6th Unit

Product Research
Product Research

◼ Marketing research is a significant tool for planning and developing of

products.

◼ It enables business in designing the right product by providing all

information regarding new ideas in market, testing the new product
and evaluating the current product mix to find out the changes that
need to be brought in it.
Product Research

◼ Marketing Research may be used in the areas of product planning

and development like to evaluate new product ideas, to evaluate
the need to change existing product mix, for testing the new
product acceptance, testing product positioning, package testing
in terms of aesthetic appeal, protection for the product and
ability to withstand transparent and stocking.

◼ It comprises the study of product design, features, quality, brand

tracking, brand preferences, product lines and rationalization of
product lines.
 PRODUCT MIX CHARACTERISTICS

◼ WIDTH
• Number of different product lines
◼ LENGTH
• # of items in the product line/mix
◼ DEPTH
• Number of variants in line/mix
Crest 2 flavors and 3 sizes
◼ CONSISTENCY
• How closely are the lines related
 Brand Asset Dimensions

Brand
Equity

Brand Perceived Brand Brand

Awareness Quality Associations Loyalty
How Many
Ideas Are
Required for
One
Successful
New Product?
 Launching and Diffusing Innovative Offerings

◼ To explain new offerings’ diffusion rates, it can be informative to classify

consumers into groups, according to their propensity to adopt new
products and which persuasive arguments will prompt them to adopt

◼ According to Geoffrey Moore, the adoption lifecycle of an innovative

offering suggests five groups of potential users:
 Innovators are the first to adopt, often before the new offering even is
officially launched
 Early adopters see the benefits of the new technology and are willing to adopt
it after just a few references
 The early majority consists of much more pragmatic consumers, who need to
be convinced that the new product really works
 Both of the last two groups, late majority and laggards, also want more
evidence, but they are especially hard to persuade

© Palmatier 7
 Crossing the Chasm: Adoption Lifecycle

Crossing the Chasm

New product launches fail
if the firm has not
prepared to sell to early
majority customers by the
time it runs out of early
adopters.

Categories of Innovators Early Adopters Chasm Early Majority Late Majority Laggards
Product First to adopt a Perceive the Gap More pragmatic, Demands even Need the most evidence
Adopters new offering; benefits of the between such that they more evidence to persuade
actively seek new technology early must be of the product’s
new and are willing adopters convinced that functionality
technologies to buy with just and early the new product and are harder
a few references majority really works to persuade

Adapted from Moore, G.A. (2006), Crossing the Chasm: Marketing and
Selling Disruptive Products to Mainstream Customers, 1st rev. ed., (New
York: Collins Business Essentials)

© Palmatier 8
 The Diffusion Process
Relationship of the Diffusion Process to the
Product Life Cycle
Introduction Growth Maturity Decline

100
Cumulative Percentage of Adoption

Product
90 life cycle
80 curve
70
Early majority
60 Late majority
50
Early adopters
40

30 Innovators
Laggards
20

10
Diffusion
curve
0
Time of Adoption of Innovations
 Failing to “Cross The Chasm” is Common
Barrier to Success
◼ Firm takes on more visionaries than it can handle

◼ Cannot take on more custom projects, but no pragmatists

ready to buy
◼ Early market becomes saturated, and revenue growth tapers
off or declines
 Key personnel become disillusioned
 Venture capital well begins to run dry

◼ Marketing strategies that lead to success in selling to

visionaries actually hinder success in selling to pragmatists
◼ The adoption lifecycle approach clearly and systematically
integrates aspects of both MP#1 and MP#2

See Marketing Input and

Innovation Strategy
reading for startups
© Palmatier 10
10
 Strategy to Cross the Chasm and Beyond
1. The Bowling Alley:
◼ New product gains acceptance from niches and extends through a
common platform
◼ Each niche requires expertise in that vertical market
◼ Market coverage propagates to neighbors and extends references
◼ Focuses marketing resources
2. The Tornado:
◼ Period of mass-market adoption when the general marketplace
switches over to the new technology
◼ Driven by application that provides compelling benefits to mass
market: the “killer app”
◼ Requires strong operational excellence to keep up with demand
3. Main Street:
◼ Market growth stabilizes
◼ Focus on cross-selling and upgrading to existing customers

© Palmatier 11
11
 Product-Based Factors that Influence
Innovation Diffusion
◼ Another long stream of research, starting with Everett
Rogers, shows that specific product characteristics can
capture 40–80 percent of the variation in the speed with
which offerings diffuse

◼ Changing each of the following five factors can alter the rate
of product diffusion, all else being equal
1. Relative advantage
2. Compatibility
3. Complexity
4. Trialability
5. Observability

© Palmatier 12
What Affects the Rate of Adoption?
Complexity

Compatibility

Characteristics
Affecting Relative Advantage
New Product
Diffusion
Observability

Trialability
 Besides Psychology and People, “Product
Factors” Determine the Rate of Diffusion
1. Relative Advantage: degree to which an offering is
perceived as being better than the ideas it supersedes
◼ Economic: cost, price
◼ Status, prestige, etc. See Note on Innovation
Diffusion: Roger's Five
◼ Necessary but not sufficient (i.e., new keyboard) Factors

2. Compatibility: degree to which an offering is perceived as

consistent with existing values and experiences
◼ Often must break habits, perceptions, beliefs
◼ Plastic wine corks, TiVO

© Palmatier 14
14
 49% to 87% of the Variance in Rate of
Adoption is Explained by 5 Factors
3. Complexity: degree to which an offering is perceived as relatively difficult
to understand/use
◼ Education is key (online banking)
◼ Speed of Google

4. Trialability: degree to which an offering may be experimented with on a

limited basis
◼ Free samples, demo, test drive
◼ Especially salient for high cost, time, risky products

5. Observability: degree to which the results of an offering are visible to

others
◼ Especially salient for status products
◼ Can be negative (parking by a “men’s club”)

© Palmatier 15
15
 STP/BOR Strategies Should be Adapted
Based on 3Ps (Psych, People, Product)
Brand – Offering - Relational

◼ Segmenting and Targeting Strategies

 Focus on vertical markets, intra-segment communication, no takeaways,
large relative advantage (10x)
 Low end and/or new markets for disruptive innovations
 Target beachheads for bowling alley effect
 Select segments where “5 factors” are best

◼ Positioning Strategies
 Make offering compatible to existing offering
 Education and simplicity are key to messaging
 Free samples, reduce risk, use warranty and trial periods
 Enhance visibility of users, testimonials

◼ Migration Strategies (Visionaries to Pragmatists)

 How to persuade gate keepers
 Building references and testimonials

© Palmatier 16
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 But, Remember That Being First is Not
a Guarantee of Success
◼ 65 year historical study on impact of market entry
 Failure rate of pioneers is 47%
 Pioneers are ultimate leaders in only 11% of categories (10 years later)

◼ First mover advantage is trumped by followers who

are better. Best beats first.
◼ Being a pioneer without the basis for sustainable
competitive advantage is a trap!

© Palmatier (Tellis and Golder) 17

 Psychology, People, and Product
Factors Determines Product Diffusion

© Palmatier 18
 Bass Diffusion Model for New Product
Adoption Capture Multiple Factors (3Ps)

◼ Mathematical model used to forecast the rate of

consumer adoption
nt = p  Remaining + q  Adopter Proportion  Remaining Potential
Potential

Innovation Effect Imitation Effect

nt = number of adopters at time t (Sales)

p = “coefficient of innovation” (propensity to adopt independent of # of previous adopters)
q = “coefficient of imitation” (propensity to adopt as a function of number of adopters)
# Adopters = n0 + n1 + • • • + nt–1
Remaining Potential = Total Potential (N) – # Adopters

© Palmatier 19
19
 Sum of Innovators and Imitators Yields Model
for New Adopters

© Palmatier 20
 Estimating the Parameters of the
Bass Model
◼ Use historical data

◼ Use analogous products

Innovation Imitation
Product/ parameter parameter
Technology (p) (q)

B&W TV 0.065 0.335

Color TV 0.021 0.583
Room Air conditioner 0.010 0.454
Clothes dryers 0.073 0.389
Ultrasound Imaging 0.003 0.506
CD Player 0.028 0.368
Cellular telephones 0.005 0.506
Microwave Oven 0.018 0.337
Hybrid corn 0.000 0.798
Home PC 0.003 0.253

Van den Bulte and Stremersch (2004) suggests an average value

© Palmatier of 0.03 for p and an average value of 0.42 for q 21
21
 Example: Forecasting DirecTV

◼ Used Bass Diffusion model

 Market size estimate from customer survey
 Diffusion parameters estimated from managerial
judgments and analogous products (cable TV)
◼ Results:
Five year forecasts made 3 years before launch
were, on average, -16% below actual
Forecast justified earlier launch of a satellite for
expanded transmission capability

© Palmatier 22
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 Trade-off

◼ A trade-off (or tradeoff) is a situational decision that involves diminishing

or losing one quality, quantity, or property of a set or design in return for
gains in other aspects. In simple terms, a tradeoff is where one thing
increases, and another must decrease. Tradeoffs stem from limitations of
many origins

◼ The concept of a tradeoff suggests a tactical or strategic choice made with

full comprehension of the advantages and disadvantages of each setup.

◼ In economics, a trade-off is commonly expressed in terms of the

opportunity cost of one potential choice, which is the loss of the best
available alternative

◼ A tradeoff, then, involves a sacrifice that must be made to obtain a certain

product, service, or experience, rather than others that could be made or
obtained using the same required resources.

© Palmatier 23
 Product – services tradeoffs

◼ A family lives on five acres in the country and the parent commutes an
hour and a half to work in the city. Although the family loves their home
and land in the country, they decide to move into the city, reducing the
commute to half an hour. They have made a trade-off of peaceful country
living for more quality family time.

◼ A big-box retail store plans to give a free lunch to every customer who
comes in on Saturday. Obviously, giving free lunch causes a loss, but the
trade-off of losing the lunch money is bringing customers into the store,
who then spend money buying merchandise.

© Palmatier 24
 Types of Trade off

◼ Price – Value trade off

◼ Brand Image – Price trade off

◼ Durability – weight tradeoff

◼ Waiting time – quality trade off

© Palmatier 25
Prototyping and Construction

◼ What is a prototype?

◼ Why prototype?

◼ Different kinds of prototyping

 low fidelity
 high fidelity

◼ Compromises in prototyping
 vertical (“deep”)
 horizontal (“shallow”)

◼ Construction
What is a prototype?
For users to effectively evaluate the design of an interactive
product, designers must produce an interactive version of their
ideas, this activity is called prototyping.

◼ In other design fields a prototype is a small-scale model:

 a miniature car
 a model of a building

◼ In interaction design it can be

 a series of screen sketches
 a PowerPoint slide show
 a video simulating the use of a system
 a lump of wood, e.g. hand-held computer
 a cardboard mock-up
 a piece of software with limited functionality
Why prototype?
◼ Evaluation and feedback:
allows stakeholders to interact with an envisioned product, to
gain some experience of using it in realistic settings and to explore
imagined uses

◼ Communication among team members:

clarifies vague requirements

◼ Validation of design ideas:

test out the technical feasibility of an idea

◼ Choosing between alternatives:

provides multiple designs for the application
What to prototype?

◼ Technical issues

◼ Work flow, task design

◼ Screen layouts and information display

◼ Difficult, controversial, critical areas

Low-fidelity Prototyping

◼ Does not look very much like the final product

◼ Uses materials that are very different from the intended final version, such as
paper and cardboard rather than electronic screens and metal, e.g. palm pilot

◼ Used during early stages of development

◼ Cheap and easy to modify so they support the exploration of alternative

designs and ideas

◼ It is never intended to be integrated into the final system. They are for
exploration only.
Examples of Low-fidelity prototyping

◼ Storyboards

◼ Sketching

◼ Index cards

◼ ‘Wizard of Oz’
High-fidelity prototyping

◼ Choice of materials and methods

 similar or identical to the ones in the final product

◼ Looks more like the final system

 appearance, not functionality

◼ Common development environments

 Macromedia Director, Visual Basic, Smalltalk,
 Web development tools

◼ Misled user expectations

 users may think they have a full system
Advantages/Disadvantages

Prototype Advantages Disadvantages

Low-fidelity - low developmental cost - limited error
prototype - evaluate multiple checking -
design concepts navigational and flow
limitations

High-fidelity - fully interactive - more expensive to

prototype - look and feel of final develop
product - time consuming to
- clearly defines build
navigational scheme - developers are
reluctant to change
something they have
crafted for hours
Compromises in prototyping

◼ All prototypes involve compromises

◼ Compromises in low-fidelity prototypes:

 device doesn't actually work

◼ Compromises in high-fidelity prototypes:

 slow response
 sketchy icons
 limited functionality available

◼ Two common types of compromise

 ‘horizontal’: provide a wide range of functions, but with little
detail
 ‘vertical’: provide a lot of detail for only a few functions
5 steps to the evaluation of
prototypes
Confirm the Prototype
Develop Questions
Design Methods
Implement & Adapt
Make Decisions
Step 1: Confirm the Prototype

◼ Do you actually have a prototype?

◼ What type of prototype is this?

◼ What parts of the prototype do you want to test?

Evaluation of a metaphor

◼ How much structure does it provide?

 requires a sound and familiar structure

◼ How relevant is it to the problem?

 reduce confusion and false expectations

◼ Is it easy to represent?
 visual and audio elements combined with words

◼ Will the audience understand it?

◼ How extensible is it?

 extra aspects that can be useful later on
Step 2: Develop Questions
Question
To what extent is this prototype likely to be
effective in achieving what we want to achieve?
To what extent is this prototype likely to be
feasible in the real world?
To what extent is this prototype likely to be viable
in the current context (economic, political, social,
etc.)?
To what extent is this prototype likely to be
supported by key stakeholders?
To what extent is this prototype
scalable for bigger impact?
Example
People agree that the only way that this thing
would work is if we put it
20 metres tall or higher.
These devices are easy to build and they seem as
easy to set up as satellite dishes.
There appears to be very little in the way of
municipal regulation of this type of technology:
it’s a pretty grey area, which may or may not work
in our favour.
We did not test this in any meaningful way – we
should do so in our next iteration and round of
testing.
The executive director of a large environmental
organization estimates there is potential for 50%
market penetration in the city: let’s consider
doing a market analysis.
Step 3: Design Methods

◼ Functionality

◼ Relevant.

◼ Credible.

◼ Appropriate burden of Proof.

◼ Quality.

◼ Timely.
Step 4: Implement & Adapt

◼ Plan-Do-Study-Act (PDSA) Cycle This highly structured methodology for

experimentation originated in Total Quality Management. Since then it
has been adapted to support the creation and testing of new ideas.
Step 5: Decisions

◼ Discard

◼ Evolve

◼ Graduate to Pilot

◼ Go to Scale

◼ Keep Testing
 Luxury and Lifestyle products.

◼ A luxury good can be identified by comparing the demand for the good at
one point in time against the demand for the good at a different point in
time, with a different income level. When income increases, demand for
luxury goods increases even more than income does. When income
decreases, demand for luxury goods drops even more than income does.
For example, if income rises 1%, and the demand for a product rises 2%,
then the product is a luxury good

© Palmatier 42
 Characteristics

◼ Luxury goods have high income elasticity of demand: as people become

wealthier, they will buy proportionately more luxury goods. This also
means, however, that should there be a decline in income, its demand will
drop more than proportionately. Income elasticity of demand is not
constant with respect to income, and may change sign at different levels
of income. That is to say, a luxury good may become a necessity good or
even an inferior good at different income levels.

◼ the technical term luxury good is independent of the goods' quality, they
are generally considered to be goods at the highest end of the market in
terms of quality and price. Many markets have a luxury segment
including, for example, luxury versions of automobiles, yachts, wine,
bottled water, coffee, tea, foods, watches, clothes, jewelry, and high
fidelity sound equipment

© Palmatier 43
Classification of products
 5 Stages of Consumer Adoption Process (Buyer
Decision Process for New Products)

© Palmatier 45
 ◼ Consumers go through 5 stages in the process of
adopting a new product.
1. Product Awareness.
2. Product Interest.
3. Product Evaluation.
4. Product Trial.
5. Product Adoption.

© Palmatier 46
 1. Product Awareness

◼ The consumer becomes aware of the new product but lacks information
about it. Initially, the consumer must become aware of the new product.

◼ Awareness leads to interest, and the customer seeks information about the
new product.

◼ Whether an innovation is continuous or not, people are either little aware or

aware of it initially.

◼ Innovator, therefore, has to inform the adopters about the innovation. In the
awareness stage, individuals become aware that the product exists, but they
have little information about it and are not concerned about getting more.

◼ Adopters may be informed through advertising, publicity, or any other effort

of the marketer.

© Palmatier 47
 2. Product Interest

◼ The consumer seeks information about the new product. Once the
information has been gathered, the consumer enters the evaluation stage
and considers buying the new product.

◼ By this time, the innovation is introduced. It is now the time for the decision-
makers to determine whether the innovation relates to their needs.

◼ They enter the interest stage when they are motivated to get information
about its features, uses, advantages, disadvantages, price, or location.

◼ Interest may or may not sparked, depending on whether the decision-

makers perceive the innovation as a relevant, feasible alternative to existing
items.

© Palmatier 48
 3. Product Evaluation

◼ Next, in the trial stage, the consumer tries the product on a small scale to
improve its value estimate. The consumer considers whether trying the new
product makes sense.

◼ Adopters of the innovations have to establish some evaluation measures to

compare the new product with existing ones.

◼ During the evaluation stage, individuals consider whether the product will
satisfy certain critical criteria for meeting their specific needs. The potential
adopters consider the innovation’s benefits and determine whether to try it.

© Palmatier 49
 4. Product Trial

◼ The consumer tries the new product on a small scale to improve their
estimate of its value. If the consumer is satisfied with the product, they enter
the adoption stage, deciding to use the new product thoroughly and
regularly.

◼ At this stage, the potential adopters examine, test, or try the innovative
product to determine its usefulness.

◼ In this stage, they use or experience the product for the first time, possibly
by purchasing a small quantity, taking advantage of a free sample or
demonstration, or borrowing the product from someone.

◼ During this stage, potential adopters determine the product’s usefulness

under the specific conditions they need.

◼ The trial stage for innovations is complex. Successful introduction depends

greatly on the new product’s characteristics, benefits, and perceived risks.
Effective communication is the key to achieving trial by consumers.
© Palmatier 50
 5. Product Adoption

◼ The consumer decides to make full and regular use of the new product. The
new product is a good, service, or idea perceived by some potential
customers as new.

◼ Individuals move into the adoption stage when choosing that specific
product when they need a product of that general type. Here the buyers
purchase the new product and can be expected to use it to solve problems.

◼ So, this final stage of the process is indicated most directly by sales, but the
innovation’s visibility is also a success measure.

◼ However, please do not assume that they will eventually adopt the new
product because a person enters the adoption process. Rejection may occur
after any stage, including the adoption stage.

© Palmatier 51
 INNOVATION - DECISION PROCESS

As an alternative to the "Stages in the adoption

process" viz., Awareness, Interest, Evaluation, Trial and Adoption, due to
the advancements in diffusion research, currently" Innovation - Decision
process" is proposed which enlightens the sequential stages in the
adoption - decisions made by individuals or other units of adoption

The "Innovation - Decision Process" is the process through which an

individual (or other decision - making unit) passes from first knowledge
of an innovation, to forming an attitude towards the innovation to a
decision to adopt or reject, to implementation of the new idea, and to
confirmation of this decision.
This process consists of a series of actions and choices over time
through which an individual or an organisation evaluates a new idea and
decides whether or not to incorporate the new idea into ongoing
practice.

© Palmatier 52
© Palmatier 53
 1. Knowledge Stage

Knowledge occurs when an individual (or the decision - making unit) is exposed to
the innovation's existence and gains some understanding of how it functions.
The following three types of knowledge possessed by an individual influence the
decisions :

◼ i). Awareness - knowledge motivates an individual to seek "how-to" knowledge

and principles knowledge. This type of information - seeking is concentrated as the
knowledge stage of the innovation - decision process, but it may also occur at the
persuasion and decision stages.
ii). How-to knowledge consists of information necessary to use an innovation
properly. When an adequate level of how-to knowledge is not obtained prior to the
trial and adoption of an innovation, rejection or discontinuance is likely to result.
Change agents could perhaps play their distinctive role to concentrate on "how-to
knowledge" at the trial and decision stage in the process.
iii). Principles knowledge consists of information dealing with the functioning
principles underlying how the innovation works. It is usually possible to adopt an
innovation without principles knowledge, but the danger of misusing the new idea
is greater, and discontinuance may result. The long-range competence of
individuals to judge future innovations is facilitated by principles knowledge.

© Palmatier 54
 2. Persuasion stage

Persuasion occurs when an individual (or other decision - making unit)

forms a favourable or unfavourable attitude toward the innovation.
While the mental activity as the knowledge stage was mainly
cognitive (or knowing), the main type of thinking at the persuasion
function is affective (or feeling). At this stage, a general perception of the
innovation is developed. The individual becomes more psychologically
involved with the innovation and hence he or she seeks information
about the new idea.

© Palmatier 55
 3. Decision stage

Decision occurs when an individual (or other decision - making unit)

engages in activities that lead to a choice to adopt or reject the
innovation.
Adoption is a decision to make full use of an innovation as the best
course of action available. Rejection is a decision not to adopt an
innovation.
The small - scale trial is often part of the decision to adopt, and is
important as a means to decrease the perceived uncertainty of the
innovation for the adopter.

© Palmatier 56
 4. Implementation stage

Implementation occurs when an individual (or other decision - making

unit) puts an innovation into use. Until the implementation stage, the
innovation-decision process has been a strictly mental exercise. But
implementation involves overt behaviour change as the new idea is
actually part into practice.
Problems of implementation are likely to be more serious when the
adopter is an organisation rather than an individual. Reason is that in an
organisational setting, a number of individuals are usually involved in the
innovation - decision process, and the implementers are often a different
set of people from the decision makers

© Palmatier 57
 5. Confirmation stage

Confirmation occurs when an individual (or other decision - making

unit) seeks reinforcement of an innovation - decision already made, but
he or she may reverse this previous decision if exposed to conflicting
messages about the innovation.
The confirmation stage continues after the decision to adopt or
reject for an indefinite period in time. At this stage, the change agents
have the additional responsibility of supporting messages to individuals
who have previously adopted.
As a sequential effect, there is a possibility for "discontinuance".
Discontinuance is a decision to reject an innovation after having
previously adopted it. There are two types of discontinuances:
i). Replacement discontinuance - is a decision to reject an idea in order
to adopt a better idea that supersedes it.
ii). Disenchantment discontinuance - is a decision to reject an idea as a
result of dissatisfaction with its performance.

© Palmatier 58