Tuesday, September 21, 2004

Four Ways to Pick a Winning Product

From HBS Working Knowledge:

"The four dimensions fall into two categories, purchase motivators and purchase barriers. The new product has to excel at:

  1. Providing high purchase motivators
    A. It must be less expensive than existing products (lower price).
    B. It must provide better features than existing products (greater benefits).

  2. Eliminating purchase barriers
    A. It must not have any switching or adoption costs (easy to use).
    B. It must be readily available (easy to buy)."
Biodiesel:
1. Purchase Motivators:
A. More expensive (at the pump anyway, indirectly much cheaper)
B. Better mpg, enviro benefits, USA made, feel good factor?

2. Purchase barriers:
A. Zero switch costs if you own a diesel vehicle, otherwise need a new car.
B. Currently hard to find

Motivators: Consumers have demonstrated a willingness to pay a premium for products across the board, if the motivation is there. Will they do it in numbers for biodiesel? I know several folks pay for performance with high octane additives. Will less direct motivators- support USA jobs, clean environment, higher mpg vs. gas, or geo-political (terrorism, war), prove to motivate? We are accustomed to cheap gas. Wildcard: "Made in USA" factor. This motivator waxes and wanes, but has tremendous power. See anti-Japanese car buying sentiment circa 77-85. My thinking: Another large domestic terrorist attack and we'll see this motivator move off the charts. If biodiesel was widely available on Sept 12, 2001, would consumers have embraced a fuel with zero profit flowing into Middle East? Other wild card is gas price. I'm not betting on sustained high gas price ($2.75+) anytime soon.

Barriers: Diesel auto supply barrier is shrinking. DaimlerChrysler (e300, Jeep liberty), and VW are betting on diesel passenger cars in the US. Trucks are available now. Fleet use is happening, particularly in Gov't. Biodiesel availability remains a barrier, yet within reach.

Hmmm......

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