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 / First Quarter 1997 / Issue 6(originally published by Booz & Company)


Setting Supplier Cost Targets: Getting Beyond the Basics

Source: Booz-Allen & Hamilton

Focus groups held during the preliminary market research also examined what "attributes" the targeted consumers wanted in a "stylish sports watch for just under $100." The focus groups highlighted a wide variety of attributes that could be organized into five "functional needs". They are listed in Exhibit II.

Exhibit II

Determining What the Consumer Wants

Source: Booz-Allen & Hamilton

"Comfort" described how the watch needed to be light, slim and comfortable.

"Stylishness" captured a set of attributes indicating that the watch needed to avoid an appearance of a standard, mass-produced product. Also, the watch needed to be appropriate for virtually any occasion since the consumers expected it to be their primary (if not only) timepiece.

"Reliability" underscored the fact that the watch was a significant expenditure for these consumers and accordingly was expected to last.

"Simplicity" indicated that the watch should be easy to read, use and wear.

"Functionality" denoted that, for the most part, only a lap timer was required beyond the basic functions of date and time to meet the needs of the "athletic consumer." A few consumers indicated that waterproofing was desirable since they wanted to wear the watch when swimming and for water sports.

Even with all that information, the design team needed more detail: it needed to know the relative importance of each of the functional areas. Since any design offers a set of trade-offs, the team needed to understand the relative weighting of each factor in order to make the right decisions.

To quantify the importance, the team conducted a survey of consumers to rate the attributes that would be key to the decision to buy a "stylish sports watch for just under $100."

Not surprisingly, the consumers ranked "stylishness" very high for that level of expenditure on a sports watch. Also, since this targeted price point was more than double the price of the primary competitive product (the Timex Ironman), the consumers ranked "reliability" very high as well.

The next most important functional need was "simplicity." The team noted that this factor had often been overlooked by higher-priced competitors, whose designs were not very "user friendly." Still important, but further down the list, was "functionality." This ranking was consistent with the focus group findings, which concluded that even though the consumers wanted to use the watch when they exercised, they really didn't need a lot of functions. In fact, many of the users of the popular Ironman had never figured out how to use some of its functionality.

The final functional need that made the cut for significance was "comfort."

As shown in Exhibit III, the team converted the relative rankings to percentage scores and multiplied them by the overall target cost to set dollar values for each functional need.

Exhibit III

Putting a Price on Each Need

Source: Booz-Allen & Hamilton

Obviously, having a target of $6.83 for "comfort," for example, does not provide enough guidance to the design team and the suppliers. To create meaningful targets, the designers used their understanding of how different parts of the watch contribute to the functional needs expressed by the consumers. This translation of the "voice of the consumer" into engineering requirements begins with a breakdown of the major "subsystems" of the watch.

The first major subsystem is the watch band assembly, which includes the typical band plus the attachment screws and bar. The power supply is another major subsystem. It consists of the battery, coil block and generating stator. The display subsystem includes the key elements making up the face of the watch. The clock subsystem consists of oscillator components that insure reliable time tracking. The timer includes the special functionality that makes the watch a sports watch: the switches, lap counter and memory functions. Exhibit IV provides a breakdown of the five subsystems as agreed to by the design team.

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