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Chapter 6: Marketing Research
in High-Tech Markets
What are the challenges high-tech marketers face in gathering market-based information?
What market research techniques are useful for incremental innovations?
What market research techniques are useful for break-through innovations?
©2010 Pearson Education, Inc. publishing as Prentice Hall
What insights can empathic design generate?
Who are lead users?
What are the benefits of QFD?
Why is it so difficult to develop forecasts in high-tech markets?
©2010 Pearson Education, Inc. publishing as Prentice Hall
©2010 Pearson Education, Inc. publishing as Prentice Hall
The Market Research Paradox: Customers find it difficult to articulate their
needs High-tech firms must use market-based data to develop and evaluate their innovation ideas Successful high-tech firms:
collect useful information to guide decisions incorporate customer information and feedback
into product development process allocate resources to information gathering
©2010 Pearson Education, Inc. publishing as Prentice Hall
% of Revenue
# of Market Research Personnel
By Industry Sector
Pharmaceuticals 0.78 % 52
Media Companies 0.68 % 22
Consumer Goods 0.51 % 18
Technology (B2B Sector) 0.25 % 15
Telecommunications 0.07 % 15
By Company Size ($ Revenue)
< $1 Million 0.07 % 5
> $5 Million 0.5 - 0.69 % 13-41
©2010 Pearson Education, Inc. publishing as Prentice Hall
Survey ResearchConcept TestingConjoint StudiesFocus Groups Customer Visits
Empathic DesignLead Users
Quality Function Deployment
Prototype Testing
Market Intuition
Incremental Innovation(need known)
Breakthrough Innovation(technical solution precedes customer need)
Customer-Driven InnovationBiomimicry
©2010 Pearson Education, Inc. publishing as Prentice Hall
Incremental Innovation◦ Customers needs generally known ◦ New-product developments are in alignment with
the current market◦ Use traditional research techniques
Radical Innovation◦ Difficult for customers to evaluate◦ Use experts, future scenarios, and guided intuition
©2010 Pearson Education, Inc. publishing as Prentice Hall
Mid-range Innovation◦ Techniques based on customer observation, lead
users, QFD
©2010 Pearson Education, Inc. publishing as Prentice Hall
A technique that solicits customer feedback to evaluate a company’s early-stage product ideas
Customer feedback is used to determine which concepts ought to be further developed
©2010 Pearson Education, Inc. publishing as Prentice Hall
1. Generate multiple product concepts/ideas
a) Observationb) Focus groupsc) Brainstormingd) Interviews
2. Share concepts with sample of customers◦ Key attributes and benefits described in paragraph
form◦ Potential customers rate concepts on dimensions
such as trial interest and perceived value
©2010 Pearson Education, Inc. publishing as Prentice Hall
3. Further reduce number of concepts to a manageable set
◦Representative sample of potential customers assess finalists
©2010 Pearson Education, Inc. publishing as Prentice Hall
Survey research tool◦Statistically predict optimal combination of
price and product attributes◦Customer sample makes judgments about
preferred combinations Uncovers trade-offs in attributes/features
Used to design product features to improve profitability
©2010 Pearson Education, Inc. publishing as Prentice Hall
1. Develop attribute combinations Use focus groups, interviews, internal
expertise
2. Present each product profile with different attribute combination to customers
Customers evaluate each combination on a rating scale
©2010 Pearson Education, Inc. publishing as Prentice Hall
Example: Product Profile- GPS Conjoint StudyAccuracy: 10 feet or 50 feet?Display: Color or black-and-white?Battery: 12 hours or 32 hours? Price: $250 or $350?
ProductConcept
Accuracy Battery Life
Display Price
#1 10 feet 32 hours Color $250
16 product profiles possible (2 x 2 x 2 x 2)
©2010 Pearson Education, Inc. publishing as Prentice Hall
3. Perform Ordinary Least Squares regression on the data
Yields consumer utility function
Example: Importance Weights- GPS Conjoint Study
Accuracy is least important, price is most important
Accuracy Battery Life
Display Price
9.6 30.9 14.9 40.6
©2010 Pearson Education, Inc. publishing as Prentice Hall
Willingness to Pay for each feature: Price 40.6
◦ Difference between $350 and $250 ◦ 100/40.6 = $2.46 value per increment of attribute
Accuracy ◦ 9.6 x 2.46 = $23.65
Display ◦ 14.9 x 2.46 = $36.65
Battery life ◦ 30.4 x 2.46 = $74.78
©2010 Pearson Education, Inc. publishing as Prentice Hall
Use to determine product feature set and price
Make market share predictions◦Predict cannibalization and substitution
effects
©2010 Pearson Education, Inc. publishing as Prentice Hall
Systematic program of visiting customers with a cross-functional team to understand customer needs. Used for: 1. New-product development ideas2. Satisfaction studies3. New market segment identification
Cross-functional teams ◦ Engineering, marketing, sales account
manager
©2010 Pearson Education, Inc. publishing as Prentice Hall
Elements of Effective Customer Visit Programs
1. Get engineers in front of customers.◦ Face to face communication◦ Interactive conversation
2. Ensure that the corporate culture embraces the value of the customer visit program.
3. Visit different kinds of customers.◦ Competitor’s customers, lost customers, lead users,
channel intermediaries, internal personnel◦ Customer councils
(see Table 6-3 for more details)
©2010 Pearson Education, Inc. publishing as Prentice Hall
Elements of Effective Customer Visit Programs (cont)
4. Visit customers in their own settings: Get out of the conference room!
◦ (versus bringing them on-premise for a “dog and pony” show)
◦ Field research◦ Firsthand knowledge◦ Inclusion of multiple decision makers
5. Conduct programmatic visits.◦ (not ad hoc)
(see Table 6-2 for more details)
©2010 Pearson Education, Inc. publishing as Prentice Hall
Research based on discovering customer needs through observation ◦“Empathy” with the user’s world Users may be unable to articulate their needs
◦Based on anthropology and ethnography Develop deep understanding of user
environment, extrapolate into future, imagine future products
©2010 Pearson Education, Inc. publishing as Prentice Hall
What a user does with the product (not what the product can do) drives its success
Types of insights A.Triggers of UseB.Unarticulated user needs/coping strategiesC.New usage situations D.Customization E.Intangible Attributes
©2010 Pearson Education, Inc. publishing as Prentice Hall
1. Observation ◦Who should be observed? ◦Who should do the observing? ◦What behavior should be observed?
2. Capture the Data◦Less focus on words/text; more on visual,
auditory, and other sensory cues ◦Via photos, etc.
©2010 Pearson Education, Inc. publishing as Prentice Hall
3. Reflection and Analysis◦Identify all customers’ possible problems
and solutions
4. Brainstorm for Solutions◦Transform observations into ideas
5. Develop prototypes of solutions ◦Tangible representation or role play/
simulation of ideas
©2010 Pearson Education, Inc. publishing as Prentice Hall
Develop detailed “map” of how customers operate
Customer scenario planning ◦Intimate understanding delivery of
value, customer loyalty
©2010 Pearson Education, Inc. publishing as Prentice Hall
Some customers face needs before a majority of the market place
◦More extreme needs than typical customers
◦Benefit by obtaining solutions to their needs sooner rather than later
Lead users tend to innovate their own solutions to their needs◦Useful insights for innovation
©2010 Pearson Education, Inc. publishing as Prentice Hall
UserManufactur
erOther
Computer Industry 33% 67%
Chemical Industry 70 30
Poltrusion-Process Machinery
85 15
Scientific instrument s 82 18
Semiconductor-electronic process equipment
63 2116%
(joint user-manufacturer
)
Electronic assembly 11 33 56 (supplier)
Surface chemistry instruments
82 18See Table 6-5
©2010 Pearson Education, Inc. publishing as Prentice Hall
Uses information from leading edges of a market◦Extreme forms of problems
Lead users may not be within usual customer base
Systematic process to collect information (see next slide)
©2010 Pearson Education, Inc. publishing as Prentice Hall
1. Identify important trend◦ Via standard environmental scanning
2. Identify and question lead users◦ Use personal contacts with customers,
surveys, networking with experts, empathic design
◦ Respect possible sensitivity of information
©2010 Pearson Education, Inc. publishing as Prentice Hall
3. Develop the breakthrough product(s)◦ Host a workshop for experts and lead users
to brainstorm
4. Assess how well lead user data and experiences apply to more typical users
◦ Gather market research from typical users
©2010 Pearson Education, Inc. publishing as Prentice Hall
New insights from gathering and using information in new ways
Cross-functional in nature
Collaboration with innovative customers
Requires corporate support, skilled teams, time.
©2010 Pearson Education, Inc. publishing as Prentice Hall
"LEAD USERS" of later commercialized modifications and enhancements
"LEAD USERS" of novel products
NUM
BER O
F U
SERS W
ITH N
EED
FOR N
OVEL P
RODUCT
Some Users Begin To Experience/
Respond To Need
First Responsive Commercial
Product Introduced
Market Growth
Time
©2010 Pearson Education, Inc. publishing as Prentice Hall
What: A tool that provides a bridge between the voice of the customer and product design
Purpose: Ensure tight correlation between customer needs and product specifications
Requirement: Close collaboration between marketing, engineers, and customers
©2010 Pearson Education, Inc. publishing as Prentice Hall
Reduce design time by 40%, design costs by 60%
Enhance design quality Reduce time-to-market Reduce number of design changes Reduce rework Lower facility’s maintenance and operation costs Improve quality Increase customer satisfaction
©2010 Pearson Education, Inc. publishing as Prentice Hall
1.Collect the “voice of the customer” ◦Identify customer needs regarding desired
product benefits via customer visits or empathic design
◦Weight or prioritize desired benefits/attributes
2.Collect customer perceptions of competitive products
◦Identify gaps or opportunities in the market
©2010 Pearson Education, Inc. publishing as Prentice Hall
3. Transform data into design requirements:
◦“Customer requirements deployment”- identify product attributes that will meet customer needs
◦“House of quality”- a planning approach that links customer requirements, design parameters and competitive data.
©2010 Pearson Education, Inc. publishing as Prentice Hall
Satisfaction
Dissatisfaction
Low level of attribute
High level of attribute
Attractive* (Delight/Wow)
One-dimensional: Known and spoken
Expected: Must-be quality
Known and unspoken
* Unknown and unspoken
©2010 Pearson Education, Inc. publishing as Prentice Hall
One-dimensional attributeso Known and voiced by customero Linearly related to customer satisfaction
©2010 Pearson Education, Inc. publishing as Prentice Hall
Must-be quality attributes◦Must be present for customer to be
satisfied◦Customers implicitly expect it to be
present, and therefore do not “voice” it as a need
◦Absence of attribute associated with extreme dissatisfaction
◦Increasing level of the attribute does not increase satisfaction
◦Essential to product functionality
©2010 Pearson Education, Inc. publishing as Prentice Hall
Attractive quality attributeso Exhibit an exponential relationship with
satisfactiono Because it is not expected (or voiced), lack
of this attribute does not lead to dissatisfaction
o “Wow” factoro Discovered through empathic design and
lead users
©2010 Pearson Education, Inc. publishing as Prentice Hall
Firmly grounds product design in customer needs
Allows product development team to develop common understanding of design issues and trade-offs
Reveals friction points and enhances collaboration
©2010 Pearson Education, Inc. publishing as Prentice Hall
Prototype: a model of the ultimate (final) product/service◦used to illustrate the product idea in order
to test customer reaction to it First: test the prototype against the
technical design specifications Second: (if it meets specifications)
customers evaluate the prototype
©2010 Pearson Education, Inc. publishing as Prentice Hall
Information acceleration technique: virtual representation of a new product
◦More vivid and realistic than concept descriptions
◦Less expensive than actual prototypes
©2010 Pearson Education, Inc. publishing as Prentice Hall
Forces design team to:
◦Carefully define target market and core product benefits early in the process
◦Plan for entire product line and cannibalization of existing products
©2010 Pearson Education, Inc. publishing as Prentice Hall
Beta version: A pre-release (potentially unreliable) version of new product◦made available to a small number of
trusted customers.
Customer agrees to provide feedback from beta test◦An item "in beta test" is mostly working but
still under test.
©2010 Pearson Education, Inc. publishing as Prentice Hall
“Co-creation”, “co-production”, “DIY innovation”, “feedback-influenced design”, “peer production”
Taps collective wisdom of a community
Requires radical rethinking of the innovation process◦R & D R & We
Move away from R & D in the lab Move towards active co-creation with customers
©2010 Pearson Education, Inc. publishing as Prentice Hall
Increasing prevalence is fueled by:
1.Economics of product development costs and high failure rates
2.Society’s beliefs about the role of customers in business strategy Environmental impact of products
3.Internet and Web 2.0 technologies Time Magazine named “You” the Person
of the Year for 2006
©2010 Pearson Education, Inc. publishing as Prentice Hall
Customers are willing to “donate” their ideas freely◦Motivated by enhanced reputation and
network effects
◦Realize low odds of successfully commercializing their own idea
©2010 Pearson Education, Inc. publishing as Prentice Hall
Yet many companies actively resist customer-driven innovation◦Customer innovators viewed as rivals or
lacking necessary knowledge/skill
◦NIH syndrome: “Not invented here” Disparages any ideas not generated
internally by the company
©2010 Pearson Education, Inc. publishing as Prentice Hall
Paradoxically, technology companies are leading the way in harnessing customer knowledge◦ PFE: Proudly found elsewhere
Requires competencies in communication, learning and collaborating with customers
©2010 Pearson Education, Inc. publishing as Prentice Hall
Biomimicry: emulating ideas from the natural world
◦Bio = life; mimesis = to imitate
Inspired by nature
Tends to generate environmentally-friendly insights
Biologists work with engineers, architects, and product designers to create sustainable solutions
©2010 Pearson Education, Inc. publishing as Prentice Hall
Namibian Desert Beetle
Desert insect that catches water under its wings
Prototypes are under test for industrial applications of a revolutionary material that collects water from invisible mist, including recycling water lost by the evaporating cooling towers used by AC systems.
Humpback Whale
Scalloped flipper proved to be a more efficient wing design in wind tunnel experiments
Potentially optimize airplane wings, helicopter rotors, propellers, and ship rudders for improved safety maneuverability, and fuel efficiency
MusselsGlue that anchors them firmly to a rock
May prove useful to the private marine industry, medical and dental fields, perhaps to repair shattered bones
LocustsAbility to fly in dense swarms without colliding
Anti-collision devices in cars
(More details in Table 6-8)
©2010 Pearson Education, Inc. publishing as Prentice Hall© Biomimicry Guild, 2008
EvaluateAgainst Life’s Principles
InterpretDesign Brief
Challenge to
Biology
EmulateNature’s
StrategiesAbstractDesign Principles
DiscoverNatural Models
IdentifyReal Challenge
©2010 Pearson Education, Inc. publishing as Prentice Hall
1. Identify the problem to be resolved.◦ Asks a series of “why” questions to open
the process for creativity in innovation.
2. Interpret the problem in nature’s terms.
◦ “Biologize” the issue◦ Ask: how does nature achieve this
function in the environment?
©2010 Pearson Education, Inc. publishing as Prentice Hall
3. Discover the best natural models that answer/resolve the challenges.
◦ Identify as many solutions as possible from organisms in nature that offer either literal or metaphorical solutions to the problem
©2010 Pearson Education, Inc. publishing as Prentice Hall
4. Abstract from the examples in prior step to identify patterns
◦ Clustering techniques, such as Venn diagrams, graphs, and visual representations can be helpful
◦ Oftentimes requires the assistance of biologists and other scientists trained in the biomimicry method
©2010 Pearson Education, Inc. publishing as Prentice Hall
5. Emulate nature, apply the ideas and solutions to the challenge at hand.
◦ The heart of the design phase◦ Solutions can mimic forms, processes,
ecosystems
©2010 Pearson Education, Inc. publishing as Prentice Hall
6. Evaluate and continue to improve the design.
7. Begin the process anew.◦ Constant learning, adapting and
evolving.
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Sustainable Perform well
◦ Nature has been evolving designs for billions of years
Save energy Cut material costs
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Redefine/eliminate “waste”◦ Mimic how nature transitions materials
within a habitat Define new product categories/
industries◦ Opportunity for disruptive technologies
Build company’s brand◦ reputation for environmental compassion
©2010 Pearson Education, Inc. publishing as Prentice Hall
Traditional Quantitative Techniques: Time Series, Moving Averages, Exponential Smoothing
Bass Model Delphi Technique Analogous Data
Incremental InnovationCompany has previous experience
Breakthrough Innovation“New to the Company”
No closely competing alternatives available
©2010 Pearson Education, Inc. publishing as Prentice Hall
Qualitative Tools:
Delphi method◦ Rely on a panel of experts
Analogous data◦ Rely on similar products with a logical connection
Serve similar need or share important characteristics (business factors for success, etc.)
© Mohr, Sengupta, Slater 2009
©2010 Pearson Education, Inc. publishing as Prentice Hall
Bass Model◦ Forecasting sales of a new technology for which
no closely competing alternative is available
Based on diffusion theory- why innovations spread through markets
Early vs. late adopters◦ Mass media (important for early adopters)◦ Interpersonal communication (important for later
adopters)
©2010 Pearson Education, Inc. publishing as Prentice Hall
InnovatorsEarly
Adopters
EarlyMajority Late
Majority
Laggards
CumulativeAdopters
NewAdopters
©2010 Pearson Education, Inc. publishing as Prentice Hall
Bass model: ◦ Estimate year one adopters, total adopters ◦ Coefficient of innovation (p) ◦ Coefficient of imitation (q)
Does make underlying assumptions that can affect reliability
Despite seeming complexity, widely and easily used by professionals
©2010 Pearson Education, Inc. publishing as Prentice Hall
Hazards:
Lack of historical data Difficult for customers to articulate
preferences Inflated projects from over-enthusiasm Competition from incumbent technologies Don’t confuse confidence in the forecast
with quality of the information Biases due to personal/organizational desire
for success
©2010 Pearson Education, Inc. publishing as Prentice Hall
Opening Vignette: IDEO Technology Expert: Grupthink (technology
for customer feedback communities) Technology Tidbit: BioWave Power End-of-Book Case: Xerox
©2010 Pearson Education, Inc. publishing as Prentice Hall
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.