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Avoid costly product planning mistakes. Understand what customers value.
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Ge#ngTheProductRight:UnderstandingCustomerChoice
May, 2009
Page 1
StrategicBusinessDevelopment,ExecuAon,M&A
Overview
• Definingtheproblem• Commonapproaches
• Thefeature‐valuemethod
• Anexample
• Applyingthemethod
• Timeline
• Summary
© 2009 Andrew Haines
CostlyMistake
• AsoMwarestartupspent9monthsinbetatestbeforediscoveringoneofthemostimportantfeaturerequirementsfortheirproduct
• Thisissomethingthatyoucanavoid
© 2009 Andrew Haines
UnderstandingCustomerNeeds
• DocustomersvaluefeatureAoverB?• Whatistherightpricepoint?
• Whatmarketsharecanyouexpect?
• WillfeatureAbeworththecost?
• HowcompeAAvewilltheproductbe?
© 2009 Andrew Haines
CommonApproaches
• Gatheringinput– Askcustomers– Askthesalesteam– MarkeAng&engineeringdialogue
• Obstaclestounderstanding– HardtojudgequalitaAvedata– Customersarecageyonprice– Instandardsurveys,customersaskforeverythingatalowprice
– NohandleoncompeAAveness
© 2009 Andrew Haines
TheFeature‐ValueMethod
• ShowcustomerssampleproductconfiguraAonsthatincludeprice
• Introducestrade‐offdecisions• Correctlydone,thisyields:
– RelaAvevalueofthefeatures– DemandcurveasafuncAonofprice– Preferenceshare– ROIforvariousalternaAves
© 2009 Andrew Haines
DesignAutomaAonProductExample
• Interviewed30engineersdrawnfromtop100customers
• Eachcustomeraskedtoratethea\racAvenessof16hypotheAcalproducts
• Eachcustomeraskedtoratepurchaseprobabilityofselectedproduct
PossibleFeatures
Turnaround Less 1 hour Several hours Over night One day (24
hours)
Stimulus Fast Write and Slow
Write Fast Write only Slow Write only System Only
Display Graphical Textual Legacy Tabular
Data Acquisition Remote Local Buffered Conditional
What’sMostImportant?
• Turnaroundiskeyfeature• TurnaroundAme
accountsfor45%ofallthechangeina\racAvenessraAngs
• Priceisimportantbutnotasimportantasturnaround
• Display,SAmulusandDataAcquisiAonrankinthatorderofimportance
0%5%10%15%20%25%30%35%40%45%50%
Dat
a A
cqui
sitio
n
Stim
ulus
Dis
play
Pric
e
Turn
Aro
und
Percen
tofRa,
ng
HowMuchIsEnough?
‐2
‐1.5
‐1
‐0.5
0
0.5
1
Lessthan1hour
Severalhours
Overnight OneDay(24Hrs)
Chan
geIn
A2rac,vene
ssRa,
ng
TurnAroundTime The Feature-Value method
provides insight into the how much is enough for each feature
In this example, several hours are almost as good as less than 1 hour
This data allows return on engineering effort to be optimized
OpAmalFeatureSet
• OnehourturnaroundAme• Fastandslowwrite• Graphicaldisplay• RemotedataacquisiAon
Lookingatthedatarevealsthefeaturesetthatoffersthemosta\racAveproductwiththeleasteffort
WhatWillTheyPay?
‐0.8
‐0.6
‐0.4
‐0.2
0
0.2
0.4
0.6
0.8
1
1.2
15K 35K 55K 75K
Chan
geIn
A2rac,vene
ss
Price($) Trade-offs judgments
required of customers by this method provide more reliable data about price
In this example, after a steep drop between $17K and $35K, the curve flattens
PriceOpAmizaAon
00.51
1.52
2.53
3.54
4.5
15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55
K$
Price(K$)
ExpectedRevenuePerProspect
TheopAmalrevenuegeneraAngpricecanbeesAmatedfromindividualrespondentraAngs
CalculateROIAndMore
• Usingsimulatedmarketshare,priceandtotalavailablemarketdata,esAmaAonofexpectedreturnsisstraightforward
• ComparingreturnsagainstthecostofdevelopingandmarkeAngprovidesROI
• MarketsegmentaAonanalysiscanbedoneifthedatasetsaresufficientlylarge(>150)
© 2009 Andrew Haines
Results
• TheFeature‐ValuemethodidenAfiedkeyproductfeaturecharacterisAcpriortoproductdevelopment
• Start‐upinsameareaspent9monthsinbetatestbeforediscoveringthisfact
• ProductlineconAnuestogeneraterevenue,differenAaAonandformsbasisfornewmarketpenetraAonstrategies
© 2009 Andrew Haines
ApplyingTheMethodFocusOnFeatures
• Understandthefeatureset– Customerdiscussions
– ApplicaAons/Sales/Engineeringinput– Survey
• Selectfeatures– Ignorefeaturesthateveryproductmusthave
– Focusoneither/orfeatures– Focusonhighcostfeatures– Select3to5features– Eachfeatureisusuallyrepresentedat3values
© 2009 Andrew Haines
ApplyingTheMethodCollectTheData
• Keycustomercallsorvisits– Focusonthosewhodriveyourbusiness– Samplesizemustbeabout20
• Internetsurvey– Broadcoveragefordiversemarkets– OpportunitytodiscoversegmentaAonstrategies
© 2009 Andrew Haines
Timeline
0 2 4 6 8 10 12
Analyze
Survey
SelectFeatureSet
Weeks
ProvenMethod
• Widespreaduseinconsumerresearch– 30yearsofuse
• Somenoteworthyexamples– MarriotAme‐shareunits–decors,services,andprice
– MasterCardandDiner’sClub–travel&entertainmentfeatures
– Polaroid’sinstantcameradesign–consumerreacAons
– Tagamet(SKF)andZantac(Glaxo)ulcerdrugs–pricing
• ApplicaAonsinsemiconductorsandEDA– FPGAfeatureset,DSPdesignenvironmentfeatures,RTLsourcelevel
debuggerfeatures
© 2009 Andrew Haines
AboutTheRoadWarriorGroup
TheRoadWarriorGroup(RWG)isateamofexperiencedinternaAonalexecuAveswiththebusinessandtechnicalskillstoprovide....
• Toolstoanalyze,measureandimproveresultsforyourcustomer
• ExperAsetoevaluate,adviseandexecutemarketdrivenM&AacAviAes
• EffecAvemarkeAngmethodstoimproveproductfeatureselecAonandROI
• Experiencetore‐structureandmanagecosteffecAvesalesorganizaAons
© 2009 Andrew Haines
Summary
• Makesounderproductdecisions
• Improve:– CompeAAveness– MarketShare– Be\erROI
• Formoreinfo:– [email protected]– www.roadwarriorgroup.com
© 2009 Andrew Haines
End
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