The key idea in our approach to volumetrics (methods for evaluating innovations’ business potential) is the binding to specific consumption/purchase situations and the evaluation of consumer behaviour changes in these situations when new products or services appear on the market.
Volumetric testing is a qualitative method that allows us to evaluate the possible sales volumes of a new product at various levels of awareness, distribution, and price for the product or service. The method has been tested and calibrated by O+K in a number of FMCG markets.
The first stage of the method is to gather information about the respondent’s consumption or purchase of the product or service studied in a certain period of time before the survey. For each instance of consumption/purchase, the brand consumed, consumption situation, and consumption volume are recorded.
At the second stage, the innovation (new product or service, modification of a product or service) is demonstrated. The respondent gets to examine the new product and evaluates it in criteria significant for the product category, pointing out its appealing and unappealing sides.
At the third stage, the interview returns to the consumption scenarios described by the respondent at the first stage. For each scenario, the respondent names the product that he would choose to consume, assuming the availability of the new product tested. This choice models consumer behaviour in conditions of 100% awareness and 100% distribution of the new product.
The fourth stage of the method is testing the product studied. The respondent rates the likelihood that he would purchase the new product at different price levels, allowing us to use price as a parameter for the market model at the analysis stage.s
Data analysis consists of building a mathematical model that includes calculated values and user-set parameters:
- Current market shares of brands (calculated based on the responses from stage one of the method; if necessary, re-weighted based on retail audit data)
- Predicted market shares of brands at 100% awareness and 100% distribution of the new product (calculated based on the responses from stage three of the method)
MODEL PARAMETERS FOR THE NEW PRODUCT
- Distribution level
- Retail price
- Spontaneous awareness level
Forecasts are done in a Microsoft Excel worksheet with the model parameters planned to achieve entered in the cells. The program automatically calculates market share forecasts based on the data the user has entered.
Volumetric model example: