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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 Marketing Strategy New Product Success Type of Innovation -Breakthrough -Incremental Type of marketing strategy is contingent upon the nature of the innovation. Aligning Market Research with the Type of Innovation Traditional Market Research Market Intuition Empathic Design Lead Users Incremental Innovation (need known) 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 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 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 higherquality 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 One-dimensional Attractive Dysfunctional Functional Must-be Know vs. Unknown Spoken vs. Unspoken Dissatisfaction 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 marketoriented • 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 Attractive Quality Model 3 ONE-DIMENSIONAL QUALITY Model 2 Model 1 Development Overall Revenue Incr. Revenue New Models Must be quality Time 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