How to Design R&D Projects

How to Design R&D Projects

TABLE OF CONTENT Information Related to R&D Projects Specifying a Sonite R&D Project Specifying a Vodite R&D Project

Sources of information related to R&D projects CompanyReport Newsletter Benchmarking Semantic Scales MDS Conjoint Analysis

The “Report” shows the base R&D project of your marketed brands

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. Unit transfer cost = $158 Why ??

The “Newsletter” gives the physical characteristics, the base costs and prices of all marketed Sonites or Vodites brands

The “Benchmarking” study gives estimates of competitive R&D budgets • Useful to determine when first Vodite brands will be launched.

The “Semantic Scales” study provides a graphical representation of segment needs and brand perceptions Segment ideal points Six dimensions : 5 physical characteristics plus price Brand perceptions

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. ?

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

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 Singles’ Ideal Max Freq in 2 years : 4.50 Singles’ Ideal Max Freq in 2 years : 30 KHz

The “MDS” study provides a graphical representation of segment needs and brand perceptions in three “composite” dimensions Three dimensions : Economy, Performance and Convenience Segment ideal points Brand perceptions

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.

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. ?

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

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 Pros Ideal Performance in 2 years : 10 Irrelevant if the MDS dimension and the characteristic are not strongly linked Pros Ideal Power in 2 years : 75 W

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.

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.

TABLE OF CONTENT Source of Information Related to R&D Projects Specifying a Sonite R&D Project Specifying a Vodite R&D Project

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.

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

Open the R&D decision form and create a new project PSIN1 using PSIBI as a basis.

Enter the new characteristics and then use an on-line query to estimate the budget.

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.

TABLE OF CONTENT Source of Information Related to R&D Projects Specifying a Sonite R&D Project Specifying a Vodite R&D Project

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 ???

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

On your marks. Get set. Go! Respect the deadline Good luck!

How to Design R&D Projects