Chapter 6: Marketing Research in High-Tech Markets.

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?



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


% 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


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


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


Mid-range Innovation◦ Techniques based on customer observation, lead

users, QFD


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


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


3. Further reduce number of concepts to a manageable set

◦Representative sample of potential customers assess finalists


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


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


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)


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


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


Use to determine product feature set and price

Make market share predictions◦Predict cannibalization and substitution

effects


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


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)


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)


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


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


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.


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


Develop detailed “map” of how customers operate

Customer scenario planning ◦Intimate understanding delivery of

value, customer loyalty


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


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


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)


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


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


New insights from gathering and using information in new ways

Cross-functional in nature

Collaboration with innovative customers

Requires corporate support, skilled teams, time.


"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


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


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


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


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.


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


One-dimensional attributeso Known and voiced by customero Linearly related to customer satisfaction


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


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


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


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


Information acceleration technique: virtual representation of a new product

◦More vivid and realistic than concept descriptions

◦Less expensive than actual prototypes


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


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.


“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


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


Customers are willing to “donate” their ideas freely◦Motivated by enhanced reputation and

network effects

◦Realize low odds of successfully commercializing their own idea


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


Paradoxically, technology companies are leading the way in harnessing customer knowledge◦ PFE: Proudly found elsewhere

Requires competencies in communication, learning and collaborating with customers


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


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


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?


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


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


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


6. Evaluate and continue to improve the design.

7. Begin the process anew.◦ Constant learning, adapting and

evolving.


Sustainable Perform well

◦ Nature has been evolving designs for billions of years

Save energy Cut material costs


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


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


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


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)


InnovatorsEarly

Adopters

EarlyMajority Late

Majority

Laggards

CumulativeAdopters

NewAdopters


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


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


Opening Vignette: IDEO Technology Expert: Grupthink (technology

for customer feedback communities) Technology Tidbit: BioWave Power End-of-Book Case: Xerox


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Chapter 6: Marketing Research in High-Tech Markets.

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