenario:
Heriford ** The warehouse/distributer cost will be $103.50 (15% profit margin) and the retailers cost will be $129.38 (25% profit margin). The two-part tariff comes into play in order to persuade the retailer to not sell the product at a discouraging low price and not at an extreme price, lowering the demand. If the end demand is 200 per order, a franchise fee of 20% will be imposed on the retailer. The total profits for channel are as follows: Manufacturer - $5,035, Warehouse/Distributer - $3,105.00, and the Retailer - $4,140.00. All channels of the Braun Flex Integral will be satisfied based on the profit margin.
The Braun Syncro Shaver case leaves a lasting impact on multiple points. One idea consists of how innovated and cross-functional development teams need to be. These teams consist of employees who have different backgrounds, which collectively develop excellent product ideas. Another aspect involves the importance of constantly updating a current product. Braun lost market share to Philips and National since they delayed on launching a new product. The competitors beat them in producing a washable shaver. Lastly includes the different considerations that need to be addressed in order to meet the consumers ideal concepts, communication, and the distribution strategy.