Making sense out of a complex customer base in bringing a new higher performing product to a fragmented set of markets
Our client is a leading producer of specialty coatings that are applied to commercial and industrial fabrics, metals, and other solid surfaces, and are used primarily for protection and aesthetics. Over the years, the client’s basic product had become increasingly commoditized. So, they developed two new formulation concepts that could change the direction of their business performance.
The client’s goals were to
- Determine customer demand for the new offering
- Find the right target application market customers for the concept customers would buy
- Identify who among potential customers would be most ready to test and purchase the product
- Price, position, and communicate the new value proposition
However, given the complexity of their application markets and the relatively small number of customers in each market, the client was unsure how to position, market, and price the new concept products. The costs quoted by major market research firms were well out of the client’s budget, and the client was unsure research findings would be valid.
Uncovering a Solution with Hybrid VOC℠
The client’s challenge was a good fit for our Hybrid VOC℠ process, which integrates qualitative interviews with quantitative pricing and positioning data collected from key decision-makers. With Hybrid VOC, we used data analysis to generate
- An offering description that delivers customer value
- Positioning and motivating communications
- Price demand curves in a competitive environment
Learnings Uncovered
Interactive What-if Price Scenario Model Enabled by Analytics
From discreet choice model conjoint, the prices of different feature configurations for the competitive set were revealed.
Concepts and existing offerings were evaluated at different prices and the share of demand that would result.
Comparative price elasticity of existing offerings; new formulation concepts; and most likely alternatives in the commoditizing market were generated.
Price Demand Earnings
We generated interactive price demand curves (shown above) to define what the concept products do, how well they work, and what could be charged for them, compared to two of the client’s existing products (a standard product and a premium product). This included
- Price range at a given share of demand and earnings
- Earnings reflecting adjustable SME (share, marketing, expense) decisions
- Degree of market awareness adjusted to impact the price demand curve
Competitive Pricing Models
Interaction of 20% Price Reduction or Increase with Share Demand
The competitive pricing model explored the interaction between share and different prices of the client offerings and the most likely alternative. What-if scenarios play out as prices are adjusted.
Positioning
Attribute importance positioning uncovered key drivers of value desired by customers. The value for individual and bundled features revealed the premium price customers would pay for the concept products. Feature value-based segments identified substantial segments and their drivers. Finally, segment positioning was based on attribute importance, feature value, and attribute segmentation.
Results
The client team assessed data-supported price options under different circumstances with
- Interactive data: The analytic relationship between product features, price, and positioning was documented.
- Accelerated data-based commercialization: Established a basis for modified market communications and brochures. Facts were delivered in 30 days from five application markets.
- Cross-functional team: Marketing and technical functions aligned to collect customer feedback together.
- Process learnings transferred to internal team: The client internalized the process so it became a new commercialization and concept-testing tool.
