Ge#ngTheProductRight:UnderstandingCustomerChoice

May, 2009

Page 1

StrategicBusinessDevelopment,ExecuAon,M&A

Overview

•  Definingtheproblem•  Commonapproaches

•  Thefeature‐valuemethod

•  Anexample

•  Applyingthemethod

•  Timeline

•  Summary

© 2009 Andrew Haines

CostlyMistake

•  AsoMwarestartupspent9monthsinbetatestbeforediscoveringoneofthemostimportantfeaturerequirementsfortheirproduct

•  Thisissomethingthatyoucanavoid

© 2009 Andrew Haines

UnderstandingCustomerNeeds

•  DocustomersvaluefeatureAoverB?•  Whatistherightpricepoint?

•  Whatmarketsharecanyouexpect?

•  WillfeatureAbeworththecost?

•  HowcompeAAvewilltheproductbe?

© 2009 Andrew Haines

CommonApproaches

•  Gatheringinput– Askcustomers– Askthesalesteam– MarkeAng&engineeringdialogue

•  Obstaclestounderstanding– HardtojudgequalitaAvedata–  Customersarecageyonprice–  Instandardsurveys,customersaskforeverythingatalowprice

– NohandleoncompeAAveness

© 2009 Andrew Haines

TheFeature‐ValueMethod

•  ShowcustomerssampleproductconfiguraAonsthatincludeprice

•  Introducestrade‐offdecisions•  Correctlydone,thisyields:

–  RelaAvevalueofthefeatures– DemandcurveasafuncAonofprice–  Preferenceshare–  ROIforvariousalternaAves

© 2009 Andrew Haines

DesignAutomaAonProductExample

•  Interviewed30engineersdrawnfromtop100customers

•  Eachcustomeraskedtoratethea\racAvenessof16hypotheAcalproducts

•  Eachcustomeraskedtoratepurchaseprobabilityofselectedproduct

PossibleFeatures

  Turnaround   Less 1 hour   Several hours   Over night   One day (24

hours)

 Stimulus   Fast Write and Slow

Write   Fast Write only   Slow Write only   System Only

 Display   Graphical   Textual   Legacy   Tabular

 Data Acquisition   Remote   Local   Buffered   Conditional

What’sMostImportant?

•  Turnaroundiskeyfeature•  TurnaroundAme

accountsfor45%ofallthechangeina\racAvenessraAngs

•  Priceisimportantbutnotasimportantasturnaround

•  Display,SAmulusandDataAcquisiAonrankinthatorderofimportance

0%5%10%15%20%25%30%35%40%45%50%

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Stim

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Dis

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HowMuchIsEnough?

‐2

‐1.5

‐1

‐0.5

0

0.5

1

Lessthan1hour

Severalhours

Overnight OneDay(24Hrs)

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TurnAroundTime  The Feature-Value method

provides insight into the how much is enough for each feature

  In this example, several hours are almost as good as less than 1 hour

  This data allows return on engineering effort to be optimized

OpAmalFeatureSet

•  OnehourturnaroundAme•  Fastandslowwrite•  Graphicaldisplay•  RemotedataacquisiAon

Lookingatthedatarevealsthefeaturesetthatoffersthemosta\racAveproductwiththeleasteffort

WhatWillTheyPay?

‐0.8

‐0.6

‐0.4

‐0.2

0

0.2

0.4

0.6

0.8

1

1.2

15K 35K 55K 75K

Chan

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Price($)  Trade-offs judgments

required of customers by this method provide more reliable data about price

  In this example, after a steep drop between $17K and $35K, the curve flattens

PriceOpAmizaAon

00.51

1.52

2.53

3.54

4.5

15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55

K$

Price(K$)

ExpectedRevenuePerProspect

TheopAmalrevenuegeneraAngpricecanbeesAmatedfromindividualrespondentraAngs

CalculateROIAndMore

•  Usingsimulatedmarketshare,priceandtotalavailablemarketdata,esAmaAonofexpectedreturnsisstraightforward

•  ComparingreturnsagainstthecostofdevelopingandmarkeAngprovidesROI

•  MarketsegmentaAonanalysiscanbedoneifthedatasetsaresufficientlylarge(>150)

© 2009 Andrew Haines

Results

•  TheFeature‐ValuemethodidenAfiedkeyproductfeaturecharacterisAcpriortoproductdevelopment

•  Start‐upinsameareaspent9monthsinbetatestbeforediscoveringthisfact

•  ProductlineconAnuestogeneraterevenue,differenAaAonandformsbasisfornewmarketpenetraAonstrategies

© 2009 Andrew Haines

ApplyingTheMethodFocusOnFeatures

•  Understandthefeatureset–  Customerdiscussions

–  ApplicaAons/Sales/Engineeringinput–  Survey

•  Selectfeatures–  Ignorefeaturesthateveryproductmusthave

–  Focusoneither/orfeatures–  Focusonhighcostfeatures–  Select3to5features–  Eachfeatureisusuallyrepresentedat3values

© 2009 Andrew Haines

ApplyingTheMethodCollectTheData

•  Keycustomercallsorvisits– Focusonthosewhodriveyourbusiness– Samplesizemustbeabout20

•  Internetsurvey– Broadcoveragefordiversemarkets– OpportunitytodiscoversegmentaAonstrategies

© 2009 Andrew Haines

Timeline

0 2 4 6 8 10 12

Analyze

Survey

SelectFeatureSet

Weeks

ProvenMethod

•  Widespreaduseinconsumerresearch–  30yearsofuse

•  Somenoteworthyexamples–  MarriotAme‐shareunits–decors,services,andprice

–  MasterCardandDiner’sClub–travel&entertainmentfeatures

–  Polaroid’sinstantcameradesign–consumerreacAons

–  Tagamet(SKF)andZantac(Glaxo)ulcerdrugs–pricing

•  ApplicaAonsinsemiconductorsandEDA–  FPGAfeatureset,DSPdesignenvironmentfeatures,RTLsourcelevel

debuggerfeatures

© 2009 Andrew Haines

AboutTheRoadWarriorGroup

TheRoadWarriorGroup(RWG)isateamofexperiencedinternaAonalexecuAveswiththebusinessandtechnicalskillstoprovide....

•  Toolstoanalyze,measureandimproveresultsforyourcustomer

•  ExperAsetoevaluate,adviseandexecutemarketdrivenM&AacAviAes

•  EffecAvemarkeAngmethodstoimproveproductfeatureselecAonandROI

•  Experiencetore‐structureandmanagecosteffecAvesalesorganizaAons

© 2009 Andrew Haines

Summary

•  Makesounderproductdecisions

•  Improve:– CompeAAveness– MarketShare– Be\erROI

•  Formoreinfo:– andyh@roadwarriorgroup.com– www.roadwarriorgroup.com

© 2009 Andrew Haines

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