WHAT’S IN IT FOR YOU?

Vision Systems is like a commercial incubator for leading edge products. They are based in Melbourne and their products are based on scientific research and market research. This is a company that competes on the world stage and has won the respect of its employees and stock market. Being given the privilege of defining the specification for an entirely new product for them is the kind of task that I can perform for any other hungry growing company.

HISTORY: As discussed in the Market Research section, Vision Systems (a division of VESDA) is a leading edge high technology group. Many of their technologies are patented. My contract role here was to create business and marketing plans for the creation of a crucial missing product in their almost complete range – the duct detector.

ACTION: I was required to essentially create a new product development plan. By performing detailed competitor analysis and primary research by way of one on one in-depth interviews with leading Sydney and Melbourne decisions buyers, I was able to gather all the required information about a product that my client only had tangential knowledge of.

RESULTS: The research provided Vision Systems with some very valuable information on such things as the level of sensitivity of the units, expected product life etc.

DETERMINING PRICE

The method I used to determine an acceptable price was an adaption of the Van Westendorp Price sensitivity model. In this model, the price test uses a series of four questions to determine an price. Respondents were asked to imagine that a duct detector has been created and that it addresses all of the problems that they had identified.  Most respondents were able to estimate values for the average cost of an individual installed duct detector. From the analysis it was noted that there is likely to be some amount of ‘Price Stress’ in such a product. This occurs when the Optimal price point (OPP) is lower than Indifference Price Point (IDP) and has greater significance when the points are far apart.

In this situation, the concern is that with the high variance of surveyed prices, customers are susceptible to “sticker shock” where a significant number of them will “believe that the normal price is too high” (especially if it is sold too close to the 'The Point of Marginal Expensiveness' (PME). The main recommendation I made regarding price in my final report was that once the price had been established, that only small price movements should be allowed for the life of the product. The analysis suggested that there was very little price elasticity for such a premium product and that if price rises occur it would most likely cause “customers to seek alternative products or abandon the product altogether.”  

CONCLUSIONS

This was a very time critical and data rich assignment that provided the client with invaluable information to literally create a world’s best product. They enjoyed the enviable position of already having an 80% market share in the ultra high end smoke detection market. The concern with this industry was that due to the life critical nature of the product, specifiers are a difficult group to convince to trial a new product.

I was contracted for this role because I had market research, analysis and product management experience. I also had technical understanding of electrical specifications from my career in electronic engineering. Supplementary to this was that coming from outside of the company I would not take on any limitations that internal politics may play and I could approach the project with a clear view, not one constrained by years of working within the industry.