And it's up to you to use that data to make decisions.
And this, of course, is the main theme behind conjoint analysis,
is that you collect data but it helps you drive decisions.
So it's not just about collecting data, it's about using the data for decisions.
And I think it's important as well to collect data that's relevant to
the decisions that you want to make.
This is maybe a little bit different than the concept of big data,
where you go out and collect all sorts of data without really no purpose of why
you're collecting the data.
And then from that you try to draw decisions.
At this course, we'd like to work a little bit more focused on collecting data that's
relevant to the decisions that you're trying to make.
An important part about thinking about your marketplace, who are your customers?
And there sort of four categories, the concept of lead users, early adopters.
There's the majority, the mass majority, and of course, every product wants to be
targeted for this because that's where something like 70%, 80% of the market is.
And then there's the laggards.
Lead users are only 5% of the markets.
So you might get all of them, and
they might be really interested in your product.
But if the early adopters are not interested in your product,
you'll just have a very small niche market that you're going to be addressing.
So you want to think about this type of activity.
And typically, products need to go through this phasing where its first lead users,
first early adopters, then the majority.
And then even you go through a phasing cycle of your product of bring
it into the laggards.
So when should you do test marketing?
Well, here is our graph that we've put together from our experiences
about what it takes to develop a new product.
These barriers we've talked about is what to start with, and
this is one of the first ones we're dealing with.
You need to start with an idea.
And then identifying a true unmet need which is the technical feasibility phase,
this is what this course is focusing on.
And the course that follows this will be focusing on the market feasibility
activity, which prepares you for a business case for doing a product launch.
So as I call this invention plus commercialization
makes the total innovation.
So as part of this, I think there's two major methods for doing test marketing.
One is called focus groups and the second one is called mailings or
face-to-face surveys.
The focus group is the one that I prefer here,
especially when we're doing inventions.
And it'll be the on that you will be using as part of your own data collection.
Find the small group of people that are relevant to the idea that you're trying to
work on and get data from them.
The mailings, of course, and face-to-face surveys we've all been part of that,
maybe more so than part of the focus groups.
But the trouble with that, again, is that you can't control how the input is done,
you don't really know context of how that information was provided to you.
And typically, the return rates on just mailings especially just doing things
through the computer is very low take rates.
So you don't really have a good sampling.
Have you only got the lead users?
Did you only get an early adopters?
Who in your survey did you start to address?
Whereas, with the focus group, you can get a feeling of where does the customers that
you're interviewing, where do they fit into as a profile of the product adoption?
I answered these two questions very quickly, really,
it's when should you do this?
What is the best method?
Now, a little bit times I said, the most important thing about any of these surveys
is how do you use the information from a test market?
Well, I'm going to say it depends on the type of new product development project.
So I'm going to give you a little bit of background now on the types of new product
development projects that there are.
What I want to distinguish between as project developments is
the technology that's available and the market that's being used.
So in the company or inside your organization or even yourself,
there's some existing in the company technology and there's current customers.
So this is the lower left hand box and it deals with what's called market
penetration, what I call projects that deal with cost reductions.
So you're trying to hold onto those customers and
try to maybe grow that type of customer and that type of capability.
It is very easy to do.
Typically, companies spend about 60% of their R&D in this area of cost reduction
types of R&D projects.
Looking for ideas related to this type of new product development.
If I move over to the right where I stay with my same technology,
my same capability.
I don't have to remodel my factory,
I don't have to change very much about my operations.
It's called market extensions, what we want to call undiscovered customers.
So the customers that are not currently your customers.
Now, if I think about bringing new technology in, now, I want to do this in
a way where I stay with my current customers, so I can do test marketing and
market research with my current customers, but find what their new problems are.
And this is what I want to call product improvements or line extensions.
Typically, companies then spend about 15% of their R&D both in
product improvement areas as well as market extensions.
And typically, there's a lot of competition in the company between these
two areas, between the marketing department and the technology department,
pushing ideas to encourage which is the most important to push and
balance your portfolio products.
Over in the right-hand area, which is the area that most of my career has been in,
by the way, is the product creation.
We want to call new to the company or even new to the world type products.
And this process is much different.
Here we're looking at new technology and trying to find new customers, or
customers that have never used this before because it is new to the company or
new to the world.
And this is a much more complex type of problem.
There's a lot more uncertainty in this type of problem because there's
uncertainty in the market as well as there's uncertainty in the technology
itself and how well it will work.
Well, let me give you an example, if I were a company making a nutrition bars,
how would these different projects differ?
How would they differ between these four strategic categories?
If I were just doing cost reductions and
trying to penetrate the market more, I would just use cheaper ingredients.
But I don't want to lose customers.
And many business schools believe this is entrepreneurship,
is just make the same product that people are buying, but do it cheaper.
Find a cheaper way to do it, with ingredients, with supply chain,
with some activity.
And that certainly is a very good business.
There's been a lot of success from people just making things a little bit less
expensive and becoming very successful from this.
If I were the same company now, if I were looking at new technology,
I might replace these chocolate chips with nuts or fruit pieces.
So it's a little bit of new technology.
I have to bake things different, I have to change my factory a little bit,
I have to learn about this different, in this case, it's the food, but
it's a little bit different technology about how to deal with this and
incorporate it into the nutrition bar.