1、1Author:Nancy GreenePenetration Curve(S-Curve)March 1998Copyright 1998 Bain&Company,Inc.Penetration CurvesBOS 2Agenda ConceptApplicationCase exampleMethodologyCopyright 1998 Bain&Company,Inc.Penetration CurvesBOS 3 Products can be thought of as following a life-cycle that has several distinct phases
2、:early adoption/trialmass adoptionsaturation/substitutiondecline The product life-cycle generates a series of market penetration rates that tend to follow a specific pattern,called an S-curve(or penetration curve)Given the pattern of penetration curves over time,and given that this relationship hold
3、s to some extent in almost every case,penetration curves can be a powerful tool in predicting the growth of new productsWhat is a Penetration Curve?(S-Curve)Penetration CurvesBOS 4Product Life-Cycle TimeVolumeProducts can be thought of as following a life-cycle that has several distinct phases.Early
4、 adoption/trialMass adoptionSaturation/substitutionDeclineDriven by people who always adopt new things early and fuel the products initial growthThe product becomes accepted by the general market;characterized by rapid product growthThe product has either saturated the market,or is already being sub
5、stituted for by another product that is in an earlier phase of the product life cycleThe decline of the product,driven by complete substitution for or replacement with another productPenetration CurvesBOS 5Characteristics of Penetration Curves Penetration can occur at the expense of an existing prod
6、uct,or it can drive new markets to growSeveral factors will influence the end state,or saturation point,of a product:duration/speed of product life-cyclecompetitive forcesinnovationculture/societyWhen considering penetration curves,there are a few characteristics to keep in mind:Penetration CurvesBO
7、S 6Agenda ConceptApplicationCase exampleMethodologyPenetration CurvesBOS 7Applications of Penetration Curves Validating/determining market growth for a new or established productShowing precedents for success of a product through existing penetration curvesPredicting the saturation level for a produ
8、ctDetermining market entry strategy or timing,given the predicted penetration of a productDetermining product management or phase-out,given the speed of new products adoptionPenetration curves can be useful in addressing a series of different strategic questions which arise when new products enter a
9、 market.Penetration CurvesBOS 8Agenda ConceptApplicationCase exampleMethodologyPenetration CurvesBOS 9 In 1994,the National Institutes of Health(NIH)issued a statement confirming that most ulcers are strongly associated with the presence of a bacteria(H.Pylori).While previously,doctors had been advi
10、sed 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 only ulcer symptoms,but the underlying cause of the disease.In 1997,a new device was granted a patent by the U.S.Patent O
11、ffice which will test human breath for the presence of H.Pyloria blood test for H.Pylori is already on the marketdoctors may also test for H.Pylori using tissue samples obtained through endoscopy,a relatively invasive and painful medical procedureOur client is considering buying the patent and belie
12、ves that the breath test technology holds significant advantages over both blood tests and endoscopyless invasive than endoscopymore accurate than blood testsSituation:How large is the market for H.Pylori tests over time?Key Question:A Bain case team used penetration curve analysis to examine how qu
13、ickly medical practices change.Disguised Case Situation(1 of 2)Penetration CurvesBOS 10 A search of the existing literature revealed that in 1995,only 5%of doctors were testing patients suspected of having an ulcer for H.Pyloriin 1991,the figure was close to 1%In order to determine how quickly the N
14、IH 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.Pylori15%said they treated all suspected ulcer patients with a course of antibiotics-without first testing for H.Pylori8the team agreed that this
15、represented a“ceiling”on testing:15%of doctors would always treat H.Pylori without testing for itResearch:Historic penetration:1991=1%1995=5%1997=60%Saturation point=85%Penetration Curve Data:Combining secondary research with surveys,the team obtained a few historic penetration points,as well as the
16、 projected saturation point.Disguised Case Situation(2 of 2)Penetration CurvesBOS 11H.Pylori Testing Market 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 20070%20%40%60%80%100%Percentage of Doctors Testing for H.Pylori=data point=predicted penetration curve (based o
17、n regression)Saturation point=85%Penetration curve analysis smoothed the known data points into an S-curve that showed an aggressive schedule for the adoption of H.Pylori tests.Penetration CurvesBOS 12Agenda ConceptApplicationCase exampleMethodologyPenetration CurvesBOS 13 Gather historic data and s
18、et up spreadsheetPick saturation pointthis should be the logical ceiling on a products penetration(i.e.not every home will have a computer,even in the most optimistic of scenarios)saturation point=100%in this exampleCalculate penetration ratio(historic percent)/(saturation point-historic percent)198
19、919901991199225.0%29.0%36.3%42.5%YearsHistoric Penetration198919901991199225.0%29.0%36.3%42.5%YearsHistoric Penetration0.3330.4080.5710.740Penetration RatioMethodology(1 of 3)Penetration CurvesBOS 14 198919901991199225.0%29.0%36.3%42.5%Years Historic Penetration0.3330.4080.5710.740Penetration Ratio7
20、.5957.5967.5977.597ln(years)(1.099)(0.895)(0.561)(0.301)ln(penetration ratio)198919901991199219931994etc.25.0%29.0%36.3%42.5%Years Historic Penetration0.3330.4080.5710.740Penetration Ratio7.5957.5967.5967.5977.5977.598etc.ln(years)(1.099)(0.895)(0.561)(0.301)ln(penetration ratio)Predicted Penetratio
21、n Ratio0.9661.268etc.Take the natural log of the years and the penetration ratioRegress the log of years vs.the log of the penetration ratioUse results to calculate predicted penetration ratiouse formula for a line,and take anti-logantilog of(ln(year)x x-coefficient+b)Methodology(2 of 3)Penetration
22、CurvesBOS 15 Calculate predicted penetration using the predicted penetration ratio and saturation point(predicted penetration ratio x saturation point)/(1+predicted penetration ratio)19891990199119921993199419951996199719981999200025.0%29.0%36.3%42.5%YearsHistoric Penetration0.3330.4080.5710.7407.5957.5967.5967.5977.5977.5987.5987.5997.5997.6007.6007.601ln(years)(1.099)(0.895)(0.561)(0.301)ln(penetration ratio)Predicted Penetration Ratio0.9661.2681.6642.1822.8633.7554.9246.457Penetration Ratio49.1%55.9%62.5%68.6%74.1%79.0%83.1%86.6%Predicted PenetrationMethodology(3 of 3)
