Distinguish Between Net Present Value Essay

  • Length: 10 pages
  • Sources: 10
  • Subject: Business - Miscellaneous
  • Type: Essay
  • Paper: #46912452

Excerpt from Essay :

In other words: Lead users are individuals who use a product that has a number of unknown needs and who also benefit if they find a solution to those needs. This is unique in that it takes a different approach to traditional market research -- instead of collecting information from users at the center of the target market, it collects information about both needs and solutions from the leading edge of the target market. The method involves four steps: 1) Begin the Lead User process model; 2) Identify and extrapolate needs and trends; 3) Find out who the lead users are and interview them; 4) Refine data, use a workshop for concept design (Urban and von Hippe, 1988).

This idea is advantageous in that it helps with breakthrough products and leading trends prior to their becoming trends. It also establishes leadership in a market instead of reacting to trends. Innovative companies like 3M actually showed that using this concept for certain products resulted in an eightfold increase in sales (Lilien, 2002). However, it is not appropriate for all industries (those with highly secretive of volatile products). Sometimes, if a product has a short-term cycle, the process is ineffective. Also, many organizations are resistant to change and innovation, all required by this method (TechITEasy, 2007).


Generating breakthrough products: the Lead User Methodology. (October 2007). Tech IT Easy.

Cited in: http://www.techiteasy.org/2007/10/14/connecting-technology-to-market-the-lead-user-methodology/

Lilien, G., et.al. (2002). Performance Assessment of the Lead User Generation Process

For New Product Development. Management Science 48 (8): 1042-59.

Urban, G. And von Hoppel, E. (1988). Lead User Analysis for the Development of New

Industrial Products. Management Science. 34 (5): 569-82.

Von Hipple, E. (1986). Lead Users: A Source of Novel Product Concepts. Management Science. 34 (5): 559-82.

8. Explain why the effectiveness of patents varies by industry.

Within different industries, there are differences in relative costs, research and development time, and effectiveness and alternatives to the patent process. For instance, patents are far more valuable (and viable) to fiscal growth in the pharmaceutical industry than in the consumer electronic industry because in the latter there is a greater ROI through lead time advantage, sales of complimentary products, and a window of opportunity to reach the intended audience. In addition, many products are so cross-functionally interdependent that it is unlikely that one firm could hold all the necessary rights -- which fosters mutual dependence, or cross-licensing negotiations between organizations. In complex product industries (e.g. computers) a number of patented materials must come together to form the whole; making it less advantageous to hold strict patents. In discrete product industries (drugs, chemicals, etc.) a product can be protected by few patents but used to block substitutes (generics, for instance) not to compel competitors to cross-license (Cohen, 2002; Moser, 2004).


Cohen, W. (February 20, 2002). Patents: Their Effectiveness and Role. Hearings on Competition

And Intellectual Property Law in the Knowledge-Based Economy. Cited in:


Moser, P. (December 28, 2004). How Do Patent Laws Influence Innovation? Massachusetts

Institute of Technology. Cited in:


9. Compare and contrast conjoint analysis and the Kano method. Explain the situations in which each tool should be used.

In marketing, it is important to be able to determine feature importance in a product. Preference methods may be measured from the top-down (wherein a customer evaluates the whole product at once), or bottom-up (where features are evaluated individually or in sets). Both lend themselves to different approaches. The former, also known as Conjoint Analysis, is a very common method in marketing research, but the later, the Kano method, is more like the "self-explicated method," and is bottom-up. Both lead to results that may be extrapolated for meaning, but CA is certainly more popular, even though the Kano method is a bit easier, say more scholars, to design and analyze (Sambandam, 2010).

Conjoint Analysis originated in mathematical psychology and requires research percipients to make a series of tradeoffs. When these tradeoffs are analyzed, the results reveal the relative importance of certain attributes. To improve this predictive ability, participants are grouped into similar subjects based on demographics, psychographics, or a series of other factors. The Kano model is a theory of product development and customer satisfaction. This satisfaction is divided into five categories: attractive, one-dimensional, must-be, indifferent, and reverse, in order to describe the way the participants feel about the product and what drivers exist to propel them to or away from the item under research. Conjoint Analysis may be used on rather complex products or questions that require a clearer hierarchy of preference. The Kano method, however, focuses on only five features; the "must haves" and does not necessary provide the detailed analysis necessary for complex products or purchasing decisions (Weitz and Wensley, eds., 2002, 198-200).


Sambandam, R. (2010). Conjoint Analysis vs. Self-Explicated Methods: A Comparison.

Green Book Guide to Marketing Research. Cited in:


Weitz, B. And Wensley, R., eds. (2002). Handbook of Marketing. Thousand Oaks: SAGE.

10. Explain the step required to conduct the analytic hierarchy process of decision making. Describe how the results from the process can be used to make an informed decision

The Analytic Hierarch Process (AHP) is a structured way to deal with rather complex decisions. Instead of positing a single correct answer, the AHP model helps managers find the answers that meets the needs and understanding of the problem and situation in the best way. Instead of a single choice model, AHP is more of a lengthier process that uses a ranking component to develop a more robust way of evaluating the situation (Saaty and Kirti, 2008).

AHP has a five point decision-making tree:

1. Model the problem as a hierarchy tree that contains the decision goal, they alternative ways to reach that goal, and the criteria one would use to evaluate any alternatives.

2. Establish and prioritize elements in the hierarch based on prior knowledge and comparisons.

3. Synthesize these judgments and come up with a set of priorities.

4. Check the consistency of the judgments.

5. Use the criteria to find a final decision based on the results of the process (Hallowell, 2005).

The model tends to be valuable because it is a natural outgrowth of the process we all tend to use -- ranking alternatives in terms of criteria, attributes, or absence of attributes. In the model, though, choices are made as to what is, and is not important; therefore some of the material can be subjective. For instance, in a scenario when we choose a leader, we might have a 5 point total criteria scale, and 5 attributes. Person 1 might rate "Experience" as a 1.5, another person as a 2.00, another person as a .75. Each of these hierarchical rankings would produce a different result. What is valuable, though, it the thought process behind the model -- often simply going through the exercise puts the decision in a clearer context.


Hallowell, D. (January 2 005).w Analytical Hierarchy Processes -- Getting Oriented.

Six-Sigma.com. Cited in: http://www.isixsigma.com/index.php…

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