1a. Risks and limitations of listening to customers during the NPD process:* Using existing organizational systems often means completely missing the boat on the real customer and his real needs. This is the customer who values the products as a breakthrough.
Products are frequently under-appreciated by firms when the new product is based on an existing platform. This leads to a wait and see attitude and the product is not given adequate support and often under-priced.* The positioning strategy should be driven by the market, rather than by the ambitions of the product champions. The source of the problem is failure to understand how consumers’ value product attributes.
In all, over-appreciating a breakthrough or new technology that cannot be appreciated by consumers. This accounts for a high percentage of product failures.* Listening to customers can mask long-run opportunities since customers rarely imagine these technologies.* When customers are asked to make new product recommendations they tend to run into at least two kinds of blocks.
The first is functional fixedness, the human tendency to fixate on the way products or services are normally used, making people unable to imagine alternative functions. People may not be able to conceive of a solution because they have apparently contradictory needs. The voice of the customer is very important, but discerning the difference between what customers are able to say and what they want demands that companies learn to go well beyond listening.* Disruptive technologies suggest that some ideas should be developed despite current lack of fit with the market.
1b. Techsonic was not particularly vulnerable to all these risks and limitations. They always started with focus groups to find out what their next move would be. In many cases these focus groups were the steps to success.
The findings from these studies were complete opposite from what Techsonic had always assumed their customers wanted in a product. These success products made listening to the customer the foundation of the company’s culture.The customer was placed at the top of the organizational chart and management started to believe that their lack of fishing experience was an advantage. Others in the industry thought they knew what the customer wanted, but Techsonic was the only one who actually asked and listened.
They continued with focus groups to find the answers to the next product generation.Techsonic was soon to be shocked that their customers wanted simpler products with less buttons and features. Listening to customers can mask long-run opportunities because customers rarely imagine new technologies. Although Techsonic had pioneered many of the innovations in the industry, many of its dealers perceived MorPal as the technological leader.
They considered the Humminbird brand to be a good value with high customer acceptance. Techsonic had many products that did not fit exactly what the market wanted and they soon realized that the solution to these customers’ needs lay in a new technology. They were able to use what they learned in the focus groups to improve on the technology of their products and take them back to the customer. It is not necessary for the customers to always imagine the new technologies; they give Techsonic the vision to create.
1c. Techsonic’s success comes from their loyal customer interest with market studies. The company’s founder Yank Dean IV believed in the company’s potential to develop better products for the customers. Jim Balkcom, vice president, had a vision focused on growth through new products and customer loyalty through outstanding service from the beginning.
The deliberate effort to research their customer base was the beginning of Techsonic’s success. They always went to the customer with a prototype or specific product questions.The results were used to develop a new technological product focused on what the customer desired. Before the use of these focus groups, Techsonic had no success with new products.
The products were not what customers needed or wanted. Techsonic spent the highest in the industry on print advertising. Humminbird products were advertised regularly in fishing and outdoor magazines.Boat shows and industry trade shows also played an important role in promoting Humminbird products.
Techsonic used them to demonstrate its products to dealers and customers, as well as to introduce new products, assess the competition, and get feedback from the market. These means of communication allowed Techsonic to get more input from the customer and further its success.2. Criteria used to evaluate the three new products:* Customer Interest: Review what the market research concluded, Do the results compare favorably with those of past new products from Techsonic?The new product needs to be something that the customer is interested in and sees a need or want for.
The results must be favorable to past new products to ensure success.* Market and Sales Potential: Review the projections for sales over three years, Do sales potential from first, second and third years exceed or compare to previous new products from Techsonic?With each new product Techsonic wants to grab more market share and increase the overall market with higher sales volume. Comparing the sales potential to past new products allows Techsonic to get a forecast of the market’s actions.* Product Features: Does the product include features that are essential for purchase? Are customers interested in what this product offers? What makes this product better than competitors?The product must include every feature that is essential for purchase behavior.
Customers must be interested in what the product is offering compared to competitors.* Margins: Are dealers’ margins at least 15% in all channels?Dealers want to make money on selling Techsonic’s products. The projected margin for dealers needs to be 15% to ensure profits.* Profit and Loss Forecast: Is the EBI&T substantially larger than the total capital expenditures?This forecast needs to show that Techsonic will make money from introducing this new product to the market.
If there is a substantial positive difference in the EBI&T and total capital expenditures, Techsonic will show profits.3. Project 901, VHF Marine Radio, Navigation Products:* Customer Interest:-The market research concluded that the 901 was a clear winner because it scored high on the dimensions of uniqueness and purchase likelihood. The results compared very favorably with those of past new products from Techsonic.
It earned the highest intention-to-buy score since the original LCR in 1984.-The market research concluded that most boaters would be purchasing a VHF radio as a replacement for an older unit. The VHF was a popular method of communication among boaters, but used primarily for safety: to communicate for help in an emergency and to find out the weather. Only 7% of Humminbird’s customers owned a VHF radio, and 42% owned a CB radio.
Since the VHF was going to be a replacement for CB radios Techsonic can get that 49% of its customers to using the new product. Many of the respondents attended a boat show, participate or watch fishing tournaments. This leaves a great opportunity for advertising and customer feedback.-Market research concluded that there was considerable lack of involvement with the product category, but expected interest to build in GPS as it became fully operational and as costs declined.
* Market and Sales Potential:-It was estimated that Humminbird’s sales potential is 139,871 units (including 93,030 standard units and 46,841 deluxe units). The LCR in 1984 sold 238,000 units and revenues increased to $52.7 million. It increased market share and brought new buyers into the market.
901 projected revenues for the first three years were $71.2 million. These sales potentials do not compare to the LCR sales in 1984. This project may not bring new buyers into the market or gather more market share from competitors.
* Product Features:-The product features that were to be included in the standard 901 model where those essential for purchase. Additional features were to be included in the deluxe model. The study shows that the 901 is much easier to understand what’s on the screen and looks as though it would be easy to use and would make catching fish easier than other products.-The major problems VHF owners faced concerned the radio’s durability, the battery’s dying, and the absence of waterproofing.
These features are essential for purchase. The new product must offer answers to these problems.-The research concluded that many owners’ complaints included having to refer to the manual all the time, not being able to use the navigation system because a transmitter was not operating, forgetting which waypoint number identifies a particular position and getting incorrect readings. Respondents that were non-owners were significantly more interested in a depth sounder combination whereas LOCATOR owners significantly preferred a marine plotter combination.
Techsonic’s new product needed to include the features respondent’s needed in order to purchase. The top features include being able to work in all weather, providing the highest level of accuracy, not affected by interference, won’t become obsolete and provides total coverage. The feature of being priced appropriately for needs was not high on the list.* Margins:-Techsonic management expected dealer margins with the 901 to be anywhere from 15% to 40%, depending on the channel.
At a similar stage, the company’s last two products to be introduced, the TCR ID-1 and TCR ID-10, had been projected to sell approximately 21,600 units each over three years with gross margins of 42% and 46% respectively. These past products offered a greater dealer margin and therefore are more attractive to dealers. The highest margin for the 901 is 40%; dealers are not going to want to take a higher margin item off the shelf for the 901 margins.-There were a few problems with the distribution channels for VHF radios.
Radios were typically purchased through marine dealers, a channel in which Techsonic was quite weak. Research concluded that a strong presence in marine dealers would be critical for success. However, there was some expectation that marine dealers would be quite wary especially if they saw Techsonic pushing the radios through the mass merchants. Techsonic projected a 15% to 35% dealer margin on the new product.
This new product would potentially force the removal of another Humminbird product from the retailers’ shelves. The retailer is not going to want to have the radio with a margin lower than that of other products like the TCR ID-1 and TCR ID-10 with margins of 42% and 46% respectively.-Management expected dealers to realize margins anywhere from 15% to 40% on GPS products. These margins were much higher than those of the competing LOCATOR products.
* Profit and Loss Forecast:-The EBI;T for the 901 for the first three years is $5,021,000 which is larger than the total capital expenditures of $610,000. The EBI;T for the last two products combined, the TCR ID-1 and TCR ID-10, was $2.08 million with capital expenditures of only $151,643. This difference is smaller than that of the 901.
Techsonic will show great profits with the 901 compared to previous products.-The EBI;T for the first three years for the VHF marine radios is $572,600 and the total capital expenditures are higher with $576,000. Techsonic will not be showing any profits the first three years for this new product.-The EBI;T for GPS is $5,136,128 with capital expenditures of $764,000.
This is a substantial positive difference in comparison to the competing LOCATOR. Its EBI;T was $545, 400 with total capital expenditures of $301,600. Techsonic has a great chance of profits with this new product, especially when compared to the competitor.4a.
All the numbers in the sales forecast are assumptions. These figures are putting a lot of reliance on the fact that the respondents that said they would buy Humminbird or are somewhat likely to buy are accounted for the units actually sold and profits. The proportion of respondents who said they would consider Humminbird was applied to that manufacturer’s potential market share to estimate Humminbird’s potential sales.This is very risky because it is an assumption on buyer intentions and could totally turn around the other way and Humminbird sales decline.
Respondents who indicated they were somewhat likely to buy the 901 at a reasonable price were considered potential customers. No price was given for the respondents to say was reasonable. Every respondent has a different price threshold therefore depending on the actual price of the 901 the sales forecast is biased.4b.
The sales forecast for the 901 is more likely to underestimate demand. The respondents were not given a price when asked how likely they were to purchase the 901 at a reasonable price. The respondents only answering somewhat likely that were included as sales will be lost if the price is above their threshold for the 901, but more customers can be gained if the price is actually lower than they perceived when answering the survey questions. Many respondents do not know what the product offers until they see if in the store.
Once they realize it solves the problems they have had with other depth sounders, they will be change from somewhat likely to buy to would buy.4c. If I were responsible for generating the sales forecast for the 901, I believe I would ask the survey questions differently. I would actually put an estimated price to define the customers’ threshold for the 901.
This would allow me to better define the categories of respondents that would buy or would not buy the new product. We want to observe behaviors not intentions. I think that even using historical data with adjustments along with the survey questions would give a closer sales forecast. Use data from the previous success products and similar survey responses.
You can’t just consider accuracy; you must also consider the direction of the error. With sales forecast, prefer to underestimate the market than overestimate the market.5. I recommend that Project 901 and the Navigation Product both be launched.
I do not think that the VHF marine radio should be launched. Techsonic should launch Project 901 because it is offering customers exactly what they want and gives options. They are offering a standard and deluxe model which serves all markets. It’s most important perceived benefit is that it helps customers find fish faster and see them better.
The 901 made fishing easier and more fun. In studies the product scored high on the dimensions of uniqueness and purchase likelihood.The results compared very favorably with those of past new products from Techsonic. It earned the highest uniqueness of any Techsonic product and the highest intention-to-buy score since the original LCR in 1984.
Project 901’s profit and loss forecast shows a definite profit with the new product. The EBI;T for the two products is $5, 021,000 compared to total capital expenditures of only $610,000. The 901 would represent retail sales of $71.2 million over three years.
The Navigation Product as a GPS system rather than a LOCATOR system.The GPS represented the best solution to many of the problems experienced that both LOCATOR owners and non-owners were concerned with. Interest is expected to build in GPS as it becomes fully operational and as costs declined. The Humminbird GPS system should be positioned as the most state-of-the-art and user-friendly system available and it can be priced at $1,000 or more.
This product offers dealer margins higher than those of LOCATOR therefore dealers will be more attracted to promoting Techsonic’s GPS system.There is profit and loss forecast shows that GPS has a substantial positive difference compared to LOCATOR and therefore Techsonic will be ensured profits with this new product. I do not recommend launching the VHF marine radios. The distribution channel problems are too risky.
If they launch this product then cannibalization can occur when mass merchants want to take another Humminbird product off the shelves. The margins for this product do not compare to those of products already on the shelves. The profit and loss forecast for VHF marine radios shows a loss. Techsonic is better focusing on the products that show profits.