How to Design R&D Projects in Markstrat3

1. How to Design R&D Projectsin Markstrat3 Rémi TrioletPartner, Director R&D

2. Where to find information on R&D projects?

3. In your Company Report

4. The “Report” shows the base R&D project of your marketed brands k/rt/markstrat3/MS3 Intro RnD new.ppt

5. Unit transfer cost = $158Why ?? The “Report” lists all Sonites or Vodites R&D projects • Listing of available R&D projects as well as on-going ones. • New brands can be launched or existing ones can be upgraded with available projects. • The brand will have the physical characteristics specified in the project. • The current base cost is the transfer cost of the units produced, for the first production batch of 100,000 units. • If the cumulative production level is lower, the unit transfer cost will be higher. • If the cumulative production level is higher, the unit transfer cost will be lower. • The minimum base cost is the minimum cost that can be specified in a cost-reduction R&D project with the same physical characteristics. k/rt/markstrat3/MS3 Intro RnD new.ppt

6. In the Newsletter

7. The “Newsletter” gives the physical characteristics, the base costs and prices of all marketed Sonites or Vodites brands k/rt/markstrat3/MS3 Intro RnD new.ppt

8. In the Benchmarking Study

9. The “Benchmarking” study gives estimates of competitive R&D budgets • Useful to determine when first Vodite brands will be launched. k/rt/markstrat3/MS3 Intro RnD new.ppt

10. In the Semantic Scales Study

11. Segment ideal points Six dimensions : 5 physical characteristics plus price Brand perceptions The “Semantic Scales” study provides a graphical representation of segment needs and brand perceptions k/rt/markstrat3/MS3 Intro RnD new.ppt

12. ? The “Semantic Scales” study tracks the evolution of segment needs • The lifetime of an R&D project is several years long. • Design R&D projects that will be attractive in a few years time. k/rt/markstrat3/MS3 Intro RnD new.ppt

13. Need to improve Design Good fit in Max Freq and Power Additional charts give exact coordinates of ideal points and brand perceptions on a 1-7 scale • Compare brand perceptions with segment expectations. R&D will let you fill in the gap k/rt/markstrat3/MS3 Intro RnD new.ppt

14. Singles’ Ideal Max Freq in 2 years : 4.50 Singles’ Ideal Max Freq in 2 years : 30 KHz The “Semantic Scales” study plots the brand perceptions against the brand physical characteristics • Do graphical interpolations on these charts to calculate the characteristic in Kg, Dm3, KHz, W, … that corresponds to a given value on the 1-7 scale k/rt/markstrat3/MS3 Intro RnD new.ppt

15. In the Multi-Dimensional Study (MDS)

16. Three dimensions : Economy, Performance and Convenience Segment ideal points Brand perceptions The “MDS” study provides a graphical representation of segment needs and brand perceptions in three “composite” dimensions k/rt/markstrat3/MS3 Intro RnD new.ppt

17. MDS dimensions are discovered by the MDS methodology and thus are a good representation of segment needs • Brand physical characteristics and prices have an influence on MDS dimensions. • For instance, Performance is strongly linked with Power and Max Freq. k/rt/markstrat3/MS3 Intro RnD new.ppt

18. The “MDS” study also tracks the evolution of segment needs • The lifetime of an R&D project is several years long. • Design R&D projects that will be attractive in a few years time. ? k/rt/markstrat3/MS3 Intro RnD new.ppt

19. Need to improve Convenience Additional charts give exact coordinates of ideal points and brand perceptions on a -20 to +20 scale • Compare brand perceptions with segment expectations. R&D will let you fill in the gap k/rt/markstrat3/MS3 Intro RnD new.ppt

20. Pros Ideal Performance in 2 years : 10 Pros Ideal Power in 2 years : 75 W The “MDS” study plots the brand perceptions against the brand physical characteristics • Do graphical interpolations on these charts to calculate the characteristic in Kg, Dm3, KHz, W, … that corresponds to a given value on the -20 to +20 scale Irrelevantif the MDS dimensionand the characteristic are not stronglylinked k/rt/markstrat3/MS3 Intro RnD new.ppt

21. In the Conjoint Analysis Study

22. The “Conjoint Analysis” study plots the utilities of various levels in each of the four most important characteristics • Higher utilities mean higher customer satisfaction levels • Beware, the four levels are arbitrarily set. Maximum utility may be achieved for a fifth level. k/rt/markstrat3/MS3 Intro RnD new.ppt

23. The “Conjoint Analysis” study indicates what characteristics are the most important ones • In the Sonite market, Price is the most important dimension, followed by Power. • For instance, almost 80% of the decision is driven by Price for Singles. k/rt/markstrat3/MS3 Intro RnD new.ppt

24. Specifying a Sonite R&D Project

25. Repositioning an existing Sonite brand through R&D in 7 steps 1. Decide on which segment to target using the MDS maps . 2. Determine what characteristics are important to that segment using the Semantic Scales or Conjoint Analysis. 3. Identify the dimensions where the gap between “Ideal” levels and your brand “Perceived” levels are the largest ones, using the Semantic Scales or MDS. 4. Decide on which brand characteristics you should modify. Small gaps and/or non-important characteristics can be ignored. 5. Calculate the “ideal” level in each characteristic you want to upgrade, using graphical interpolations. Remember to take the evolution of needs into account. 6. Estimate the future price of the brand when it is repositioned and decide on a “Base Cost” that will give you an acceptable profitability ratio.Or develop the project at the minimum possible base cost (R&D budget will be higher) 7. Launch an R&D project with the new characteristics and the new base cost, using the current base project as a starting point. k/rt/markstrat3/MS3 Intro RnD new.ppt

26. A Complete Example : Repositioning SIBI • SIBI : Based on PSIBI • Weight = 19 Kg - Design = 8 - Volume = 60 dm3 • Max Freq = 15 KHz - Power = 20 W • Base cost = $99 (current cost = $79) • Target Segment : Singles • Most important characteristics : Power, Max Freq, Design • Ideal Power in two years = 4.80 = 65 W • Ideal Max Freq in two years = 4.70 = 30 KHz • Ideal Design in two years = 5.20 = 7 • R&D project PSIN1 • Weight = 19 Kg - Design = 7 - Volume = 60 dm3 • Max Freq = 30 KHz - Power = 65 W • Develop project at minimum cost k/rt/markstrat3/MS3 Intro RnD new.ppt

27. Open the R&D decision form and create a new project PSIN1 using PSIBI as a basis k/rt/markstrat3/MS3 Intro RnD new.ppt

28. Enter the new characteristics and then use an on-line query to estimate the budget k/rt/markstrat3/MS3 Intro RnD new.ppt

29. Your R&D project is now ready to be launched. It will be available next period to modify an existing brand or introduce a new one k/rt/markstrat3/MS3 Intro RnD new.ppt

30. Specifying a Vodite R&D project

31. Specifying a Vodite R&D project • The only available data are the “Semantic Scales - Ideal Values” and the importance of characteristics. • Eg: • Most important characteristic : “Max Freq” • Ideal level for Innovators : 4.90 on the 1 to 7 scale • Ideal “Max Freq” in KHz for this segment ??? k/rt/markstrat3/MS3 Intro RnD new.ppt

32. 7.0 4.9 1.0 5 15 20 Specifying a Vodite R&D project (cont’d) • When no brands are marketed, estimating ideal characteristics through graphical interpolation is not possible. • One has to assume that • 1 on the semantic scales corresponds to the minimum feasible characteristic, e.g.: 5 KHz • 7 on the semantic scales corresponds to the maximum feasible characteristic, e.g.: 20 KHz • Variations are linear in between k/rt/markstrat3/MS3 Intro RnD new.ppt

33. On your marks. Get set. Go! k/rt/markstrat3/MS3 Intro RnD new.ppt