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Merwyn Business Simulation FAQ

 

General Merwyn Business Simulation Questions

Q: What is a Merwyn Business Simulation?
A: The Merwyn Business Simulation is a tool that measures new inventions, innovations and business opportunities. It is required to post your innovations on Planet Eureka's National Innovation Marketplace.

Q:How does the Merwyn Business Simulation work?
A: A user completes a 33-question questionnaire that requires less than 100 inputs, then the Merwyn Research Team creates a 4 page Merwyn Business Simulation Report. During this process there may be a need for corrections on the users side, if a member of the Merwyn Research team finds an input unclear.

Q:What's in the Questionnaire I need to complete for the Merwyn Business Simulation?
A: This questionnaire has 3 tabs; the first defines your innovation. You will be asked to explain and describe your innovation in various ways. The goal is to take your idea and communicate it in a way that someone else could understand it within 60 seconds. The second tab contains all the sales forecast questions, which requires you to think through your business model and make estimates for these 5 key variables:

1. Number of Final Decision Makers
2. Initial Revenue per Purchase
3. Repeat Rate
4. Repeat Revenue per Purchase
5. Number of Repeats (within 1 year)

The last tab is miscellaneous data and details and is there to gather all the other information that wasn't on included on the first two tabs. For example, one question ask whether or not you want to publicly post this innovation on the National Innovation Marketplace.

Q. What is included in a Merwyn Business Simulation Research Report?
A.
The Heading
Included in the heading is the header, which will either have your target countries flag or a globe. Next is simply the title of the innovation followed by quick sentences that sum up what "it" is and who "it" benefits.

Annual Sales Forecast
Reported for 5 levels of sales and marketing support. These levels are defined on the fourth page of the report, so you use the fourth page to determine your mostly likely support level.

All estimates are reported as three values.
1. The Conservative estimate represents the number where there is a 80% chance that the actual annual sales will be above the number and a 20% chance it will be below the number.
2. The Most Likely estimate represents the number where there is a 50% chance that the actual annual sales will be above the number and a 50% chance it will be below the number.
3. The Aggressive estimate represents the number where there is a 20% chance that the actual annual sales will be above the number and a 80% chance it will be below the number.

Innovation Status
There are 5 levels for both development status and proprietary protection status.
Also on page 2 of the report, the inventor's commentary and basis for assumptions will be listed for both development and proprietary protection status

Idea
The Concept Score, also referred to as a Merwyn Score, is a vale between 10 and 90 representing the quality of the idea as communicated in the concept text. The score is shown on the first page but is detailed further on page 2 of the report. Just like annual sales we report three values for the concept score, which will show the clarity of the idea. The closer the numbers are to one another reflects more agreement and clarity in the concept text. Three aspects of a concept are Overt Benefit, what's in it for the final decision maker, Reason to Believe, why should a final decision maker believe that you can deliver the benefit promised, and Dramatic Difference, what makes you meaningfully unique versus the competition. Each of the aspects is broken down to show which areas are good and where there is room for improvement.

Report Assumptions
Page 2 of the report includes all of the inventor's most likely estimates along with commentary where the inventor has the opportunity to explain the logic and reasoning behind each estimate.

Page 3
Sales goals are straight forward, what the inventor thinks. There is room for a picture and additional commentary if the inventor chooses to include that information.

The alternative scenarios are to help people get out of the research stage. Too often people want to spend all there time playing with the words and the numbers, so we skip that step and report what the annual sales would be if you improved your concept. This allows you to spend more time and money making it real and less time and money rerunning the simulation.

Fair Market Royalty (%)
The Fair Market Royalty Matrix includes a royalty rate along with annual royalty revenue. A 3-year value is also included, because it is considered by some experts to be a fair buyout value. The rate is based off of the 25% Rule, Proprietary Protection, Development Status and the Wow Factor. The rates and values shown are meant to be a starting point for negotiation, because there are several factors not involved in the calculation.

Sales and Marketing Support
Here is a description of each support level and the inventor's confidence in each level. The awareness and distribution levels are used in the calculations, but the inventor's confidence does not affect any of the calculations.

Industry Codes
These industries are simply what the inventor selected and are a used to organize reports in the marketplace.

Inventor Pedigree
Includes years of experience, granted patients, number of licensing deals and number of inventions shipped. This information is supplied directly from the inventor for the use of potential buyers and partners.

 

Q: How can I be confidant Merwyn Business Simulation will work for my unique situation?
A: We recognize that everyone is different, but the 50 success factor Merwyn measures can be applied to virtually any situation.

Q: Why should I use Merwyn Business Simulation instead of my current approach?
A: The biggest advantage of the Merwyn Business Simulation is that a concept/ innovation can be tested at all stages of development. The Merwyn Business simulation requires less than 5% of the inputs required by tradition testing and just as successful in its predictions. Basically Merwyn is a “fail fast, fail cheap, get smart” test allows you to quickly measure your concept/innovation potential.

Q: Merwyn Business Simulation is great for a lot of things, but what should I NOT use Merwyn Business Simulation for?
A: Merwyn Business Simulation is not a yes or no response, but rather a tool that helps you make a more educated decision on whether or not to proceed with a new concept or innovation.

Q: How long does it take to get results from Merwyn Business Simulation?
A: Please allow one week between submission and receiving your business simulation.

Q: Once I get the Merwyn Business Simulation report back, then what?
A: You can decide to post your Business Simulation to the National Innovation Market Place, which will allow you to connect with potential parnters to help with Manufaturing, R&D, Distribution, Liscensing, etc..

Q: Does Merwyn Business Simulation replace or eliminate the need for other testing?
A: We stand by our results, but don’t discourage you from other testing, which may provide additional information. Also keep in mind that Merwyn Business Simulation is significantly correlated with BASES and AcuPOLL results as well as survival in the marketplace.

Q: What do you I click after completing the questionaire inputs?
A: There are 3 sets of inputs on the questionaire:
Simulations, Setup and Definitions
Sales and Forecast Inputs
Misceilaneous Data and Detials
You click next and previous to naviagate between these pages.

You can save your current progress at any time by clicking "Save Concept"

When you are finished completing all 3 pages of inputs you then click "Save and Submit Concept"

 

Sales Inputs Questions

Q: Why do you ask for three estimates for each sales input?
A: Non-Technical Answer: It is impossible to estimate any input exactly with one number, so by asking for 3 numbers we allow you to better communicate a more realistic estimate, which then leads to a more accurate sales forecast.
Technical Answer: By asking for three values instead of just one, we can model the variance of each input and calculate the range of possible values. We then use all this information in the monte-carlo simulation to forecast annual sales.

Q: What do you mean by pessimistic and optimistic estimates?
A: Pessimistic and optimistic are NOT the lowest and highest possible values, this a common mistake. There should be a 20% chance of being lower than pessimistic and 20% chance of being higher than optimistic. See definitions:
PESSIMISTIC Estimate - The value where there is only a 1 in 5 chance (20%) that the true number is WORSE than this number. Note, this is not the "worst" possible value. Rather, it's the most likely lowest value.
OPTIMISTIC Estimate - The value where there is only a 1 in 5 chance (20%) that the true number is BETTER than this number. Note, this is not the "best" possible value. Rather, it's the most likely highest value.

Q: What is Confident? and how do I answer Confidence questions?
A: Your confidence is simply how much you believe you’re correct. We strongly recommend using the key words under that numbers to guide you to your correct confidence level. Be honest, there is no benefit to overstating your confidence level.

Q: Do Confidence questions refer to pessimistic and optimistic estimates?
A: NO, we are asking about your confidence in your most likely estimate, NOT about your pessimistic, optimistic range. A common mistake is to put a very high confidence, because you made your range very large.

Q: Who is included in the number of Final Decision Makers?
A: Count them if they have a choice and will be making a decision whether or not to buy, even if you think there is no way they will buy.
Merwyn Score and Marketing Support Level will account for variables like price, awareness and able to buy.
Think, if you were selling cat food then every household who owns a cat would be a final decision maker.

Q: What if I have more than one group of Final Decision Makers (FDM)?
A: Due to the added complexity we strongly recommend focusing on your mostly likely group of Final Decision Makers.
So your best options are:
Run two business simulations
Focus on the Final Decision Makers who you think will generate the most in annual sales
Focus on the Final Decision Makers who you think you are more likely to sell too

If you are set on selling to multiple groups, then go through each group individually and think through all the inputs. Then sum the total number of final decision makers and average the remaining inputs. When averaging make sure you proportionally weight the groups based on the number of final decision makers. The key to doing this is fully explaining every estimate in the inventor detail boxes, so someone with virtually no knowledge can understand your logic flow.

Q: What does first purchase revenue refer to?
A: First purchase revenue is the amount of money a final decision maker will spend the first time they spend money on your innovation. Keep in mind that a FDM may decide to buy more than one unit. For example: If you are selling tires, Final Decision Makers might purchase 2 tires or 4 tires. If we assume 50% of customers purchase 2 tires, and 50% purchase 4 tires, the AVERAGE purchase is 3 tires. If each tire cost $50.00, the First Purchase Revenue would be $150.00 (for 3 tires).

Q: How do I estimate the percent repeat rate?
A: This is the percent of the final decision makers who will make at least one additional purchase out of those who made a first purchase.
For consumer products please use our reference data and remember that FDM may repurchase within your category, but may not repurchase your exact product.
Percent repeat is higher for products that have service contracts, monthly fees/dues, because FDM expect to repeat when making the first purchase.

Q: How do I count Number of Repeats?
A: This is the number of times a FDM will make a repeat purchase within 12 months of making the first purchase. We are forecasting annual sales, so you only want to account for the sales made within one year.
For consumer products please use our reference data and remember that a Final Decision Maker may repurchase within your category, but may not repurchase your exact product.
Things to keep in mind:
Innovations with monthly fees tend to have 11 repeats.
Don’t include the time of first purchase in your estimate.
Match the logic to repeat revenue, if a FDM is purchasing more (more revenue) then they will purchase less often (lower number of repeats) and vise versa.

Q: I don’t understand repeat logic?
A: Here are some examples to help you think through possible business strategies:
Tires – First purchase a set of tires and then no repeat within a year
Video Games – First purchase the game system and then repeat purchases include games, accessories, online accounts etc.
Shaving Razors – No First purchase, because the razor is free, and replacement blades are the repeat purchases
Cell Phones – First Purchase is the phone; repeat purchase is the monthly fees.
Remember to be consistent and make your logic flow throughout your business strategy.

Development and Proprietary Protection Levels

Q: How does Development and Proprietary Protection Status influence Annual Sales?
A: Which of the 5 categories you are in doesn’t affect annual sales forecast.

Q: What does Development and Proprietary Protection Status have an effect on?
A: Development and Proprietary Protection Status affect royalty rates and restricts confidence levels, because if the concept is not far enough along in development there is still a lot of unknowns.

Q: What if I fit into multiple Development and Proprietary Protection Status levels?
A: Simply select the highest of the levels you fit into. This way you get the most credit in the royalty model and you may not be restricted from confidence levels. Also remember to take full advantage of the inventor detail boxes and explain

Q: How did you determine the rank order of the levels for Development and Proprietary Protection Status?
A: The rank order was determined by the results of the International Invention Licensing Survey. Each level is discounted from level 5, for example here is proprietary protection:

The Percent represent the perceived value to buyers versus granted patent claims.

For more details see the royalty white paper.

 

Sales and Marketing Support Confidence Questions

Q: Why do you ask about my confidence in Sales and Marketing Support?
A: This is to help YOU determine which level of marketing support you are most likely to be. Confidence questions do NOT affect annual sales forecast. This also allows everyone viewing your report to know what marketing support level you think you are, which helps everyone be on the same page when negotiating royalty revenue or comparing annual sales versus goal sales etc.

Q: How do I determine my confidence in Sales and Marketing Support?
A: First think of your most likely awareness and distribution percents. Then for each of the five levels compare your percents to the example of a % distribution and % awareness. If you are higher than you should be more confident than if the example is higher.
OR use the Graph, find the point on the graph the represents your most likely level of awareness and distribution. For all the lines above that point you should have low confidence and for all the lines below that point than you should have high confidence
For example if you think you can get 50% of FDM aware and Distribute to 50% of FMD than you should have low confidence (10%) for high and ultra high. For medium you should have relatively high confidence (70 or 80%) and for low and ultra low you should be very certain (90%)

Q: What if I don’t know my most likely level of awareness and distribution?
A: Not knowing makes it very difficult to answer the marketing support confidence questions, so we allow you to skip these questions. However we highly recommend doing any kind of research either on your past products or a similar companies past products, so you have a better understanding when you see your report. These confidence levels have no effect on the sales forecast numbers.

 

Reading the Report Questions

Q: Why are there 15 numbers for annual sales?
A: The rows represent 5 different marketing support levels. Due to the fact that is marketing support is an unknowable (no one every actually gives the exact same marketing support as they plan), we report annual sales at 5 constant levels shown on page 4 of the report.
The columns represent the probability distribution of the annual sales, so a conservative estimate represents the value where 20% of the time the actual annual sales will be below and 80% of the time the actual sales value will be above. Most Likely represents the center point where half the time the actual annual sales will be above and half the time it will be below. Aggressive represents the value where 80% of the time the actual annual sales will be below and 20% of the time the actual sales value will be above.

Q: I used the specialized version of the fourt-woodlock equation to calculate annual sales and my estimate did not match your 50% odds value?
A: The value you calculated is the mean (average) annual sales value. The 50% odds value we report is the median annual sales value.
These values can be very close or very different depending on the variance in all of the inputs.

Notice in the first curve that the mean and median are the same. This is what you expect to happen, but due to the variance in all the inputs the actual distribution looks more like the second curve. The mean value is still the same, but the median (50% odds value) is lower.
Reporting 80%, 50% and 20% odds of at least this value is our way of accurately describing the curve and providing the best information to help you make a more informed business decision.

Q: Why are there more annual sales forecast on page 3?
A: People are curious about what if they made this improvement, so instead of making them run another MBS we forecast 3 alternative scenarios.

Q: Why is there a 3-year value for royalty revenue and how did you get that number?
A: The 3-year is often considered an appropriate starting point when negotiating a buyout. It is simply calculated by multiplying the 50% odds value by 3.

Merwyn Questions

Q: How is my Concept Scored / Measured?
A: First see how to write a concept
We essentially measure what’s in it for the FDM (overt benefit), why should they care (dramatic difference) and why should they believe you (real reason to believe)
The Score we calculate a called a Merwyn concept score.

Q: What/Who is Merwyn?
A: Merwyn is the name of our method of concept testing and also Doug’s Father’s name.

 

Q: How has Merwyn helped business leaders make better decisions?
A: Merwyn has been used by small, medium and large companies to measure there ideas and make more informed business decisions. Remember Merwyn is 7 times smarter than human judgment when it comes to picking winning ideas.