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  • 1. E-mail: info@imc-re.comWeb: http://www.imc-re.comProduct Engineering and DevelopmentA White Paper by imc Research International Chapter: Introduction2010 imc Research - http//:www.imc-re.com 1
  • 2. Table of ContentsIntroduction ......................................................................................................................................................... 3USING MARKET RESEARCH IN PRODUCT DEVELOPMENT ................................................................................ 4PRE-BIRTH ESTABLISHING NEEDS .................................................................................................................... 4YOUTH STIMULATING PRODUCT TAKE-UP ..................................................................................................... 9MATURITY IMPROVING PRODUCT PERFORMANCE....................................................................................... 9OLD AGE DETERMINING THE FUTURE .......................................................................................................... 10DETERMINING THE TYPE OF MARKET RESEARCH REQUIRED ........................................................................ 11CONCLUSION ..................................................................................................................................................... 12 Chapter: Introduction2010 imc Research - http//:www.imc-re.com 2
  • 3. IntroductionNew is one of the strongest words in marketing. New invokes the belief that something is movingforward, that it is different, modern or improved. People are attracted to new products like a magnet.Introducing new products on a constant basis is the best way to get attention and is invaluable publicityfor a business. New positions a company as being dynamic and forward looking. Companies such as3M and Sony have held this slot for periods of time but it is difficult to stay there. Innovation is hardwork and the road is paved with failures. This white paper shows how market research, when usedcorrectly, will minimize the risk of failure. It also explains that market research does not always give aclear-cut answer considerable insights and experience are required by the market research analyst tointerpret the data and visualize the opportunity.The word new is sometimes over-played in marketing because it is so frequently used for everythingfrom conceptually new products through to old wine in new bottles. The main types of productdevelopment are as follows:1. New concepts completely new products that have arisen as a result of innovation and which cansometimes create new markets.2. Additions to existing product lines new products that supplement established product lines. Forexample, a supplier of industrial gases may introduce a new, smaller cylinder to include in an existingproduct line, aimed at serving customers who require smaller amounts of gas.3. Modifications of existing products existing products that are modified in order to better meetcustomer needs, such as improved performance.90% of new product research is focused on product additions and modifications rather than on theconcepts. There is nothing wrong with this. Product improvements are obvious developments and aremuch more easily accepted than conceptually new products.In fact, the more conceptually new the product, the riskier it can be. FedEx lost $340 million on its newZap mail and DuPont lost an estimated $100 million on a new synthetic leather product called Corfam.With this in mind, many companies turn to disciplined market research as a form of insurance, i.e. as ameans of reducing business risk. The next section looks at how market research is used in productdevelopment not only as insurance, but also as a tool to establish needs and to obtain intelligence onmarket potential. Chapter: Introduction2010 imc Research - http//:www.imc-re.com 3
  • 4. USING MARKET RESEARCH IN PRODUCT DEVELOPMENTMarket research can be used at all stages in the product life cycle, as illustrated in Figure 1 andexplained in the following sections on applications for market research.Figure 1 - Applications For Market ResearchPRE-BIRTH ESTABLISHING NEEDS Chapter: USING MARKET RESEARCH IN PRODUCT DEVELOPMENTMany companies recognize the importance of new and for this reason they allocate substantial sumsto research and development. Electronics companies may have an R&D budget equal to 15% of theirsales, but this is required in order to cope with the rapid pace of change in their sector. For mostcompanies, the expenditure on R&D is somewhere between 2% and 5% of sales still huge sums for thelikes of Boeing, Honda or Siemens.Over 90% of all innovations that are successful start in the wrong direction1, and are not the outcome ofgood market research. In fact, many new and successful products arise by accident and not as a resultof hours and hours of focused R&D or significant financial investment. Indeed the telephone, X-rays,bubble gum, Velcro, Viagra and Post-it notes to name but a few examples were all invented byaccident. In the case of Post-it notes, for instance, a researcher at 3M was eager to create the worldsbest glue, but actually ended up creating one of the worst glues ever one that didnt stick whichnevertheless ended up as one of 3Ms most successful products: that of the ubiquitous Post-it notes.1 According to Clayton Christensen, a Harvard Business School professor, in an interview with MIT SloanManagement Review, published in the Wall Street Journal December 15th 2008: How Hard Times Can DriveInnovationNot all new products arise by accident, however, and market research can play a role in determining theneed for most new products. Drucker (1993) tells the story of William 2010 imc Research - http//:www.imc-re.com 4
  • 5. Conner, a medical salesman, who decided he wanted to set up his own company. Conner sought newproduct opportunities by visiting surgeons and asking them about the challenges they faced in theirwork. In these interviews, Conner learned that the process for cataract surgery involved a difficult taskfor physicians, in that they had to cut a ligament which was an unpleasant and risky move. Conner thendiscovered an enzyme which could dissolve this ligament (thus eliminating the requirement to cut theligament), as well as a means through which the enzyme could be preserved until it was required insurgery. The innovation was a success, which led to Conner patenting his compound and meeting anunmet need in the industry all thanks to market research which played an instrumental role indiscovering and unleashing the market opportunity.In the case of the cataract surgery, market research provided invaluable insights into unmet needs and athorough understanding of the environment in which the new product would be sold. However, cautionshould be taken in terms of the expectations of market research, for it cannot be assumed thatconducting research with the market will uncover sizeable opportunities and lead to the conception andlaunch of new products. It is the role and responsibility of the researcher to use the understanding ofthe needs of the market to find applications for new products that will satisfy these needs. The marketcannot be expected to announce what the new product should be, and market research respondentscannot play the role of R&D Director!Furthermore, it cannot be assumed that market research is an exact science, as it would be unrealisticand unreasonable to expect market researchers to predict the precise demand for a new concept, giventhat there are numerous variables that can impact demand outside of the market researchers remit. Ittakes years to get a product to the commercialization stage, let alone to get it well established in amarketplace.Market research should be regarded as an experiment which may fail if it is not conducted in the rightconditions. For example, Xerox commissioned three independent consultants to explore theopportunity for a copier. Two consultants advised against the launch and the third consultant forecastsales of 8,000 units over 6 years. Xerox chose to ignore the recommendations of the consultants,launched the copier and installed 80,000 machines within just 3 years. The market research hadunderestimated demand as respondents were unable to provide their views on a new product that theyhad never experienced.Indeed, innovations that require potential users to try something new (which is likely to involve achange in mental attitudes) are difficult to research, given that potential buyers or users when asked Chapter: PRE-BIRTH ESTABLISHING NEEDSin an interview or focus group cannot be expected to imagine using a product and to then state howlikely they would be to buy it, or to state how much they would pay for it,