Technsonic industries report...
46108130 Techsonic Industries: Take Home Case 1. Single minded- devotion to listening to the consumers could lead to problems and may not have been the reason for Techsonic’s success. a) Effective product development strategies may rely on input from your existing customer base. These existing consumers are willing to help develop a new/better product. Although, there may be some limitations with this approach. By asking customers, the innovation process becomes diluted as they are only limited to their own experience. These could be incremental changes that aren’t innovative enough, and competitors are able to enter. It also becomes an issue when consumers do not want new features or functions on their products as they don’t believe improvements are necessary; their current product is already the status quo. Consumers are usually unaware of the evolution of technologies in an industry, they focus on existing technology. It becomes difficult to assess the value that a breakthrough in technology may have on consumers. (as may be the case with GPS product). This accounts for a high percentage of product failures, without considering barriers to adoption. Consumers also tend to under-weigh benefits and firms tend to over-weigh them, finding the middle ground may be challenging. b) Through their research, especially in focus groups, they surprisingly learned what their customers really wanted. Their LCR product had emerged as a success due to points that were brought up in focus groups, such as less buttons and simpler layouts. From them on, Technsonic placed their consumers as the foundation of their culture. The GPS product has a technology breakthrough that consumers may not be aware of. Techsonic may be vulnerable to over-valuing the particular product and consumers being more skeptical. Also, solely listening to customers limits their innovative mindset, they had become a mid-level product. MorPal had become the technological leader, some considered Hummingird’s ‘fish in red’ a gimmick’ but worked well with consumers because it was simple. c)Techsonic’s success come from a number of different factors. Their ways of communicating were paramount to their success. Starting with their company culture of putting customers and their outlooks as a priority. They would listen and use feedback to better their products. They would gain knowledge first hand, through focus groups (MRF), and address specifics about their products. Their vision to focus on growth through new products and proving outstanding service set them apart from their competitors. Their reputation for quality and standards of service kept a loyal consumer base. They have a strong supply chain in place, mostly through mass merchants and catalogers who have lower gross margins than marine dealers. They were perceived as the pioneer for many of the industry’s first products, which gave them a loyal customer base as well. Their promotion of products played an important role in their success. They would feature regularly in fishing magazines and would show their new products at trade and boat shows.
2) Criteria used to evaluate three new products
Features of Product (Exhibit 8): Necessary to include only features that provide value to the end-user. It should better that of other companies in the market. What is unique about their product? Profit and Loss (Exhibit 9): To see if the product is viable it has to be profitable. They need to measure the margins needed to work with marine dealers or merchants. Capital Expenditures must be less than Earning before tax. Do they expect to be profitable? In what year? Customer Interest (Exhibit 5 for 901) and Purchase Intent: They need to create a demographic for their consumer base. They need to compare previous products and test new products on the market to gauge reaction. The extent to which the product meets the customer’s needs. Market Potential and Size: Techsonic have potential customer information for the first, second and third years. They need to measure sales over these years and how high potential for market growth is. Are they also going to attract new consumers to the market? If so, how many will they capture?
3)Product 901 a) This is a product extinction of the depth sounders which primarily find fish faster and see fish better. It scored high on uniqueness and how likely consumers would purchase it (customer interest high). It bettered the past new products of Techsonic, most likely replicating that success. Although technology played an important role in the uniqueness of the product, consumers were no longer amazed by it. Also, consumers who are “very likely” and “somewhat likely” are a big part of the sales forecast. These above assumptions may make the market seem bigger than it actually is. The price was not precisely tested in the market, and it was rather estimated on responses of a price range would pay for. b) It is more likely to overestimate demand for the 901. The assumption of ‘somewhat likely’ consumers as potential sales for years 2 and 3, is overestimated. Also, the sales forecast is based on the money people said they would spend on their next depth sounder rather than Techsonic offering a reasonable price to them. It was based on a reasonable range. Many consumers also may not know the benefits of using the new 901 product until they try it or see someone trying it. As of now, they may not have problems with their current fish finder and not sure if the new product will fix any problems they are having until they test it. c) For the 901, I would recommend removing the deluxe model completely as the most important features are already included in the standard model. The deluxe line will not sell as much and may prove a failed product. Techsonic should provide consumers and marine experts with a trial run for the product and measure the responses from the consumers. I don’t believe that, in Exhibit 6, they should include ‘somewhat likely’ purchases for the Hummingbird in their forecast. This is an unpredictable assumption that the 2nd and 3rd year sales are based on. I believe they should have also included a specific price they would sell. I would consider more interviews than 375 should be conducted (500-750 is a wider scope) and they should focus on, more than proportion, freshwater consumers as that is where the majority of fishing takes place.
46108130 4) I strongly recommend that the GPS navigation product should be launched. The Locator system seems obsolete in technology and the evolution of the technology will provide a market opportunity. As technology also develops, costs of the navigation product will reduce and therefore the prices accordingly. It solves the problems of using an unreliable and inefficient Locator system, that consumers also found difficult to use. This category also doesn’t have a dominant market leader, nor are competitors (such as MorPal) are considering GPS products. The forecast shows that the GPS is very profitable, more than the Locator. The option to create a joint venture is beneficial, as this would put Techsonic in a unique position with experienced partners who create low cost GPS products. It also opens the door for other GPS consumer applications. This system is also profitable, especially in year 2 and 3, according to the forecast. I do not believe that another simpler locator is needed, but rather the GPS replacing it completely. I similarly recommend the launch of Humminbird 901 system. The new product addresses the issues that consumers have with fish finding. It is able to see fish better and find fish faster. It is a unique product and serves the market with two different product options. The research among consumers show similar patterns to that of previous successful new products by Techsonic. The forecast, even though may be overestimated, shows that the 901 is extremely profitable from the first year and grows exponentially over the next two years. Capital I do not believe the VHF product is viable in the market. The concerns among the distribution channels are justifiable. Techsonic has a weak presence with marine dealers (due to margin concerns) where the majority of radios were purchased. Among other channels, Techsonic may have to remove another product to launch their radio as mass merchants are unwilling to increase allocation of stock keeping units. It requires more shelf space. Their pricing strategy as a midpoint product is quite high. Their pricing is among high-end radios and their current reputation will not work in favor of this. They may also need to reduce margins so they can get space among retailers, this could change their profit forecast substantially. The first year also shows a loss in earnings and does not exceed capital expenditures. 5) Their NPD process relies heavily on what consumers tell them. It can be beneficial as past experiences indicate success, but may create limitations as mentioned in part(1). Listening to the customer only, may deter them from technological advancements and they will base their products solely on what consumers know through their own experiences. They also needed to be more specific with their pricing strategy and proceed to giving consumers test products. I believe they need to test the product in the market with trial-runs among lead-users and marine experts. This will improve the feedback they receive and go back to the drawing board if need be. It will improve the information base of their own product and realistically how consumers value their products. They need to be more skeptical with their forecasts and market presence, especially with 901. Their forecasts need to take into account the best and worst circumstances possible (they can create 3 forecasts). They should position themselves as the pioneers, but only if their NPD process is more assuring.