1. Chapter 6: Marketing Research in High-Tech Markets

2.  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

3.  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

4. 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

5. ©2010 Pearson Education, Inc. publishing as Prentice Hall % of Revenue # of Market Research Personnel By Industry Sector Pharmaceuticals0.78 %52 Media Companies0.68 %22 Consumer Goods0.51 %18 Technology (B2B Sector)0.25 %15 Telecommunications0.07 %15 By Company Size ($ Revenue) < $1 Million0.07 %5 > $5 Million0.5 - 0.69 %13-41

6. ©2010 Pearson Education, Inc. publishing as Prentice Hall Survey Research Concept Testing Conjoint Studies Focus Groups Customer Visits Empathic Design Lead Users Quality Function Deployment Prototype Testing Market Intuition Incremental Innovation (need known) Breakthrough Innovation (technical solution precedes customer need) Customer-Driven Innovation Biomimicry

7. ©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

8. ©2010 Pearson Education, Inc. publishing as Prentice Hall Gathering Information: Aligning Market Research with Type of Innovation  Mid-range Innovation ◦ Techniques based on customer observation, lead users, QFD

9. ©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

10. ©2010 Pearson Education, Inc. publishing as Prentice Hall Traditional Tools of Marketing Research: Concept Testing 1. Generate multiple product concepts/ideas a)Observation b)Focus groups c)Brainstorming d)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

11. ©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

12. ©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

13. ©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

14. ©2010 Pearson Education, Inc. publishing as Prentice Hall Traditional Tools of Marketing Research: Conjoint Analysis Example: Product Profile- GPS Conjoint Study Accuracy: 10 feet or 50 feet? Display: Color or black-and-white? Battery: 12 hours or 32 hours? Price: $250 or $350? Product Concept Accuracy Battery Life DisplayPrice #110 feet32 hoursColor$250 16 product profiles possible (2 x 2 x 2 x 2)

15. ©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 DisplayPrice 9.630.914.940.6

16. ©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

17. ©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

18. ©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 ideas 2.Satisfaction studies 3.New market segment identification  Cross-functional teams ◦ Engineering, marketing, sales account manager

19. ©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)

20. ©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)

21. ©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

22. ©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 Use B.Unarticulated user needs/coping strategies C.New usage situations D.Customization E.Intangible Attributes

23. ©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.

24. ©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

25. ©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

26. ©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

27. ©2010 Pearson Education, Inc. publishing as Prentice Hall UserManufacturerOther Computer Industry 33%67% Chemical Industry 7030 Poltrusion-Process Machinery 8515 Scientific instrument s 8218 Semiconductor-electronic process equipment 6321 16% (joint user- manufacturer) Electronic assembly 1133 56 (supplier) Surface chemistry instruments 8218 See Table 6-5

28. ©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)

29. ©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

30. ©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

31. ©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.

32. ©2010 Pearson Education, Inc. publishing as Prentice Hall

33. 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

34. ©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

35. ©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

36. ©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.

37. ©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

38. ©2010 Pearson Education, Inc. publishing as Prentice Hall  One-dimensional attributes o Known and voiced by customer o Linearly related to customer satisfaction

39. ©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

40. ©2010 Pearson Education, Inc. publishing as Prentice Hall  Attractive quality attributes o Exhibit an exponential relationship with satisfaction o Because it is not expected (or voiced), lack of this attribute does not lead to dissatisfaction o “Wow” factor o Discovered through empathic design and lead users

41. ©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

42. ©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

43. ©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

44. ©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

45. ©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.

46. ©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

47. ©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

48. ©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

49. ©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

50. ©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

51. ©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

52. ©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 Mussels Glue that anchors them firmly to a rock May prove useful to the private marine industry, medical and dental fields, perhaps to repair shattered bones Locusts Ability to fly in dense swarms without colliding Anti-collision devices in cars (More details in Table 6-8)

53. ©2010 Pearson Education, Inc. publishing as Prentice Hall © Biomimicry Guild, 2008 Evaluate Against Life’s Principles Interpret Design Brief Challenge to Biology Emulate Nature’s Strategies Abstract Design Principles Discover Natural Models Identify Real Challenge

54. ©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?

55. ©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

56. ©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

57. ©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

58. ©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.

59. ©2010 Pearson Education, Inc. publishing as Prentice Hall  Sustainable  Perform well ◦ Nature has been evolving designs for billions of years  Save energy  Cut material costs

60. ©2010 Pearson Education, Inc. publishing as Prentice Hall  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

61. ©2010 Pearson Education, Inc. publishing as Prentice Hall Traditional Quantitative Techniques: Time Series, Moving Averages, Exponential Smoothing Bass Model Delphi Technique Analogous Data Incremental Innovation Company has previous experience Breakthrough Innovation “New to the Company” No closely competing alternatives available

62. ©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

63. ©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)

64. ©2010 Pearson Education, Inc. publishing as Prentice Hall Innovators Early Adopters Early Majority Late Majority Laggards Cumulative Adopters New Adopters

65. ©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

66. ©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

67. ©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

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