projecteverest

Experiment adopted

[Experiment Adopted] FIJI FUEL DEC 18 - CURRENCY TESTING

by
Haziq Ahmed
Haziq Ahmed | 2 months ago | in Sustainable Fuel Consulting

 

 

Lean Phase: Revenue Streams, Cost Structure, Solution

 

Assumption: The customers in Fiji are willing to pay more than $60 FJD for the Buka Stoves 5.0

 

Time Box: It is estimated that these tests can be conducted intensively within 2 weeks, and then every time significant design changes occur or new distribution methods are explored.

 

Key Metrics

The key metric to measure is willingness to pay the same or more for Buka Stove 5.0. This is done through price testing a range both above and below the price for Buka Stove 4.0

Conduct utility/currency testing with 30 existing customer across the customer archetypes to prove product viability of Buka Stoves 5.0

 

Success Criteria

Green Light Point – 40% of the customers are willing to pay more for Buka Stove 5.0

 

Green Light Proceed:  Finding a price point that 40% of customers in a segment are willing to pay for the 5.0 Stove. From here, distribution of the stoves can be commenced, allowing for feedback from customers to start influencing the iterative design of the Stove.

 

Orange Light Point - 20% to 40% of potential customers are willing to pay more for Buka Stove 5.0

 

Orange Light optimise:  If between 20-40% of potential customers identify a price point meeting the above criteria then more work should be done on how the value is presented and identifying what could be improved in pitching the product. Additionally, small changes to the design or appearance of the Stove may produce enough change to increase perceived value, things such as packaging, improved branding, painting etc.

 

Red Light Point – Less than 20% of the customer are willing to pay more than $60 for the 5.0

Red Light Failure: less than 20% of customers identify a suitable price point then a re-evaluation of the design would be considered. Undertaking a design review to identify areas where costs can be cut in manufacturing and materials would be useful. Also potentially simplifying the design and testing whether reduced features at a lower cost is a better alternative. Conversely looking further into more features such as thermoelectric generators to charge phones and if that adds more value than it does cost to produce.

 

Experiment build:

Due to the inflexible nature of the product and the resources required to test one version, let alone different models, a simplified A/B Price test is suggested with standardised pricing for all customers. This is reflective of the medium-term goals for the project in the sense that we have a physical product that needs to be manufactured on scale and therefore limits the variability in the value we can offer, at least with current manufacturing and supply methods.

 

What this would look like in practice:

  1. Empathising with potential customers

  2. Presenting the stove or showing photos/demonstration of it.

  3. a. After the customer understands the product, leading them to say what they would be willing to pay for the stove.

b. Sometimes a. Is difficult to achieve, and often results in “Well how much does it cost” and this can go in circles. In this case, different price points as per the example above should be tested in different villages and then reactions to those prices recorded.

4.   Analysing the data to find a suitable price point for the new 5.0 stove and assessing the viability of the design as per the metric stoplights defined above.

 

One important consideration is the following: Assuming the margin on the stoves is enough for a sustainable business, even if there is market demand we should remember that we can either have a more expensive stove and smaller target market, or slightly cheaper stove and get it to more people. The second option is more aligned with our purpose.

 



edited on 2nd December 2018, 21:12 by Haziq Ahmed

Haziq Ahmed 2 months ago

Status label added: Experiment adopted

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Haziq Ahmed 2 months ago

Status label added: Proposed Experiment

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Haziq Ahmed 2 months ago

Status label removed: Proposed Experiment

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Alexander Teicher 2 months ago

Love the idea of seeing whether the new design can generate a higher price point compared to the 4.0. One thing I notice is with the AB Test that you plan to do different prices for different villages, is that to avoid any miscommunication between neighbours of he said $60 to me and $70 to you? This is an obviously sensitive point, however can be done carefully.

If you do do separate prices for different villages I am worried the data may not be as clean as different villages tend to have different mean income levels and so overall responses to $70 for example may be really good in Nayawa but you would never find out if $80 or $60 is a better fit. Something to think about as there isn't a really easy option or clearly better way, however getting a range of prices in each village I feel would be useful to see where they lie rather than knowing percentage of yes/no for one price point.

Incorporating offer testing of the TEG phone charger idea is something we wanted to do in July but never go around to, so that could be interesting to get some preliminary responses after you do the currency test. Simply asking if a phone charger on the stove would be useful or not. As the stove is the main thing, a push approach I don't think is that bad as now it is more value adding as you said.

Super excited to see how this goes! xxx

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