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Prelaunch forecasting of new automobiles
148
J PROD
INNOV lWl;X:138-152
MANAG
skills. The people we find will increasingly demand jobs that are empowered. Empowerment “means that management vests decision-making or approval authority in employees where traditionally such authority was a managerial prerogative. ’ ’ Empowered clerks decide on the discounts that will be allowed, empowered employees approve their own expense accounts, empowered assembly line operators can pull the lever and stop the line when they think necessary. There are certain conditions required for empowerment. First, employees must be properly trained-they must be able to take the actions they will be permitted. Second, there need to be shared visions-company goals such as “best customer service firm in the industry.” Third, there should be shared values-beliefs about standards of behavior. Fourth, the beneJits ofempowerment should be shared with the employee who now is making decisions, and such sharing should be fast, certain, and publicized. There will be more bonuses and stock payments, not promotions to higher salary grades. Fifth, managers of course need to have faith in the employees to be empowered, not frightened and unwilling to take the risks involved. Middle managers must accept a new role as visionaries, coaches and rewarders, and they should now be evaluated and rewarded by how much empowerment has been put into place. Senior level managers should take the lead and publicize empowerment decisions such as reducing approval levels and collapsing job categories. Sixth, the author feels that empowerment can only work when the top management accepts it and commits to it wholeheartedly. The culture must usually be changed. Among other things, this calls for the removal of barriers that create distinctions between employees based on status, education, and professional association. Particularly cited for elimination are distinctions that are deliberately selected for their visibility (e.g., special parking places and separate classes of travel). Other general changes that outline the new culture include the constant asking of “How may this operation be improved?” Another is adopting the response, “Just do it!” Empowerment does not happen when a CEO announces that it will take place starting next Monday. The laboratory scientist, the market re-
ABSTRACTS
searcher, the new products manager-they all have memories of what happened the last time they took it upon their shoulders to make a decision that had to be made fast, or forgot to get an approval from some staff department. They will make empowerment effective only when they are sure it is for real and that management understands just what it means. Prelaunch Forecasting of New Automobiles, Glen L. Urban, John R. Hauser, and John H. Roberts, Management Science (April 1990), pp. 401-421. This is a long and technical article that offers its full value only to those who are trained to understand it. However, there is value for all new product managers developing durable goods, and this abstract will concentrate on those aspects of the article. The report is of an attempt to model the 4-year forecasted sales of a new Buick automobile. First, the authors had to get a good understanding of the automobile industry, as a basis for the modeling. They identified several key characteristics: Automobile test drives.
buyers visit showrooms
Word-of-mouth communication zine reviews are important.
and take
and maga-
Most sales are made “off the lot” so availability is important. Production of cars is such that no test market is practical. Most new cars are replacements models, not new ones.
for present
Production constraints hurt, since facilities need to be decided before sales forecasts can be made with any accuracy. Prices may not be as planned, given the ease and effectiveness of changing them. The group was able to build its model on extensive efforts by automobile new products people
J PROD INNOV lYYl:8:138-152
ABSTRACTS
to develop their forecasts. They traditionally make good use of concept testing, focus groups, perceptual mapping, conjoint analysis, and consumer clinics. Clinics are where customers are shown proposed new models and asked to react to them. The forecasting plan used by the researchers consisted of several steps. First they adopted the clinic idea and selected samples of consumers to see, hear about, and test drive a proposed new Buick Park Avenue with front-wheel drive. (The new car for a control group was actually the current year’s model.) Clinic participants gave their sets of current cars considered when buying, and which car they would probably buy when next making a decision to buy. They were then exposed to the proposed new car, and after various schemes of information flow, made their decisions as to whether they would purchase the new car. Unfortunately, the forecasts produced by the model were lower than management expected, so consideration went to what changes could be made. Immediately the decision was made to continue the old model for a year or so alongside the new one. Then management asked the researchers to prepare models necessary to test whether there should be changes in advertising, dealer visits, word-of-mouth, and production constraints. Using the established concepts of a probability flow model, they did so. Increasing the advertising level was too expensive for only a little gain. But encouraging dealer visits looked promising as did giving more dealer training. These decisions stood, and the product went to market. Afterwards, the researchers were able to study the sales results. Unfortunately, the realities of the marketplace usually require changes in strategy, and here there were changes in advertising level and in rebates. But, putting those changes back into the model, as though they had been planned, the sales forecasts were quite accurate (and still disappointing). This method of evaluating the forecasting procedure is less than desirable, according to the authors, and they continue to seek new and more reliable ways to measure the accuracy of marketing plan forecasting when actual marketing efforts are substantially different from those planned. Subsequently, the authors have applied their
MANAG
149
system to three other new car marketings, and in all cases results are very promising. The secret, of course, lies in understanding the way new car sales come about (buyer behavior, market actions, and the like). Work along these lines continues, and parallel efforts on other durable product lines are reported in a bibliography. Lessons
Houston,
in
New
Product
Direct Marketing
Launching, Paul (May 1989), pp. 78+
This is not a research report. It is a direct statement of how a company developed and marketed a new product. The interesting side of the story is that the firm had just before this had a disasterthey had rushed into marketing a new product the wrong way, and had lost half a million dollars. The firm is ManagersEdge Corporation, whose mission is to provide solution-oriented business information to management. Their core skill is the effective auto presentation of business information. Their first product, the one that made the firm, was Newstrack Executive Tape Service, marketed in 1980. Their failed product was a 1986 effort, and remains unnamed. What follows is a step-by-step description of what they did the next time. 1. Strategy. They wanted a product for which they could use 20% of their existing customers as a springboard. Unknown at this time, of course, management stipulated that it would be a business cassette, it would take less than six months, and it would be profitable within three years. 2. Idea generation. Their idea in effect came through the mail. The president had been receiving many sales promotion mailings about open-enrollment business seminars. He reasoned that if they were so popular, why not develop a seminar in the audio-cassette medium? 3. Concept screening. From their mail list of executives and middle managers, they chose 445 who were contacted and told the firm would be conducting a lo-minute telephone survey. From this they got an 80% completion rate. Interestingly, their telephone staff had to be specially trained to move from selling to surveying. First, they developed the 12 most popular seminar topics advertised in the direct mailings
J PROD
INNOV lWl;X:138-152
MANAG
skills. The people we find will increasingly demand jobs that are empowered. Empowerment “means that management vests decision-making or approval authority in employees where traditionally such authority was a managerial prerogative. ’ ’ Empowered clerks decide on the discounts that will be allowed, empowered employees approve their own expense accounts, empowered assembly line operators can pull the lever and stop the line when they think necessary. There are certain conditions required for empowerment. First, employees must be properly trained-they must be able to take the actions they will be permitted. Second, there need to be shared visions-company goals such as “best customer service firm in the industry.” Third, there should be shared values-beliefs about standards of behavior. Fourth, the beneJits ofempowerment should be shared with the employee who now is making decisions, and such sharing should be fast, certain, and publicized. There will be more bonuses and stock payments, not promotions to higher salary grades. Fifth, managers of course need to have faith in the employees to be empowered, not frightened and unwilling to take the risks involved. Middle managers must accept a new role as visionaries, coaches and rewarders, and they should now be evaluated and rewarded by how much empowerment has been put into place. Senior level managers should take the lead and publicize empowerment decisions such as reducing approval levels and collapsing job categories. Sixth, the author feels that empowerment can only work when the top management accepts it and commits to it wholeheartedly. The culture must usually be changed. Among other things, this calls for the removal of barriers that create distinctions between employees based on status, education, and professional association. Particularly cited for elimination are distinctions that are deliberately selected for their visibility (e.g., special parking places and separate classes of travel). Other general changes that outline the new culture include the constant asking of “How may this operation be improved?” Another is adopting the response, “Just do it!” Empowerment does not happen when a CEO announces that it will take place starting next Monday. The laboratory scientist, the market re-
ABSTRACTS
searcher, the new products manager-they all have memories of what happened the last time they took it upon their shoulders to make a decision that had to be made fast, or forgot to get an approval from some staff department. They will make empowerment effective only when they are sure it is for real and that management understands just what it means. Prelaunch Forecasting of New Automobiles, Glen L. Urban, John R. Hauser, and John H. Roberts, Management Science (April 1990), pp. 401-421. This is a long and technical article that offers its full value only to those who are trained to understand it. However, there is value for all new product managers developing durable goods, and this abstract will concentrate on those aspects of the article. The report is of an attempt to model the 4-year forecasted sales of a new Buick automobile. First, the authors had to get a good understanding of the automobile industry, as a basis for the modeling. They identified several key characteristics: Automobile test drives.
buyers visit showrooms
Word-of-mouth communication zine reviews are important.
and take
and maga-
Most sales are made “off the lot” so availability is important. Production of cars is such that no test market is practical. Most new cars are replacements models, not new ones.
for present
Production constraints hurt, since facilities need to be decided before sales forecasts can be made with any accuracy. Prices may not be as planned, given the ease and effectiveness of changing them. The group was able to build its model on extensive efforts by automobile new products people
J PROD INNOV lYYl:8:138-152
ABSTRACTS
to develop their forecasts. They traditionally make good use of concept testing, focus groups, perceptual mapping, conjoint analysis, and consumer clinics. Clinics are where customers are shown proposed new models and asked to react to them. The forecasting plan used by the researchers consisted of several steps. First they adopted the clinic idea and selected samples of consumers to see, hear about, and test drive a proposed new Buick Park Avenue with front-wheel drive. (The new car for a control group was actually the current year’s model.) Clinic participants gave their sets of current cars considered when buying, and which car they would probably buy when next making a decision to buy. They were then exposed to the proposed new car, and after various schemes of information flow, made their decisions as to whether they would purchase the new car. Unfortunately, the forecasts produced by the model were lower than management expected, so consideration went to what changes could be made. Immediately the decision was made to continue the old model for a year or so alongside the new one. Then management asked the researchers to prepare models necessary to test whether there should be changes in advertising, dealer visits, word-of-mouth, and production constraints. Using the established concepts of a probability flow model, they did so. Increasing the advertising level was too expensive for only a little gain. But encouraging dealer visits looked promising as did giving more dealer training. These decisions stood, and the product went to market. Afterwards, the researchers were able to study the sales results. Unfortunately, the realities of the marketplace usually require changes in strategy, and here there were changes in advertising level and in rebates. But, putting those changes back into the model, as though they had been planned, the sales forecasts were quite accurate (and still disappointing). This method of evaluating the forecasting procedure is less than desirable, according to the authors, and they continue to seek new and more reliable ways to measure the accuracy of marketing plan forecasting when actual marketing efforts are substantially different from those planned. Subsequently, the authors have applied their
MANAG
149
system to three other new car marketings, and in all cases results are very promising. The secret, of course, lies in understanding the way new car sales come about (buyer behavior, market actions, and the like). Work along these lines continues, and parallel efforts on other durable product lines are reported in a bibliography. Lessons
Houston,
in
New
Product
Direct Marketing
Launching, Paul (May 1989), pp. 78+
This is not a research report. It is a direct statement of how a company developed and marketed a new product. The interesting side of the story is that the firm had just before this had a disasterthey had rushed into marketing a new product the wrong way, and had lost half a million dollars. The firm is ManagersEdge Corporation, whose mission is to provide solution-oriented business information to management. Their core skill is the effective auto presentation of business information. Their first product, the one that made the firm, was Newstrack Executive Tape Service, marketed in 1980. Their failed product was a 1986 effort, and remains unnamed. What follows is a step-by-step description of what they did the next time. 1. Strategy. They wanted a product for which they could use 20% of their existing customers as a springboard. Unknown at this time, of course, management stipulated that it would be a business cassette, it would take less than six months, and it would be profitable within three years. 2. Idea generation. Their idea in effect came through the mail. The president had been receiving many sales promotion mailings about open-enrollment business seminars. He reasoned that if they were so popular, why not develop a seminar in the audio-cassette medium? 3. Concept screening. From their mail list of executives and middle managers, they chose 445 who were contacted and told the firm would be conducting a lo-minute telephone survey. From this they got an 80% completion rate. Interestingly, their telephone staff had to be specially trained to move from selling to surveying. First, they developed the 12 most popular seminar topics advertised in the direct mailings