Marketing_HighTech_3e_ch06

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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?
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
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?
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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
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% of Revenue
# of Market Research
Personnel
Pharmaceuticals
0.78 %
52
Media Companies
0.68 %
22
Consumer Goods
0.51 %
18
Technology (B2B Sector)
0.25 %
15
Telecommunications
0.07 %
15
< $1 Million
0.07 %
5
> $5 Million
0.5 - 0.69 %
13-41
By Industry Sector
By Company Size ($ Revenue)
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Survey Research
Concept Testing
Conjoint Studies
Focus Groups
Incremental Innovation
(need known)
Market Intuition
Customer-Driven Innovation
Customer Visits
Biomimicry
Empathic Design
Lead Users
Quality Function Deployment
Prototype Testing
Breakthrough Innovation
(technical solution precedes customer need)
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
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
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
Mid-range Innovation
◦ Techniques based on customer observation, lead
users, QFD
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

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
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Generate multiple product concepts/ideas
1.
a)
b)
c)
d)
Observation
Focus groups
Brainstorming
Interviews
Share concepts with sample of customers
2.
◦
◦
Key attributes and benefits described in
paragraph form
Potential customers rate concepts on
dimensions such as trial interest and perceived
value
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3.
Further reduce number of concepts to a
manageable set
◦ Representative sample of potential customers
assess finalists
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
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
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Develop attribute combinations
1.

Use focus groups, interviews, internal expertise
Present each product profile with different
attribute combination to customers
2.

Customers evaluate each combination on a
rating scale
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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
#1
Accuracy
10 feet
Battery
Life
32 hours
Display
Price
Color
$250
16 product profiles possible (2 x 2 x 2 x 2)
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Perform Ordinary Least Squares regression
on the data
3.

Yields consumer utility function
Example: Importance Weights- GPS Conjoint Study
Accuracy
9.6
Battery
Life
30.9
Display
Price
14.9
40.6
Accuracy is least important, price is most important
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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
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

Use to determine product feature set and
price
Make market share predictions
◦ Predict cannibalization and substitution
effects
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
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
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Elements of Effective Customer Visit Programs
Get engineers in front of customers.
1.
◦
◦
Face to face communication
Interactive conversation
Ensure that the corporate culture embraces the
value of the customer visit program.
Visit different kinds of customers.
2.
3.
◦
◦
Competitor’s customers, lost customers, lead users,
channel intermediaries, internal personnel
Customer councils
(see Table 6-3 for more details)
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Elements of Effective Customer Visit Programs
(cont)
Visit customers in their own settings:
Get out of the conference room!
4.
◦
◦
◦
◦
(versus bringing them on-premise for a “dog and
pony” show)
Field research
Firsthand knowledge
Inclusion of multiple decision makers
Conduct programmatic visits.
5.
◦
(not ad hoc)
(see Table 6-2 for more details)
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
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
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
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
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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.
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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
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

Develop detailed “map” of how customers
operate
Customer scenario planning
◦ Intimate understanding  delivery of
value, customer loyalty
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
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
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User
Manufacturer
Computer Industry
33%
67%
Chemical Industry
70
30
Poltrusion-Process Machinery
85
15
Scientific instrument s
82
18
Semiconductor-electronic
process equipment
63
21
Electronic assembly
11
33
Surface chemistry
instruments
82
18
Other
16%
(joint usermanufacturer)
56
(supplier)
See Table 6-5
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
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)
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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
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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
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
New insights from gathering and using
information in new ways

Cross-functional in nature

Collaboration with innovative customers

Requires corporate support, skilled
teams, time.
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Time
NUMBER OF USERS WITH NEED
FOR NOVEL PRODUCT
"LEAD USERS"
of later commercialized
modifications and enhancements
"LEAD USERS" of
novel products
Some Users Begin
To Experience/
Respond To Need
First Responsive
Commercial
Product Introduced
Market Growth
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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
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
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
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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
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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.
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Satisfaction
* Unknown and unspoken
One-dimensional:
Known and spoken
Attractive*
(Delight/Wow)
Low level of
attribute
High level
of attribute
Expected:
Must-be quality
Known and unspoken
Dissatisfaction
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
One-dimensional attributes
o
o
Known and voiced by customer
Linearly related to customer satisfaction
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
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
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
Attractive quality attributes
o
o
o
o
Exhibit an exponential relationship with
satisfaction
Because it is not expected (or voiced), lack
of this attribute does not lead to
dissatisfaction
“Wow” factor
Discovered through empathic design and
lead users
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


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
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
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
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
Information acceleration technique:
virtual representation of a new product
◦ More vivid and realistic than concept
descriptions
◦ Less expensive than actual prototypes
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
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
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
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.
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“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
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
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
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
Customers are willing to “donate” their
ideas freely
◦ Motivated by enhanced reputation and
network effects
◦ Realize low odds of successfully
commercializing their own idea
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
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
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
Paradoxically, technology companies
are leading the way in harnessing
customer knowledge
◦ PFE: Proudly found elsewhere

Requires competencies in communication,
learning and collaborating with customers
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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
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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.
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
Namibian
Desert
Beetle
Humpback
Whale
(More details in Table 6-8)
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Challenge
to Biology
Identify
Evaluate
Real Challenge
Against Life’s
Principles
Interpret
Design Brief
Emulate
Discover
Nature’s Strategies
Abstract
Natural Models
Design Principles
© Biomimicry Guild, 2008
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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?
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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
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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
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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
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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
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Traditional
Quantitative
Techniques:
Time Series, Moving
Averages, Exponential
Smoothing
Incremental Innovation
Company has previous experience
Bass Model
Delphi Technique
Analogous Data
Breakthrough Innovation
“New to the Company”
No closely competing alternatives available
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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)
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Cumulative
Adopters
New
Adopters
Innovators
Early
Early
Late
Majority
Adopters
Majority
Laggards
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
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
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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
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



Opening Vignette: IDEO
Technology Expert: Grupthink (technology
for customer feedback communities)
Technology Tidbit: BioWave Power
End-of-Book Case: Xerox
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