Managing offering-based SCA Flashcards
What is innovation?
Innovation is the “creation of substantial new value for customers and the firm by creatively changing one or more dimensions of the business”
What is offering equity?
And what must be true to ensure a SCA?
It refers to the core value that the performance of the product or service offers the customer, absent any brand or relationship equity effects
It is relatively easy to copy given enough time and money –> must be linked to brands and relationships to ensure SCA
What are the benefits of offering equity?
New offerings often motivate customers to switch from competitors to the innovative firm, new offerings can help the firm enter new markets, and new offerings also tend to enhance a firm’s brand.
What is a stage-gate development process and how can it support a firm in developing innovative offerings? Mention the stages.
A model that divides the development process into a series of stages, and each project is evaluated on multiple dimensions, by independent evaluators in each stage
- Concept and definition
- Design & development
- Validation and production
- Final audit
Via the evaluators, try to find the offering that best fits customer and market trends. Try to identify trade-offs among potential product attributes.
When dividing the development process into a series of stages, firms can increase the speed of offering development and increase likelihood of succes, while reducing development costs
What characterises a blue ocean market?
Market space does not exist (unknown boundaries), demand is created rather than fought over (often no direct competition), hard to test, often requires intuition, high risk
What characterises a red ocean market?
Named to reflect the metaphor of blood in the water: very competitive and populated by “sharks” fighting over the same customers
What are sustaining and disrupting technologies?
Sustaining: this well-understood technology will lead to continuous, incremental improvements over time.
Disrupting: with its very different price and performance characteristics this technology often improves very quickly.
Does the size of the firm matter for whether innovation is possible?
Small firms: little bureaucracy, fast reaction to changing/entirely new niches (behavioral advantage)
Large firms: Attract highly skilled specialist, economies of scale and scope in R&D (ressource advantage)
Does the size of the firm matter for whether innovation is possible?
Small firms: little bureaucracy, fast reaction to changing/entirely new niches (behavioral advantage)
Large firms: Attract highly skilled specialist, economies of scale and scope in R&D (ressource advantage)
What are the different ways to innovate? And how can it be visualized in an innovation radar?
Changing what firms offer, changing who customer is, changing how to sell to customers, changing where to sell to customers.
What is a critique of the stage-gate model and what are alternatives?
It has been criticized for being too linear.
Alternatives are a spiral process with cycles through stages or overslapping stages (e.g., design might begin before the end of idea generation)
How can choice-based conjoint analysis be helpful in developing innovative offerings? Mention the 6 steps and what is important in each step.
The idea is to make an experiment where to simulate choices that are made very similar to actual market place choices. E.g., if you were in the market to buy a new PC today, which one would you choose?
- Formulate the problem
*Determine the relative importance of attributes in the consumer choice process
*Estimate market share of competing products that differ in attribute levels
*Determine the composition of the most preferred brand.
*Set the optimal pricing strategy for the existing and new products
*Segment the market based on similarity of preferences for attribute levels - Design the experiment
*Select attributes and attribute levels
Attributes should be relevant (should influence consumer preference & choice), influential (important for new product development), independent (utility of an attribute should be independent of others e.g., weight and sound in bluetooth speakers), the number of attributes should be restricted (easier for respondent to come up with a reliable answer) and lastly prevalent (e.g., price levels should be realistic)
*Construct the stimuli and choice sets
Full factorial design: Include all combinations of attribute levels: 3(Brand) x 3(Display) x 3(memory) x 2(OS) x 3(price)=162 profiles –> Not practical when the total number of combinations are large
Fractional: Do some fraction of profiles and use computers
Random sampling: Pick some random profiles
General recommendation: 4 alternatives each described on 5 attributes
None option (optional)
Number of choice sets: Not more than 20!
*Evaluate the design of efficiency
1.Statistical efficiency
2.Utility balance
3.Minimal overlap
4.Managerial efficiency
- Collect the data
- Estimate the utility function
- Deterministic and random part
- Select choice model (=conditional logit model)
- Logit choice probabilities
- Estimation of parameters: Maximum likelihood
- Interpret the results
- Simulate the market
*Construct products with different features
*Insert utility levels (part-worths)
*Find sum of utility for each product
*Calculate logit choice probabilities exp(utility) for each
*Compute sum and calculate market share
*Afterwards do market simulation
What are limitations of the CBC-analysis?
*Assumes that customers are perfectly informed about all attributes
*Assumes that all product are equally available
*Respondents may be different from potential buyers
*Result will probably not reveal how much actual market share will increase
*Cannot fully account for differences in awareness developed through advertising and promotion
