Marketing of High-Technology Products and Innovations Marketing Research In High-Tech Markets.
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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
© Mohr, Sengupta, Slater
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
© Mohr, Sengupta, Slater
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)
© Mohr, Sengupta, Slater
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
© Mohr, Sengupta, Slater
2005
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
© Mohr, Sengupta, Slater
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?
© Mohr, Sengupta, Slater
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
© Mohr, Sengupta, Slater
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)
© Mohr, Sengupta, Slater
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
© Mohr, Sengupta, Slater
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.
© Mohr, Sengupta, Slater
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
© Mohr, Sengupta, Slater
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.
© Mohr, Sengupta, Slater
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)
© Mohr, Sengupta, Slater
2005
Lead Users
"LEAD USERS" of later commercialized modifications and enhancements
"LEAD USERS" of novel products
NU
MB
ER
OF
US
ER
S W
ITH
N
EE
D F
OR
NO
VE
L
PR
OD
UC
T
Some Users Begin To Experience/ Respond To Need
First Responsive Commercial Product Introduced
Market Growth
Time
© Mohr, Sengupta, Slater
2005
Lead Users in Market Research
The lead user process can create breakthrough products by systematically identifying lead users and learning from them.
© Mohr, Sengupta, Slater
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
© Mohr, Sengupta, Slater
2005
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
© Mohr, Sengupta, Slater
2005
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
The possibility of extrapolation
© Mohr, Sengupta, Slater
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.
© Mohr, Sengupta, Slater
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)
© Mohr, Sengupta, Slater
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.
© Mohr, Sengupta, Slater
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
© Mohr, Sengupta, Slater
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
© Mohr, Sengupta, Slater
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.
© Mohr, Sengupta, Slater
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.
© Mohr, Sengupta, Slater
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
© Mohr, Sengupta, Slater
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
© Mohr, Sengupta, Slater
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.
© Mohr, Sengupta, Slater
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
© Mohr, Sengupta, Slater
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
© Mohr, Sengupta, Slater
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
© Mohr, Sengupta, Slater
2005
Customer excellence Tied to being customer-focused
and market-oriented Knowledge of customer
environment and product usage
© Mohr, Sengupta, Slater
2005
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
© Mohr, Sengupta, Slater
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
© Mohr, Sengupta, Slater
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)
© Mohr, Sengupta, Slater
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
© Mohr, Sengupta, Slater
2005
Kano’s House of Quality
infrastructureBase technology & IT
Org
an
izatio
ns
Con
cep
ts
Tech
niq
ues
•Quality Circle,…
•QFD,…
PDCA, …
Customer satisfaction
Incentive mechanismMotivation
Approach
Objectives
© Mohr, Sengupta, Slater
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.
© Mohr, Sengupta, Slater
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
© Mohr, Sengupta, Slater
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.
© Mohr, Sengupta, Slater
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?
© Mohr, Sengupta, Slater
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
© Mohr, Sengupta, Slater
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!
© Mohr, Sengupta, Slater
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
© Mohr, Sengupta, Slater
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)
© Mohr, Sengupta, Slater
2005
Appendix: Conjoint Analysis
Products/Services are Composed of multiple Features/Attributes
Personal Computer: Brand + Microprocessor Speed + RAM +
CD Speed + HD Size + Price
© Mohr, Sengupta, Slater
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)
© Mohr, Sengupta, Slater
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
© Mohr, Sengupta, Slater
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”
© Mohr, Sengupta, Slater
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.)
© Mohr, Sengupta, Slater
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.
© Mohr, Sengupta, Slater
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).
© Mohr, Sengupta, Slater
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
© Mohr, Sengupta, Slater
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
© Mohr, Sengupta, Slater
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