Welcome back to our course on Quantitative Customer Insight Techniques. I'm James Lenz with the University of Illinois. And we will do today Lecture Two associated with our Module Two on Concept Testing. And, again, the whole theme of this concept is you'll be building up experience and understanding about new product development with the many different aspects of it in order to be able to do a survey yourself. And this lecture will end with a video of an example of a conjoint analysis survey that was done and will have you spend time studying that video. As I mentioned before is what an important aspect what market research can address is how do you determine an unmet need. This is our breakpoint between the management of innovation and what I call the management of commercialization. Can you align a product feature of your idea directly with this unmet need? And this is what I want you thinking about your own idea is how can you define and write down that unmet need. One way to understand this a bit better is through surveys. But before I do that, I want to do a little discussion of the word quality. So a word about the word quality. And in business, we use this word quality in a little bit different way than what the dictionary defines. The dictionary defines as something as you have learned what quality means. It's a degree of excellence of something. But in business, it started with Edward Deming in the 1950s. He started referring to the word quality as the totality of a product's features that satisfy customer needs. So it's not so much about the product being very good. It's not so much about the customer wanting something, but it's about putting those two things together and how well they fit together is a measurement of quality. As a result of that is the Asian countries took to this theme much more before the United States companies took to this concept of Deming's work around quality. And today there's a quality award called the Deming Award that's given to companies that fit this need of really matching the totality of a product's features that really meet and satisfy customers' needs. When we refer to the word quality, we'll be using in this context, this concept of customer needs and product features. So you've gone through, and I want to tell you a little bit about what types of surveys we can do here. You've seen two product descriptions of bubble inkjet printer and a widget were two ideas, I think, are interesting to talk about of ideas that have made it into products. There's three basic methodologies to do market research. You've heard of these already, I think. The voice of the customer is more of a qualitative than quantitative method. And I'll show you an example of that. A common quantitative method is what's called the quality functional deployment or the house of quality. But the one we want to focus on here through the rest of this course is what is called conjoint analysis. This is a way that gives you very specific quantitative measurements about the market analysis. And we'll be spending more time describing that and understand how that works. So the voice of the customer is basically four steps to it is to define the market of interest. Are you dealing with airport operations? Are you dealing with the cookies like macaron cookies? Are you dealing with the beer that's consumed in the home? What is your market of interest? Then define what your research questions are, and then you interview various job types related to the target market. So not just the people that you think would be the people to buy that product but all sorts of other people associated with that. And I'll explain that in an example. And then you come back and transcribe those interviews and bring back the analysis and try to find out where is there critical, what are called critical-to-technology product features. So an example that I worked, on and we were one of the first people to actually implement voice the customer activism. This was done in the early 1990s. We were trying to grow, when I was working with Honeywell, we're trying to grow our business with airlines and airports, especially the airport operations, the outside of the airport, the ramp operations. How can we look for ideas and new needs and solve many of the complexities associated with the logistics of loading an airplane, parking an airplane, push an airplane bag, getting an airplane about up to the point where it can take off. So we came up with 30 questions that were asked in order. So we all had a script, and that's difficult I think because when you were having a real discussion with someone, typically, one question leads to the next question leads to the next question. There's voice the customer was rigorous to make sure you went through this in the same order. So there was a consistency to how the questions got asked and how the answers got it recorded. And a group of five of us went out and did these interviews. Typically, there's two of us. One would read the questions, the other one to make sure that a tape recorder was running or also take notes if any important points were done. And we identified 35 customers. In the case of the airport, this was people that worked in security at airports. It was people that worked in the tower of airports, the ramp operations, people that loaded baggage, people that ran the airline themselves, people pilots, flight attendants and so on. So all sorts of people are involved in this, and it took over eight months to find and identify these people encourage them to do this interview with us. And then we had all those interviews transcribed and in five long days in a workshop, our whole new little business opportunity group came together and put them on post-it notes and stuck them, where is there an unmet need? What is this point trying to make? And from that, then we defined R&D projects. So this whole activity took a year, and many of us technologists felt like we could have actually done some technical work in that year instead of just collecting this data. But it did help guide our R&D projects. And I said an important part of any technology development is defining this unmet need and justify in that investment. Another example is what's called a quality function deployment or the house of quality. This, again, was made a little bit famous by Toyota in the 1980s. Here's an example of this bubble jet printer for an oilfield application. So we might list what are our technical features and then what are our market needs. And these market needs come from, again, by talking to different people and understanding things. And now you can fill out this form with pluses, minuses, or sort of neutral points. Does that technical feature, is it important to making that market need matching that market need? So now it gives you ideas of where is the most important technical features if you're trying to meet this type of application for your device. In fact, also, you can then rank these market needs by importance for that specific application. It's a very nice tool when you're trying to decide where should you work on your technical projects. Which technical features are the most important for addressing this unmet need? But the one I'm talking about is conjoint analysis. So this is a market research technique that's been determined and developed for several years to help line up a market need and also some sensitivity of the market to price. And that's an important ingredient of this type of research. The previous ones don't really understand price. How do you bring price into the analysis? This conjoint analysis has a methodology of bringing price into it, and I'll show you this. What I think about conjoint analysis, typically, you simplify the problem down to this or that. And it's an important aspect to do that. And I think of about as a taste test. Do you like this or not like this? I lived a long time in Minneapolis. Minneapolis has many bakeries, many food companies there and there was always fundraising activities you could bring a group of people in and do a taste test. And you might taste five different types of popcorn or five different types of candy bars or different types of cereal. And so you would always bring in sample A and sample B. Do you like this one or this one? Do you like this one or this one? So they'd go through this all night long with a number of people. And at that point, so they were doing conjoint analysis. They were coming back with a way of defining what is this ingredient. They're trying to look, I think, for sometimes it's a lower price. Is it lower cost, lower ingredients? How do you understand this taste test? So conjoint analysis is really three major steps. There's collecting the trade-offs. So you have to survey market preferences. And then there's a little bit a hard step here, which is a mathematical model. And I've done much of this work already for you, and we'll be using this mathematical model that I've developed. But, here, from this mathematical model, you could estimate the buyer value systems and then eventually from that data, you want to make some sort of choices. You have to make some decisions. And what's important about making the decision, they are your decisions. It's up to you to make these decisions. The data doesn't make the decisions for you. It's your interpretation of this data, and you own these decisions and this interpretation of what's going on, what is the right thing to do from this analysis. So I want to show you an example that was done. I've ran a conjoint analysis. I've an example of what are called macaron cookies. They're a favorite cookie if you're ever been in France, especially Paris. There's many, what you call, boulangeries that have these types of cookies. And so in one little neighborhood, I wanted to see which cookie offers the best value. In fact, how do customers define value, and that's what I want you to do is to run a test like this as well as we go through the rest of this course. And so you'll have some fun to see the entertainment of doing this but also the value that comes from this type of conjoint analysis. So to conclude this lecture, I want you to watch this video, study it. What two parameters are used in this competition, if you want to call it a competition? How is the survey organized? What data is taken? And, now, the next lecture will show you how the data is analyzed, and you'll see many charts inside this video that's going to come from the analysis of the data, and we will go through how those charts are generated as well as then what conclusions can be lead drawn from it. So enjoy the video, and we'll catch you in the next lecture.