marketing of high-technology products and innovations chapter 5: marketing research in high-tech...

Marketing of High-Technology Products and

Innovations

Chapter 5: Marketing Research In

High-Tech Markets

© Mohr, Sengupta, Slater

2005

Chapter Outline

Aligning Market Research with Innovation Type High-Tech Marketing Research Tools

Concept Testing Conjoint Analysis Customer Visit Programs Lead Users Empathic Design Quality Function Deployment Prototypes and Beta Testing

Gathering Competitive Intelligence Forecasting Demand

Delphi method Analogous Products Information Acceleration


2005

Customer Input During Product Development at Microsoft

Activity Based Planning Wish Lines Calls Data

Analysis and User Needs DefinitionSpecification Development

Product Prototyping

Usability Lab Testing

Additional Product DevelopmentInternal Alpha Release

Feedback Analysis and Product Refinements

Beta Site Testing

Feedback Analysis & Product RefinementsExternal Product Release

Surveys Studies


2005

Aligning Market Research with Type of Innovation

Survey ResearchConcept TestingConjoint Studies

Customer VisitsEmpathic Design

Lead UsersQuality Function Deployment

Prototype Testing

Market Intuition

IncrementalInnovation(need known)

Breakthrough Innovation(technical solutionprecedes customer need)


2005

Concept Testing Generate multiple product concepts

Observation Focus groups Brainstorming

Judgmentally reduce number of concepts Describe their key attributes and benefits in paragraph

form Potential customers rate each concept on dimensions such

as trial interest and perceived value Further reduce number of concepts based on

results from previous stage Representative sample of potential customers complete a

battery of questions and diagnostic ratings on each finalist


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Conjoint Analysis To determine how respondents

value various attributes, and levels of attributes, in the product

If we learn how buyers value the components of a product, we are in a better position to design those that improve profitability


2005

The Conjoint Task

$1,550 $2,000 $1,200

17-Inch Monitor

21-Inch Monitor

21-Inch Monitor

256 Meg RAM

256 Meg RAM

512 Meg RAM

2.8 GHz Processor

3.2 GHz Processor

2.4 GHz Processor

None: I Wouldn't

Choose Any of These

Compaq

Dell

IBM

If you were in the market to buy a new PC today and these were your only options, which would you choose?


2005

Customer Visit Programs 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


2005

Customer Visits (Cont.) Go to the customer’s site and get out

of the conference room (versus bringing them on-premise for a

“dog and pony” show) Ask probing questions Ensure customer visits are

programmatic/ systematic for a deep reviewing of all profiles of product (not ad hoc)


2005

Empathic Design Because users may be unable to articulate their

needs, this technique focuses on observations of customer behavior and workarounds to develop a deep understanding the user’s environment.

Types of insights (unexpected success and failure) Triggers of Use (what? why? ) Coping strategies with unarticulated user needs

(how?) New usage situations (what’s new?) Customization (when, where, who?) Intangible Attributes


2005

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.


2005

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


2005

Use of Empathic Design At Intel

Success rate based on engineers’ ideas: only 20% Example: video-phone

Team of 8 design ethnographers to find how technology can help solve user problems Salmon industry in the Alaska (video monitoring) Business owners (handwriting recognition) Teenagers (exchanging pictures with others)The lesson: What a user does with a product is more

important than what the product can do.


2005

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 combat fighters

need for better brakes They stand to benefit substantially by

obtaining solutions to their needs sooner rather than later

They struggle with the inadequacies of existing products tend to innovate their own solutions to their needs (see Table 5-1)


2005

Lead Users

"LEAD USERS" of later commercialized modifications and enhancements

"LEAD USERS" of novel products

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Some Users Begin To Experience/ Respond To Need

First Responsive Commercial Product Introduced

Market Growth

Time


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Lead Users in Market Research

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


2005

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, and high-resolution images


2005


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


2005


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

The possibility of extrapolation


2005

Benefits of the Lead User Process

New insights from gathering and using information in new ways

Cross-functional in nature Identifying and capturing the innovation

sources earlier than competitors (appropriability)

Collaboration with innovative customers Requires corporate support, skilled

teams, time.


2005

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 (a surprising findings: substantial benefit to Vet and artist)


2005

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.


2005

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/intensive collaboration between marketing, engineers, and customers


2005

QFD can: Reduce product development time by 50% Cut start-up and engineering costs by 30% Reduce time-to-market Reduce number of design changes Reduce rework Lower facility’s maintenance and operation

costs Improve quality (meeting the requirements)

Increase customer satisfaction


2005

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.


2005

Steps to Building The House of Quality

1. Determine what, specifically, is important to customers.

2. Rank customer requirements in terms of importance.

3. Translate customer requirements into design specifications.

4. Rate the design attributes by organizational difficulty.

5. Assess the current marketplace. How effective are you at meeting customer requirements? How effective are competitors? Why is one product perceived to be better than another?

6. Conduct research to determine the target values for the design requirements. (try-out)

7. Complete and evaluate new design.


2005

QFD—Using the Kano Concept

Satisfaction

Dissatisfaction

Dysfunctional Functional

Attractive One-dimensional

Known vs. UnknownSpoken vs. Unspoken

Must-be

「狩野紀昭」 (Noriaki Kano) 品質概念圖


2005

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


2005

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.


2005

QFD—3 Types of Attributes (Cont.)

3. “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: de-compressible/expandable laptop


2005

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


2005

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


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Customer excellence Tied to being customer-focused

and market-oriented Knowledge of customer

environment and product usage


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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


2005

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


2005

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 (compatibility consideration)


2005

QFD and TQM (Cont.) Cost Excellence

Provide necessary customer value with 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


2005

Kano’s House of Quality

infrastructureBase technology & IT

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•Quality Circle,…

•QFD,…

PDCA, …

Customer satisfaction

Incentive mechanismMotivation

Approach

Objectives


2005

Prototype Testing Prototype: an experimental design of the

whole or part of a product that is used for illustration or testing purposes. Rapid prototyping: a process for producing

fully functional prototypes in reduced time. Made possible by shorter design cycle

time or the decoupling of design and manufacturing.

Enables the designer to experiment before deciding on a final design.


2005

Beta Testing Beta version: A pre-release (potentially

unreliable) version of a piece of software or hardware made available to a small number of trusted customers.

An item "in beta test" is mostly working but still under test.

In practice, systems (hardware or software) often go through two stages of release testing:

Alpha (internal) and Beta (external).

To become a Beta tester, go to Intuit


2005

Competitive Intelligence

What: Information about competitors

Why: Provides information for better decision making and improved strategies An early warning system A strategy is the firm’s best response

to its competitors’ response and vice versus.


2005

Competitor AnalysisCompetitor’s goals

and objectives

Competitor’s strategy

Competitor’s assumptionsabout the industry

Competitor’s keystrengths and weaknesses

What strategic changeswill the competitor initiate?

How will the competitorrespond to our initiatives?

How can you develop this information?


2005

Effective Competitive Intelligence Programs

Affect decisions of top managers Are proactive in reading the market Look beyond existing market

boundaries Utilize the Web Gauge/measure potential for

misleading signals


2005

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

Failed!


2005

Qualitative Forecasting Tools Delphi method

Rely on a panel of experts Analogous data

Rely on similar products Risk of commensurability

Internet dialed up to 90M users by 3 years, while Radio took 13 years to 60 and TV 15 years.

Information Acceleration Use “virtual” prototypes to obtain customer

feedback


2005

High-Tech Forecasting Hazards

Lack of historical data Difficult for customers to articulate

preferences Inflated projects from over-enthusiasm Competition from incumbent

technologies (deterrence) Don’t confuse confidence in the

forecast with reality (quality of the information)


2005

Appendix: Conjoint Analysis

Products/Services are Composed of multiple Features/Attributes

Personal Computer: Brand + Microprocessor Speed + RAM +

CD Speed + HD Size + Price


2005

How to Learn What Customers Want

Ask Direct Questions about preference:

What brand do you prefer? What hard drive size would you like? What processor speed would you like? How much do you want to pay?

Answers often trivial and unenlightening (e.g. respondents prefer low price to high price, faster speeds to lower speeds)


2005

How to Learn What Is Important

Ask Direct Questions about importances How important is it that you get the <<brand,

hard drive size, processor speed, price >> that you want?

Importance Ratings often have low discrimination:

Average Importance Ratings

7.5

8.1

7.2

6.7

0 5 10

Price

Speed

Hard Drive

Brand


2005

What is Conjoint Analysis?

Research technique developed in early 1970s

Measures how buyers value components of a product/service bundle

Dictionary definition-- “Conjoint: Joined together, combined.”

Marketer’s catch-phrase-- “Features CONsidered JOINTly”


2005

How Does Conjoint Analysis Work?

We vary the product features (independent variables) to build many (usually 12 or more) product concepts.

We ask respondents to rate/rank those product concepts (dependent variable).

Based on the respondents’ evaluations of the product concepts, we figure out how much unique value (utility) each of the features added.

(Regress dependent variable on independent variables; betas equal part worth utilities.)


2005

What’s So Good About Conjoint?More Realistic Questions

Would you prefer . . .

210 Horsepower or 140 Horsepower17 MPG 28 MPG

If choose left, you prefer power. If choose right, you prefer fuel economy.

Rather than ask directly whether you prefer power over fuel economy, we present realistic tradeoff scenarios and infer preferences from your product choices.

When respondents are forced to make difficult tradeoffs, we learn what they truly value.

For application examples, go to Sawtooth Software.


2005

First Step: Create Attribute List

Attributes assumed to be independent (Brand, Speed, Color, Price, etc.)

Each attribute has varying degrees, or “levels”

Brand: Dell, Gateway, Compaq, IBM Speed:3.2 Ghz, 2.8 Ghz, 2.4 Ghz Price: $500, $1200, $2000

Each level is assumed to be mutually exclusive of the others (a product has one and only one level level of that attribute).


2005

The Conjoint TaskIf you were in the market to buy a new PC today and

these were your only options, which would you choose?

IBM

Dell

Compaq

None: I Wouldn't Choose Any of These

2.4 GHz Processor

3.2 GHz Processor

2.8 GHz Processor

512 Meg RAM

256 Meg RAM

256 Meg RAM

21-Inch Monitor

21-Inch Monitor

17-Inch Monitor

$1,200 $2,000 $1,550


2005

Output: Conjoint Utilities Numeric values that reflect how

desirable different features are:

Feature UtilityDell 2.5Compaq 1.8

3.2 Ghz P4 Processor 4.82.8 Ghz P4 Processor 3.22.4 Ghz Celeron Processor 1.2

The higher the utility, the better


2005

Output: Conjoint Importances

Measure of how much influence each attribute has on people’s choices

Best minus worst level of each attribute, percentaged:

Dell - Compaq (2.5 - 1.8) = 0.7 16.3%3.2 – 2.4 Ghz Processor (4.8 - 1.2) = 3.6 83.7%

----- --------Totals: 4.3 100.0%

Importances are directly affected by the range of levels you choose for each attribute

marketing of high-technology products and innovations chapter 5: marketing research in high-tech...

Documents

customer need slide

profiles of product

concept testing

finalist slide

profitability slide

customer input

market research

beta testing