Creating a product concept ladder
If you have not read the informative guide on the Optimisation function, you should do so before proceed further as the ladder function is an extension of the optimisation function.
You often need to simulate different scenarios before deciding which new product to add to your portfolio. This process may involve many costs and benefits evaluations, especially when you have a lot of new product ideas. Hence, Conjoint.ly introduced the ladder function to help you quickly and easily find the order of products to add to your product range to meet your business goal.
The ladder function clearly shows you the optimal order to add products to your portfolio, and the incremental benefit given by each one to your preference share, revenue and profit.
Similar to the optimisation function, the conjoint ladder function will ask you several inputs:
- A starting scenario
- Potential extra concepts to add in the process of optimisation
- What to optimise: A formula that calculates preference shares, revenue, or profit for a selected group of products
- Constraints (The target count of concepts in the product concept ladder)
Then Conjoint.ly runs a genetic search algorithm that finds the best scenario that maximises the formula from Step 3.
Case study: Granny’s Mix yogurt
To illustrate the steps to create the product concept ladder, this guide will be following the same Granny’s Mix example used in the Optimisation function guide.
This time, Granny’s Mix used Conjoint.ly’s powerful ladder function to discover which NPD product should be launched first to maximise revenue and which should be the second, third, fourth, and fifth NPD to launch, and the incremental benefit of each NPD with the following steps:
Step 0: Choose starting scenario
Within the scenario you are looking to optimise, select→ .
Please note that all the settings within the simulator scenario (including the advanced settings) are used in ladder too.
Step 1: Choose concepts
First, you tick on the product concepts that are possible to be removed by the optimisation process.
In this example, Granny's Mix can only remove its own product but not Orange Fox's. The Orange Fox's box is unchecked.
Step 2: Configure extras
Step 2a: Add or remove extras
Next, you can add or remove any additional concepts known as "Extras" to be optimised. Feel free to add as many extras as you wish to test. You may also rename the extras here or at the final output.
Granny's Mix intends to identify the next new product ideas based on existing product attributes and levels. Hence, it removes the default Orange Fox's extra and added six extras.
Step 2b: Tick the must-have extras
After adding the extras, you may check the boxes for those extras that must be present within the optimised simulator. Otherwise, keep the extras' boxes uncheck.
Granny's Mix wants the Granny's Mix Bifi+Lacto+Eco extra to be included in the final simulator and it ticks the extra's box.
Step 2c: Specify changeable extras' attributes
For each extra, you may specify the attributes. There is no limitation on how many extras you can add. Feel free to add any concepts with various attributes.
Step 3: Objective function
The objective function will look for what to maximise for the optimisation wizard.
You can specify your objective function by using the standard mathematical operators (i.e. +,-,*,/,^) as well as built-in functions (i.e
Step 4: Optimisation constraints
In the previous steps, you may include as many concepts and extras as possible into the optimisation wizard to avoid missing any possibility. This step allows you to specify the number of concepts in the final optimised scenario.
For instance, Granny's Mix specified eight product concepts (two original concepts and six extras) but prefer to have the up to five concepts in their ladder. Hence, the target count of concepts is five in this example.
Step 5: Optimising
Take a break for few minutes while the powerful optimization wizard works out the most optimised scenario for you.
Please note that the wizard uses a genetic search algorithm and hence:
- It takes a few minutes to put together the data and
- It may not always find the absolute optimal scenario
However, the optimisation wizard is more time-saving and accurate than manually changing the attributes and recalculating the simulator. It also serves as a solid foundation for the next experiment or new product development.
Step 6: Optimisation output
The optimal product combinations are here! There are two main sections of the output.
Output (i): The optimised scenario
Based on the number of concepts included in step 4, the simulator will build the same number of scenarios, starting from only one product being launched, to the maximum number included.
Each of these scenarios represents the optimal portfolio of products when including the specified number of alternatives.
In the case of Granny's Mix, the revenue optimised scenario suggests it can change to the glass bottle packaging to strengthen its current position. If it wants to add another product concept, the best would be using the existing concept but slightly lower the price to $1.80.
Output(ii): The optimised preference share and revenue projection simulator
Both the preference shares and revenue projections simulator show the baseline and optimised scenario side-to-side.
In this example, the optimised simulator shows:
- If there is only two concepts in the simulator, Granny's Mix can increase the preference share from 61% to 76.7% and revenue projections increase from $1159.75 to $1457.27 by switching to glass bottle.
- If Granny's Mix want to add another product concept, it can consider price the initial concept at $1.80.
- The optimised simulator provides Granny's Mix up to the order of five product concepts to be added to maximise revenue.
Do not panic if you see the error. It is probably due to an error in one of the following sources:
|Source of error||Recommended action|
|Configure extras||Check and ensure the extras added are different as the same extra can only be added once|
|Objective function||Check and ensure the objective function is entered in the correct format|