1、Author: Nancy Greene,Penetration Curve (S-Curve),March 1998,Copyright 1998 Bain characterized by rapid product growth,The product has either saturated the market, or is already being substituted for by another product that is in an earlier phase of the product life cycle,The decline of the product,

2、driven by complete substitution for or replacement with another product,5,Characteristics of Penetration Curves,Penetration can occur at the expense of an existing product, or it can drive new markets to grow Several factors will influence the end state, or saturation point, of a product: duration/s

3、peed of product life-cycle competitive forces innovation culture/society,When considering penetration curves, there are a few characteristics to keep in mind:,6,Agenda,Concept Application Case example Methodology,7,Applications of Penetration Curves,Validating/determining market growth for a new or

4、established product Showing precedents for success of a product through existing penetration curves Predicting the saturation level for a product Determining market entry strategy or timing, given the predicted penetration of a product Determining product management or phase-out, given the speed of

5、new products adoption,Penetration curves can be useful in addressing a series of different strategic questions which arise when new products enter a market.,8,Agenda,Concept Application Case example Methodology,9,In 1994, the National Institutes of Health (NIH) issued a statement confirming that mos

6、t ulcers are strongly associated with the presence of a bacteria (H. Pylori). While previously, doctors had been advised to treat ulcer symptoms with anti-secretory drugs, NIH now recommends that ulcer patients with H. Pylori infections also be treated with antibiotics. The new treatment cures not o

7、nly ulcer symptoms, but the underlying cause of the disease. In 1997, a new device was granted a patent by the U.S. Patent Office which will test human breath for the presence of H. Pylori a blood test for H. Pylori is already on the market doctors may also test for H. Pylori using tissue samples ob

8、tained through endoscopy, a relatively invasive and painful medical procedure Our client is considering buying the patent and believes that the breath test technology holds significant advantages over both blood tests and endoscopy less invasive than endoscopy more accurate than blood tests,Situatio

9、n:,How large is the market for H. Pylori tests over time?,Key Question:,A Bain case team used penetration curve analysis to examine how quickly medical practices change.,Disguised Case Situation (1 of 2),10,A search of the existing literature revealed that in 1995, only 5% of doctors were testing pa

10、tients suspected of having an ulcer for H. Pylori in 1991, the figure was close to 1% In order to determine how quickly the NIH report would impact doctors behavior, our case team surveyed doctors in the fall of 1997: 60% said they were testing their suspected ulcer patients for H. Pylori 15% said t

11、hey treated all suspected ulcer patients with a course of antibiotics - without first testing for H. Pylori the team agreed that this represented a “ceiling” on testing: 15% of doctors would always treat H. Pylori without testing for it,Research:,Historic penetration: 1991 = 1% 1995 = 5% 1997 = 60%

12、Saturation point = 85%,Penetration Curve Data:,Combining secondary research with surveys, the team obtained a few historic penetration points, as well as the projected saturation point.,Disguised Case Situation (2 of 2),11,H. Pylori Testing Market,Saturation point = 85%,Penetration curve analysis sm

13、oothed the known data points into an S-curve that showed an aggressive schedule for the adoption of H. Pylori tests.,12,Agenda,Concept Application Case example Methodology,13,Gather historic data and set up spreadsheet Pick saturation point this should be the logical ceiling on a products penetratio

14、n (i.e. not every home will have a computer, even in the most optimistic of scenarios) saturation point = 100% in this example Calculate penetration ratio (historic percent) / (saturation point - historic percent),1989 1990 1991 1992,25.0% 29.0% 36.3% 42.5%,Years,Historic Penetration,1989 1990 1991

15、1992,25.0% 29.0% 36.3% 42.5%,Years,Historic Penetration,0.333 0.408 0.571 0.740,Penetration Ratio,Methodology (1 of 3),14,1989 1990 1991 1992,25.0% 29.0% 36.3% 42.5%,Years,Historic Penetration,0.333 0.408 0.571 0.740,Penetration Ratio,7.595 7.596 7.597 7.597,ln(years),(1.099) (0.895) (0.561) (0.301)

16、,ln(penetration ratio),1989 1990 1991 1992 1993 1994 etc.,25.0% 29.0% 36.3% 42.5%,Years,Historic Penetration,0.333 0.408 0.571 0.740,Penetration Ratio,7.595 7.596 7.596 7.597 7.597 7.598 etc.,ln(years),(1.099) (0.895) (0.561) (0.301),ln(penetration ratio),0.966 1.268 etc.,Take the natural log of the

17、 years and the penetration ratio Regress the log of years vs. the log of the penetration ratio Use results to calculate predicted penetration ratio use formula for a line, and take anti-log antilog of ( ln(year) x x-coefficient +b ),Methodology (2 of 3),15,Calculate predicted penetration using the p

18、redicted penetration ratio and saturation point (predicted penetration ratio x saturation point) / (1 + predicted penetration ratio),1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000,25.0% 29.0% 36.3% 42.5%,Years,Historic Penetration,0.333 0.408 0.571 0.740,7.595 7.596 7.596 7.597 7.597 7.598 7