Developing a “Voice of the Customer” Analysis for a New Insulation Material

QUESTION

1. Jack works for a polymer firm that has developed a new insulation material that has the potential to make newly constructed homes more energy efficient. He is asked to develop a “voice of the customer” analysis.
2. Describe how many interviews he ought to plan for, whom he should interview, and in what sequence.
3.  Jack’s colleague suggests he talk to the company’s salespeople to get insights more quickly than doing a VOC analysis. State whether you agree or disagree and why.
4.  Suppose the new product can reduce a typical home’s energy bill by 15% per year (and take the typical annual energy bill for a home as $2500). It is expected that 1000 sq ft of this product would suffice for installation in a single home. It is further expected that builders can charge a $1000 premium on the home price if this material is used due to its brand value. Suppose the competing product currently being used is priced at $0.20 per square foot. What is the value-in-use for this new product per square foot (i.e., the theoretical maximum price that the firm can charge)?
5. When interviewing customers, one could ask them directly what new products they need. State two downsides of asking such a question.
6. Suppose that the cost to manufacture the new product is $0.14 per square foot. State a price that you would suggest to Jack for this new polymer material, and explain why (use the information from part c).

ANSWER

Developing a “Voice of the Customer” Analysis for a New Insulation Material

In the realm of innovative products, understanding customer needs and preferences is pivotal for success. Jack, who is working for a polymer firm that has devised a revolutionary insulation material aimed at enhancing energy efficiency in new homes, is tasked with developing a “voice of the customer” (VOC) analysis. This analysis will provide invaluable insights into the expectations and requirements of potential customers, thereby guiding the firm’s product development, marketing, and pricing strategies. Here, we’ll delve into the key steps Jack should take, the sequence he should follow, and address the suggestion of consulting salespeople.

Determining the Number and Sequence of Interviews

To conduct a comprehensive VOC analysis, Jack should plan to conduct a series of interviews with different stakeholders. Given the potential impact of the insulation material on new homes, a sample size of around 20-30 interviews would be appropriate. Jack should strive to cover a diverse range of perspectives, including:

Homeowners: Those who have an interest in energy-efficient solutions and have the potential to invest in new insulation materials.

Builders/Contractors: Professionals responsible for constructing homes and making material decisions on behalf of customers.

Architects and Designers: Individuals who influence the choice of materials in construction and design.

Energy Efficiency Experts: Professionals who understand the technical nuances and benefits of insulation materials.

Environmental Advocates: Individuals with a focus on sustainability and green solutions.

The sequence of interviews should begin with energy efficiency experts and architects. Their insights can inform the technical aspects of the product and help refine its features. Subsequently, builders and contractors can provide practical perspectives on installation and market readiness. Homeowners should be interviewed last, as their feedback will help fine-tune the product based on real-world considerations.

Consulting Salespeople: Agree or Disagree?

Jack’s colleague suggests that he consult the company’s salespeople to expedite the VOC analysis process. While this approach has its merits, it’s important to note that salespeople may be biased toward existing products that are easier to sell. Additionally, their understanding of customer needs might be limited to what they have encountered previously. While initial conversations with salespeople can provide insights, relying solely on their input might not capture the full spectrum of customer needs. Therefore, it’s advisable for Jack to supplement salespeople’s input with direct interviews with a diverse range of stakeholders.

Calculating Value-in-Use

The value-in-use of the new insulation material can be calculated by considering the annual energy bill savings, the premium charged by builders, and the cost of the competing product. Given that the new product can reduce a typical home’s energy bill by 15% per year (or $375), and builders can charge a $1000 premium, the total value generated is $1375. Deducting the cost of manufacturing ($0.14 per sq ft) and the cost of the competing product ($0.20 per sq ft), the net value-in-use per square foot of the new product is $1.01. This implies that the firm can theoretically charge up to $1.01 more per square foot for the new insulation material compared to the competing product.

Downsides of Asking Customers Directly

While asking customers what new products they need seems intuitive, there are a couple of downsides to this approach. Firstly, customers might not always be aware of emerging technologies or solutions, which could lead to missed opportunities for innovative products. Secondly, customers’ responses might be influenced by their immediate needs rather than their latent desires. This could result in a focus on incremental improvements rather than transformative solutions.

Pricing Recommendation

Considering the annual energy bill savings, the premium charged by builders, and the value-in-use of the new product, I would suggest a price point of around $0.95 to $1.00 per square foot for the new polymer insulation material. This pricing strikes a balance between capturing the substantial value the product provides while remaining competitive with the existing market price of the competing product. It also takes into account the additional benefits and premium associated with the brand value of the new material.

In conclusion, developing a robust “voice of the customer” analysis is crucial for launching a successful new insulation material. By interviewing a diverse range of stakeholders, carefully sequencing the interviews, and considering various factors such as energy savings and premium pricing, Jack can gain valuable insights to shape the product’s development, marketing, and pricing strategies. While consulting salespeople can offer initial insights, it’s important to supplement their input with direct conversations with a variety of stakeholders. Through a meticulous approach to understanding customer needs, Jack can pave the way for a product that truly resonates with the market.