Transcript Marketing of High-Technology Products and Innovations

Marketing of High-Technology
Products and Innovations
Chapter 5:
Marketing Research In
High-Tech Markets
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 Definition
Specification Development
Product Prototyping
Usability Lab Testing
Additional Product Development
Internal Alpha Release
Feedback Analysis and Product Refinements
Beta Site Testing
Feedback Analysis & Product Refinements
External Product Release
Surveys
© Mohr, Sengupta, Slater 2005
Studies
Aligning Market Research
with Type of Innovation
Survey Research
Concept Testing
Conjoint Studies
Market Intuition
Customer Visits
Empathic Design
Lead Users
Quality Function Deployment
Prototype Testing
Incremental
Innovation
(need known)
Breakthrough Innovation
(technical solution
precedes customer need)
© Mohr, Sengupta, Slater 2005
Concept Testing

Generate multiple product concepts




Judgmentally reduce number of concepts



Observation
Focus groups
Brainstorming
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
If you were in the market to buy a new PC today and
these were your only options, which would you choose?
IBM
Dell
Compaq
2.4 GHz
3.2 GHz
2.8 GHz
Processor
Processor
Processor
None: I
Wouldn't
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
Choose
Any of
These
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
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
First Responsive Commercial
Experience/ Respond To Need
Product Introduced
© Mohr, Sengupta, Slater 2005
Market
Growth
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.
2.
3.
4.
5.
Determine what, specifically, is important to customers.
Rank customer requirements in terms of importance.
Translate customer requirements into design specifications.
Rate the design attributes by organizational difficulty.
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
One-dimensional
Attractive
Dysfunctional
Functional
Must-be
Known vs. Unknown
Spoken vs. Unspoken
Dissatisfaction
「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 overruns
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
Attractive Quality
Model 3
ONE-DIMENSIONAL
QUALITY
Model 2
Model 1
Development
Overall Revenue
Incr. Revenue
New Models
Must be quality
Time
© 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
Objectives
•QFD,…
Incentive mechanism
Base technology & IT
infrastructure
© Mohr, Sengupta, Slater 2005
Concepts
•Quality
Circle,…
Techniques
Motivation
Organizations
Approach
Customer satisfaction
PDCA, …
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 Analysis
Competitor’s goals
and objectives
Competitor’s strategy
What strategic changes
will the competitor initiate?
Competitor’s assumptions
about the industry
How will the competitor
respond to our initiatives?
Competitor’s key
strengths and weaknesses
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.”


Failed!
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 © 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
6.7
Brand
7.2
Hard Drive
8.1
Speed
7.5
Price
0
5
10
© 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
17 MPG




or
140 Horsepower
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 Task
If you were in the market to buy a new PC today and
these were your only options, which would you choose?
IBM
Dell
Compaq
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
None: I
Wouldn't
Choose
Any of
These
Output: Conjoint Utilities


Numeric values that reflect how desirable
different features are:
Feature
Dell
Compaq
Utility
2.5
1.8
3.2 Ghz P4 Processor
2.8 Ghz P4 Processor
2.4 Ghz Celeron Processor
4.8
3.2
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
© Mohr, Sengupta, Slater 2005