Marketing of High-Technology Products and Innovations

Marketing Research In

High-Tech Markets

Outline of Chapter : Gathering Information in High-Tech Markets

• What is Marketing Research• “Traditional” Marketing Research Tools

– Qualitative or Quantitative Methods

• High-Tech Marketing Research Tools– Empathic Design– Lead Users– Quality Function Deployment

• Gathering Competitive Intelligence• Forecasting Demand

– Delphi method

– Analogous Products

– Information Acceleration

Marketing Research

• Definition: the function which links the consumer and market to the marketer through information by which – market opportunities and problems are identified– marketing performance is generated, monitored and

evaluated

• Process– Identify issues– Specify information necessary to address these issues– Data collection– Analyze results– Communicate the findings and implications

“Traditional” Marketing Research Tool

• Qualitative Method– Used when the nature of problem is uncertain– Exploratory research– Focus group, interview

• Quantitative Method– Used when the problem and necessary information can

be identified– Exploratory/confirmatory research– Factor analysis, multidimensional scaling (MDS),

discriminant analysis, MANOVA, conjoint analysis, structural equation modeling, LISREL,…

High-Tech Marketing Research

• Align marketing research tools with type of innovation – Incremental innovation:

• Rely on traditional marketing research tools—• Focus groups, surveys, conjoint analysis, etc.

– Breakthrough products: • Market intuition, future scenarios

– Mid-range• Empathic design, lead users

Contingency Theory

Type of marketing strategy is contingent upon the nature of the innovation.

Marketing Strategy

New Product Success

Type of Innovation -Breakthrough -Incremental

Aligning Market Research with the Type of Innovation

Traditional Market Research

Incremental Innovation (need known)

Market Intuition

Empathic Design Lead Users

Break-through innovation (technical solution precedes customer need,

"technology push")

Empathic Design

• Because users may be unable to articulate their needs, this technique focuses on observations of customer behavior to develop a deep understanding the user’s environment.

• Types of insights – Triggers of Use– Unarticulated user needs/coping strategies– New usage situations – Customization – Intangible Attributes

5 Steps in Empathic Design

• 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.

5 Steps in Empathic Design (Cont.)

• 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

Use of Empathic Design At Intel

• Success rate based on engineers’ idea only 20%– Example: video phone

• Team of 8 design ethnographers to find how technology can help solve user problems– Salmon industry – Business owners– Teenagers

Customer Visits

• Use cross-functional teams – Engineering, marketing, sales account manager– Supportive corporate culture

• Visit different kinds of customers: – Competitor’s customers, lost customers, lead users,

channel intermediaries, internal personnel– Customer councils

Customer Visits (Cont.)

• Go to the customer’s site– (versus bringing them on-premise for a “dog

and pony” show)

• Ask probing questions

• Ensure customer visits are programmatic/systematic – (not ad hoc)

Lead Users

• Some customers face needs before a majority of the market place;

• Their needs may be more extreme than typical customers– Ex: auto racers’ and military’s needs for better brakes

• They stand to benefit by obtaining solutions to their needs sooner rather than later

• They tend to innovate their own solutions to their needs (see Table 5-1)

Lead Users

"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

Lead Users in Market Research

• The lead user process can create breakthrough products by systematically identifying lead users and learning from them.

Steps in Lead User Research

• 1. Identify important trend– Via standard environmental scanning

– 3M identified trend of detecting small features via medical imaging, which required higher-quality high-resolution images

Steps in Lead User Research

• 2. Identify and question lead users– Personal contacts with customers, surveys, networking

with experts, empathic design

– Respect possible sensitivity of information

– Ex: • 3M identified radiologists working on most challenging medical

problems, who had developed imaging innovations to meet their needs

• Networking to other fields in pattern recognition (the military) and semiconductors

Steps in Lead User Research

• 3. Develop the breakthrough product(s)– Host a workshop for experts and lead users to

brainstorm– Ex: medical imaging, experts in high-resolution

imaging, and pattern recognition developed ideas

• 4. Assess how well lead user data and experiences apply to more typical users – Gather market research from typical users

Benefits of the Lead User Process

• New insights from gathering and using information in new ways

• Cross-functional in nature

• Collaboration with innovative customers

• Requires corporate support, skilled teams, time.

Example of Lead User Process: 3M Corporation and Infection Control

• 1. Identify important trends in infection control– Travel to extreme situation: surgical environments in

developing countries

• 2. Identify lead users– Veterinary hospitals, make-up artists in Hollywood

Example of Lead User Process: 3M Corporation and Infection Control

• Develop the breakthrough ideas at a workshop with experts and lead users– Economy line of surgical drapes, hand-held devices

to apply anti-microbial substances to skin, “armor” line to coat catheters and tubes with anti-microbial protection, and upstream containment of infection prior to surgery for high-risk patients.

Quality Function Deployment

• 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

QFD Process

• 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

• Collect customer perceptions of competitive products • 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.

QFD—Using the Kano Concept

Satisfaction

Dissatisfaction

Dysfunctional Functional

Attractive One-dimensional

Know vs. UnknownSpoken vs. Unspoken

Must-be

QFD—3 Types of Attributes

• 1. “One-dimensional quality”: – Increases in level of attribute linearly related to

customer satisfaction– Typically “known” attributes identified by customer– EX: battery life in lap tops

QFD—3 Types of Attributes (Cont.)

• 2. “Must-be quality”: – Increases in level of attribute has negligible effect on

customer satisfaction; – However, decreases in attribute has strong negative effect

on customer satisfaction– Because they are so basic to product functionality, they

are typically unspoken attributes: customer expects product to deliver these

– EX: ability of laptop to handle bumps and rough handling

QFD—3 Types of Attributes (Cont.)

• “Attractive Quality:” – Increases in level of attribute associated with

exponential increase in customer satisfaction – But, because attribute is one that “delights” the

customer, its absence does not necessarily lead to dissatisfaction

– Typically unknown to customer at conscious level– Ex: decompressable/expandable laptop

QFD: Summary

• 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

QFD and Total Quality Management

• TQM grounded in customer knowledge and ability to deliver customer value, which is enhanced by: – Customer excellence – Cycle-time excellence – Cost excellence – Cultural excellence

Customer excellence

• Tied to being customer-focused and market-oriented

• Knowledge of customer environment and product useage

Cycle-time excellence

• Products late to the market suffer negative impacts to profitability from two reasons: – Long time-to-market cycles typically experience cost over-runs

– More importantly, products late to the market suffer loss of market share

• Lesson: Being fast to market is important, but only when

combined with ability to accurately deliver customer requirements – Therefore, link QFD with TQM

Relationship between Entries in the Market and Quality

ONE-DIMENSIONAL QUALITY

Model 1

Model 2

Model 3

Time

Development Overall Revenue Incr. Revenue New Models

Attractive Quality

Must be quality

Does this approach to cycle time excellence make sense?

• Bring higher levels of product functionality to the market incrementally over time with successive product iterations.

• Yes! – Striving for complicated set of features with initial

offering can lead to delays • Delays mean that customer needs may have changed or

a competitor beats firm to the market • Purchasers of first generation of new product become

installed base for later generations

QFD and TQM (Cont.)

• Cost Excellence– Provide customer value and lowest possible cost – Use supply partnerships– Use downsizing cautiously, lest negative impact on customer

value

• Cultural Excellence: – Align goals of the organization and of personnel to be

able to capitalize on market opportunities – Ex: culture of innovation, effective marketing/R&D

interaction

Competitive Intelligence

• What: Information about competitors

• Why: Provides information for better decision making and improved strategies– An early warning system

Effective Competitive Intelligence Programs

• Affect decisions of top managers

• Are proactive in reading the market

• Look beyond existing market boundaries

• Utilize the Web

• Gauge potential for misleading signals

Forecasting Customer Demand for High-Tech Innovations

• “Who the hell wants to hear actors talk?” – Harry M. Warner (1927) reacting to addition of audio

technology to silent movies

“ “Television won’t be able to hold on to any market it captures after the first six months. People will soon get tired of staring at a plywood box every night.” – Darryl Zanuck, 20th Century Fox Films, 1946 

• “There is little reason for any individual to have a computer in their home.” – Ken Olsen, president and founder of the DEC

Corporation,1977

Qualitative Forecasting Tools

• Delphi method– Rely on a panel of experts

• Analogous data– Rely on similar products

• Information Acceleration – Use “virtual” prototypes to obtain customer

feedback

High-Tech Forecasting 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