[MUSIC] Welcome back to our course on Quantitative Customer Insights Techniques. I am James Lenz with the University of Illinois. Today, we're going to start on Module 3, which is dealing with Test Marketing. Throughout this course there'll be kind of a parallel theme that goes on between experiencing yourself the development of a new product. And we want you to feel this, learn this, understand this, and think this through. And also, in parallel to that, is the basic understanding as a New Product Development from my own experiences. I will be illustrating these points as we go along. Throughout the module, you'll learn about various tools and methods to collect data about the market. You'll do market segmentation, understanding which market your idea would perfectly fit into. And we'll develop some data methods to do this. But the bottom line we're trying to understand is can your idea make money? Throughout this module, there'll be quizzes, as well as at the very end. And this module is going to be a little bit shortened because I want to have time, have you have time to go out and collect data. You will run a focus group and collect data around your own idea. And at the end of module, I'll illustrate exactly how to do that. So hopefully, from the last module, Module 2, you've filled in this survey, you've given a plan for it. You've gotten feedback from your peers about how well it's done. You've updated it from that feedback. Maybe you've changed it completely. All those are good things. As you develop a survey, it's very good to get some feedback from your colleagues. So hopefully, by now, you have some type of format that looks like this. The key is you have this survey form that illustrates what parameters you're going to take. because I've said with the experiment that I've done myself, it was on about taste testing of cookies and we looked at the two parameters of appearance and taste. Maybe you're following that same theme or you've picked up another theme to do, which is fine. But come up with two parameters and illustrate those parameters, and have them be able to compare those parameters, and collect data against those two parameters. So you recall this story, we talked about before is you can see within 50 meters of each other, two stores more or less selling the exact same products, but one tends to have 20 times more business than the other one. So I did a little bit of test marketing on this. I didn't do surveys, I didn't do taste test, I just interviewed people in a very simple form of why were they interested in this place and the other one. And basically the one on the left which just has this long line, people all told me they're here because it's the best one in France, that was their story. And how they found the place was through social media. So many of the TripAdvisor, Yelp, the different apps that give you advice about where to go to, to find the best things, or the most interesting things or at least the most popular things, this is the number one on the list. When I talk to people on the one on the right, King Falafel, which is just a few meters away, actually less than 50 meters away, I asked them why were they having this falafel. And they said they didn't want to wait in the long line that was up at the other one, but they'd gone there first. So this falafel is really only getting spillover from the people who didn't want to wait. Sometimes it's one hour wait to just get a small little sandwich. I also did some more market research. So that there has to be more than just social media. But maybe 90% of this is social media that's driving this behavior. But I did find out that also this last two falafel has another little catch, that they claim that their food and their place is a little bit blessed by the local Rabis. And so that tends to give another little niche to their business. I don't think it changes their product at all, and it doesn't change their place, but just it's a sign. It's a sign that says this, and from that sign you can see maybe it generates a lot more business. So again, your ideas are maybe more than just a technology. It's also about the position of the product in the marketplace. So today I want to talk a little bit more about test marketing. And maybe there's three specific questions we want to address is when should you conduct a test market, what is the best method, and how should you use the information? And I want to remind you again about anything to do with data is the purpose of taking data is to drive decisions. And it's up to you to use that data to make decisions. And this, of course, is the main theme behind conjoint analysis, is that you collect data but it helps you drive decisions. So it's not just about collecting data, it's about using the data for decisions. And I think it's important as well to collect data that's relevant to the decisions that you want to make. This is maybe a little bit different than the concept of big data, where you go out and collect all sorts of data without really no purpose of why you're collecting the data. And then from that you try to draw decisions. At this course, we'd like to work a little bit more focused on collecting data that's relevant to the decisions that you're trying to make. An important part about thinking about your marketplace, who are your customers? And there sort of four categories, the concept of lead users, early adopters. There's the majority, the mass majority, and of course, every product wants to be targeted for this because that's where something like 70%, 80% of the market is. And then there's the laggards. Lead users are only 5% of the markets. So you might get all of them, and they might be really interested in your product. But if the early adopters are not interested in your product, you'll just have a very small niche market that you're going to be addressing. So you want to think about this type of activity. And typically, products need to go through this phasing where its first lead users, first early adopters, then the majority. And then even you go through a phasing cycle of your product of bring it into the laggards. So when should you do test marketing? Well, here is our graph that we've put together from our experiences about what it takes to develop a new product. These barriers we've talked about is what to start with, and this is one of the first ones we're dealing with. You need to start with an idea. And then identifying a true unmet need which is the technical feasibility phase, this is what this course is focusing on. And the course that follows this will be focusing on the market feasibility activity, which prepares you for a business case for doing a product launch. So as I call this invention plus commercialization makes the total innovation. So as part of this, I think there's two major methods for doing test marketing. One is called focus groups and the second one is called mailings or face-to-face surveys. The focus group is the one that I prefer here, especially when we're doing inventions. And it'll be the on that you will be using as part of your own data collection. Find the small group of people that are relevant to the idea that you're trying to work on and get data from them. The mailings, of course, and face-to-face surveys we've all been part of that, maybe more so than part of the focus groups. But the trouble with that, again, is that you can't control how the input is done, you don't really know context of how that information was provided to you. And typically, the return rates on just mailings especially just doing things through the computer is very low take rates. So you don't really have a good sampling. Have you only got the lead users? Did you only get an early adopters? Who in your survey did you start to address? Whereas, with the focus group, you can get a feeling of where does the customers that you're interviewing, where do they fit into as a profile of the product adoption? I answered these two questions very quickly, really, it's when should you do this? What is the best method? Now, a little bit times I said, the most important thing about any of these surveys is how do you use the information from a test market? Well, I'm going to say it depends on the type of new product development project. So I'm going to give you a little bit of background now on the types of new product development projects that there are. What I want to distinguish between as project developments is the technology that's available and the market that's being used. So in the company or inside your organization or even yourself, there's some existing in the company technology and there's current customers. So this is the lower left hand box and it deals with what's called market penetration, what I call projects that deal with cost reductions. So you're trying to hold onto those customers and try to maybe grow that type of customer and that type of capability. It is very easy to do. Typically, companies spend about 60% of their R&D in this area of cost reduction types of R&D projects. Looking for ideas related to this type of new product development. If I move over to the right where I stay with my same technology, my same capability. I don't have to remodel my factory, I don't have to change very much about my operations. It's called market extensions, what we want to call undiscovered customers. So the customers that are not currently your customers. Now, if I think about bringing new technology in, now, I want to do this in a way where I stay with my current customers, so I can do test marketing and market research with my current customers, but find what their new problems are. And this is what I want to call product improvements or line extensions. Typically, companies then spend about 15% of their R&D both in product improvement areas as well as market extensions. And typically, there's a lot of competition in the company between these two areas, between the marketing department and the technology department, pushing ideas to encourage which is the most important to push and balance your portfolio products. Over in the right-hand area, which is the area that most of my career has been in, by the way, is the product creation. We want to call new to the company or even new to the world type products. And this process is much different. Here we're looking at new technology and trying to find new customers, or customers that have never used this before because it is new to the company or new to the world. And this is a much more complex type of problem. There's a lot more uncertainty in this type of problem because there's uncertainty in the market as well as there's uncertainty in the technology itself and how well it will work. Well, let me give you an example, if I were a company making a nutrition bars, how would these different projects differ? How would they differ between these four strategic categories? If I were just doing cost reductions and trying to penetrate the market more, I would just use cheaper ingredients. But I don't want to lose customers. And many business schools believe this is entrepreneurship, is just make the same product that people are buying, but do it cheaper. Find a cheaper way to do it, with ingredients, with supply chain, with some activity. And that certainly is a very good business. There's been a lot of success from people just making things a little bit less expensive and becoming very successful from this. If I were the same company now, if I were looking at new technology, I might replace these chocolate chips with nuts or fruit pieces. So it's a little bit of new technology. I have to bake things different, I have to change my factory a little bit, I have to learn about this different, in this case, it's the food, but it's a little bit different technology about how to deal with this and incorporate it into the nutrition bar. If I were looking at market extensions, I might take the same product and I might just take it to the Asian market, if I'm a US company, for example. How do I take it to the Asian market? I need to change the packaging, I maybe have to change the taste a little bit to adapt to that. But maybe not too much, but just to make it a little bit. So I have to understand that market and adjust things. And if I were trying to really do some far out things, which I recommend most company's spend about 5% of their R&D on is this new to the world category, I might just look at boxed premium chocolates. Completely different type of product. Different factory to make it. Different type of customer that I've been selling to. So how do I look at these things? And typically, these things are high risk, but they can be tremendously high payoff activities. So now I'd like you to watch an interview I had with Mr. William Wright. William Wright is a very unusual, a very unique person in the world, I believe. I had a chance to meet him. They just created a new position at Tupperware. Tupperware is based in Orlando, Florida. And they just brought together basically, the two parts of the company, the innovation side, the technology side, and the marketing side. And so they created this new department called the product innovation and supply chain. Bring in both the marketing theme and the product innovation theme together. So I've had a chance to interview him about market research and new product development and how he and his multiyear career has sort of shaped this kind of new capability, and was what business schools have been practicing for a long time was bring these things together. You can't really just push technology. You can't really just push markets. You need to really bring these capabilities together to get the most out of the company. So please watch this video, and we'll see you again at the next lecture as part of Module 3. Hey, welcome, Bill, thanks for joining us today. I'd like you to talk about your experiences in new product development and especially your position. So why don't you start by maybe describing your new position here at Tupperware and how that came to be? >> Well, first of all, thanks for allowing me to have this opportunity. I greatly appreciate it. It's one of my passions, product innovation is really something I've fallen in love with over the past 20 years, but today I'm actually the executive vice president of not only product innovation, but the global supply chain for Tupperware brands. >> Yeah, so I think that's what's unique. I don't know many companies that have done that, where they have taken both the sort of innovation department and the marketing department and kind of put them together in one organization. >> I've been with Tupperware for 21 years, and throughout this, I started, surprisingly on the finance side. We were spun off in 1996 before some of your students, I'm sure, were born. And actually to start the treasury group here at Tupperware. From there, I moved into a re-engineering of IT, finance, procurement, and HR. And then over to the strategy group, where I actually kind of went against what Tupperware stands for. We're a direct selling company for those of you who don't know. And we entered a retail channel, Target. And we rolled out Tupperware products, Tupperware branded products in the Target stores, 1,200 stores in the US. It was highly successful, but against really our brand heritage and our sales force, so we pulled back. But I did that in a strategy group. From there, I actually moved over to global marketing for the first time. That was really my first exposure to marketing and product innovation. I was brought over there because we were struggling to get new products out. From there, after spending about three years, I moved over to run marketing and business development for Europe, Africa, and the Middle East. Came back about eight years ago now, to become in charge of product innovation and marketing. And then 3 years ago, because somebody who had run the supply chain for over 20 years, a great leader, but again, when you run something for 20 years, you really don't transition the organization and transform it to meet today's needs. So they asked me based off my prior experiences of transforming organizations to come over and lead the supply chain. With that we've also put a chief marketing officer in place who was in charge of product innovation. With that person we moved back to Europe earlier this year, so I'm now assumed the responsibility, believe it or not, of both the supply chain and product innovation and global marketing again on an interim basis. >> Yeah, I think that's a fascinating capability to me. This is what our course at Coursera and our course in the University of Illinois are trying to get students to understand today that you need to be able to bring both of those aspects together as you do business today. >> Right. >> So it's fascinating. So can you distinguish between marketing and supply chain? >> It's difficult, and I was just presenting at the CFO conference for Tupperware. Tupperware is actually a global brand, we operate in 86 different markets around the world, so we brought our CFOs in. And I stood up on stage and I talked about the transformation of our supply chain. The reduction of our manufacturing footprint, looking at it from a consumer to consumer, from a supply chain perspective, from the time we captured the order to the time we actually delivered the order and not just from a manufacturing perspective. So I had that discussion. And then I actually left the stage and I came back and said, okay, guys, now, I'm going to tell you the vision of where we're going to go from a marketing perspective. So you all have to be somewhat bipolar at cases and argue with yourself because there are some conflicts that you face. As long as you have the best interest of the organization in mind, it does work out. >> Are some markets easier to forecast and predict your business? >> Forecasting is always a disaster at every company. I wish it was more of an exact science. It's always one of the most difficult things to do. A couple were forecast a little bit different because we control our channel as I said. So when we forecast our metrics or our drivers that we use to actually forecast are sales force members that we have, and more specifically, active sales force members that we're predicting. But forecasting is very difficult in both established emerging markets. Those markets that we've been in for over 65 years versus those that we entered five years ago. We struggle with forecasting in all of them. It is definitely an inexact science, which is why you need to have flexibility within your supply chain. >> Do you want to give any advice to these students that are listening to you? >> If somebody wants to get into product innovation, right, which as I mentioned to start is one of my passions. The first thing you have to do is be ready to accept the challenge because product innovation is probably the most difficult thing and you heard how diverse my background is. It's probably the most difficult thing I've ever done because you start with a clean sheet of paper and you have to determine where you're going to invest the company's assets. >> Thank you so much today, Bill, for joining us. And I look forward to more discussions in the future with you. >> It's great, Jim. It's been my pleasure, thank you. [MUSIC]
