Week 10

Chapter 6:
Marketing Research
in High-Tech Markets
 What are the challenges high-tech marketers
face in gathering market-based information?
 What market research techniques are useful

for incremental innovations?
 What market research techniques are useful

for break-through innovations?
©2010 Pearson Education, Inc. publishing as Prentice Hall

 What insights can empathic design
generate?
 Who are lead users?
 What are the benefits of QFD?
 Why is it so difficult to develop forecasts

in high-tech markets?

The Market Research Paradox:
 Customers find it difficult to articulate their
needs
 High-tech firms must use market-based data
to develop and evaluate their innovation ideas
 Successful high-tech firms:
 collect useful information to guide decisions
 incorporate customer information and feedback into
product development process
 allocate resources to information gathering

# of Market Research
% of Revenue
Personnel
By Industry Sector
Pharmaceuticals 0.78 % 52
Media Companies 0.68 % 22
Consumer Goods 0.51 % 18
Technology (B2B Sector) 0.25 % 15
Telecommunications 0.07 % 15
By Company Size ($ Revenue)
< $1 Million 0.07 % 5
> $5 Million 0.5 - 0.69 % 13-41

Survey Research
Concept Testing Market Intuition
Conjoint Studies
Focus Groups Customer Visits Customer-Driven Innovation
Empathic Design Biomimicry
Lead Users
Quality Function Deployment
Prototype Testing
Incremental Innovation Breakthrough Innovation
(need known) (technical solution precedes customer need)

 Incremental Innovation
◦ Customers needs generally known
◦ New-product developments are in alignment with
the current market
◦ Use traditional research techniques
 Radical Innovation
◦ Difficult for customers to evaluate
◦ Use experts, future scenarios, and guided intuition

 Mid-range Innovation
◦ Techniques based on customer observation, lead
users, QFD

 A technique that solicits customer feedback
to evaluate a company’s early-stage product
ideas
 Customer feedback is used to determine
which concepts ought to be further developed

1. Generate multiple product concepts/ideas
a) Observation
b) Focus groups
c) Brainstorming
d) Interviews
2. Share concepts with sample of customers

◦ Key attributes and benefits described in
paragraph form
◦ Potential customers rate concepts on dimensions
such as trial interest and perceived value

3. Further reduce number of concepts to a
manageable set
◦ Representative sample of potential customers

assess finalists

 Survey research tool
◦ Statistically predict optimal combination of
price and product attributes
◦ Customer sample makes judgments about
preferred combinations
 Uncovers trade-offs in attributes/features
 Used to design product features to improve

profitability

1. Develop attribute combinations
 Use focus groups, interviews, internal expertise
2. Present each product profile with different

attribute combination to customers
 Customers evaluate each combination on a
rating scale

Example: Product Profile- GPS Conjoint Study
Accuracy: 10 feet or 50 feet?
Display: Color or black-and-white?
Battery: 12 hours or 32 hours?
Price: $250 or $350?
Product Accuracy Battery Display Price
Concept Life
#1 10 feet 32 hours Color $250
16 product profiles possible (2 x 2 x 2 x 2)

3. Perform Ordinary Least Squares regression
on the data
 Yields consumer utility function
Example: Importance Weights- GPS Conjoint Study
Accuracy Battery Display Price

Life
9.6 30.9 14.9 40.6
Accuracy is least important, price is most important

Willingness to Pay for each feature:
 Price 40.6
◦ Difference between $350 and $250

◦ 100/40.6 = $2.46 value per increment of attribute
 Accuracy
◦ 9.6 x 2.46 = $23.65
 Display
◦ 14.9 x 2.46 = $36.65
 Battery life
◦ 30.4 x 2.46 = $74.78

 Use to determine product feature set and
price
 Make market share predictions

◦ Predict cannibalization and substitution
effects

 Systematic program of visiting customers
with a cross-functional team to understand
customer needs. Used for:
1. New-product development ideas
2. Satisfaction studies
3. New market segment identification
 Cross-functional teams
◦ Engineering, marketing, sales account
manager

Elements of Effective Customer Visit Programs
1. Get engineers in front of customers.

◦ Face to face communication
◦ Interactive conversation
2. Ensure that the corporate culture embraces the
value of the customer visit program.
3. Visit different kinds of customers.
◦ Competitor’s customers, lost customers, lead users,
channel intermediaries, internal personnel
◦ Customer councils
(see Table 6-3 for more details)

Elements of Effective Customer Visit Programs (cont)
4. Visit customers in their own settings: Get

out of the conference room!
◦ (versus bringing them on-premise for a “dog and pony”
show)
◦ Field research
◦ Firsthand knowledge
◦ Inclusion of multiple decision makers
5. Conduct programmatic visits.
◦ (not ad hoc)
(see Table 6-2 for more details)

 Research based on discovering customer
needs through observation
◦ “Empathy” with the user’s world
 Users may be unable to articulate their needs
◦ Based on anthropology and ethnography

 Develop deep understanding of user
environment, extrapolate into future, imagine
future products

 What a user does with the product (not
what the product can do) drives its success
Types of insights
A.Triggers of Use
B.Unarticulated user needs/coping strategies
C.New usage situations
D.Customization
E.Intangible Attributes

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.

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

 Develop detailed “map” of how customers
operate
 Customer scenario planning
◦ Intimate understanding  delivery of

value, customer loyalty

 Some customers face needs before a
majority of the market place
◦ More extreme needs than typical customers
◦ Benefit by obtaining solutions to their needs
sooner rather than later
 Lead users tend to innovate their own

solutions to their needs
◦ Useful insights for innovation

User Manufacturer Other
Computer Industry 33% 67%

Chemical Industry 70 30
Poltrusion-Process Machinery 85 15
Scientific instrument s 82 18
Semiconductor-electronic 16%
63 21 (joint user-
process equipment manufacturer)
56
Electronic assembly 11 33
(supplier)
Surface chemistry
82 18
instruments
See Table 6-5

 Uses information from leading edges of a
market
◦ Extreme forms of problems
 Lead users may not be within usual

customer base
 Systematic process to collect information

(see next slide)

1. Identify important trend
◦ Via standard environmental scanning
2. Identify and question lead users

◦ Use personal contacts with customers, surveys,
networking with experts, empathic design
◦ Respect possible sensitivity of information

3. Develop the breakthrough product(s)
◦ Host a workshop for experts and lead users to
brainstorm
4. Assess how well lead user data and

experiences apply to more typical users
◦ Gather market research from typical users

 New insights from gathering and using
information in new ways
 Cross-functional in nature
 Collaboration with innovative customers
 Requirescorporate support, skilled
teams, time.

Time
"LEA DU SERS"
oflatercom m ercialized
NUMBER OF USERS WITH NEED m odificationsandenhancements
FOR NOVEL PRODUCT
"LEA DU SERS"of
novel products
Som eUsersBegin FirstResponsive MarketGrowth

ToExperience/ C omm ercial
RespondToN eed ProductIntroduced

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

 Reduce design time by 40%, design costs by 60%
 Enhance design quality
 Reduce time-to-market
 Reduce number of design changes
 Reduce rework
 Lower facility’s maintenance and operation costs
 Improve quality
 Increase customer satisfaction

1. 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
2. Collect customer perceptions of

competitive products
◦ Identify gaps or opportunities in the market

3. 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.

Satisfaction
* Unknown and unspoken Attractive* One-dimensional:
(Delight/Wow) Known and spoken
Low level of High level

attribute of attribute
Expected:
Must-be quality
Known and unspoken
Dissatisfaction

 One-dimensional attributes
o Known and voiced by customer
o Linearly related to customer satisfaction

 Must-be quality attributes
◦ Must be present for customer to be
satisfied
◦ Customers implicitly expect it to be
present, and therefore do not “voice” it as
a need
◦ Absence of attribute associated with
extreme dissatisfaction
◦ Increasing level of the attribute does not
increase satisfaction
◦ Essential to product functionality

 Attractive quality attributes
o Exhibit an exponential relationship with
satisfaction
o Because it is not expected (or voiced), lack
of this attribute does not lead to
dissatisfaction
o “Wow” factor
o Discovered through empathic design and
lead users

 Firmly
grounds product design in
customer needs
 Allowsproduct development team to

develop common understanding of design
issues and trade-offs
 Revealsfriction points and enhances

collaboration

 Prototype: a model of the ultimate (final)
product/service
◦ used to illustrate the product idea in order to
test customer reaction to it
 First: test the prototype against the
technical design specifications
 Second: (if it meets specifications)
customers evaluate the prototype

 Information acceleration technique:
virtual representation of a new product
◦ More vivid and realistic than concept

descriptions
◦ Less expensive than actual prototypes

 Forces design team to:
◦ Carefully define target market and core

product benefits early in the process
◦ Plan for entire product line and

cannibalization of existing products

 Beta version: A pre-release (potentially
unreliable) version of new product
◦ made available to a small number of trusted
customers.
 Customer agrees to provide feedback

from beta test
◦ An item "in beta test" is mostly working but
still under test.

“Co-creation”, “co-production”, “DIY innovation”,
“feedback-influenced design”, “peer production”
 Taps collective wisdom of a community
 Requires radical rethinking of the

innovation process
◦ R & D  R & We
 Move away from R & D in the lab
 Move towards active co-creation with customers

 Increasing prevalence is fueled by:
1.Economics of product development costs
and high failure rates
2.Society’s beliefs about the role of
customers in business strategy
 Environmental impact of products
3.Internet and Web 2.0 technologies
 Time Magazine named “You” the Person
of the Year for 2006

 Customers are willing to “donate” their
ideas freely
◦ Motivated by enhanced reputation and
network effects
◦ Realize low odds of successfully
commercializing their own idea

 Yetmany companies actively resist
customer-driven innovation
◦ Customer innovators viewed as rivals or
lacking necessary knowledge/skill
◦ NIH syndrome: “Not invented here”
 Disparages any ideas not generated
internally by the company

 Paradoxically, technology companies
are leading the way in harnessing
customer knowledge
◦ PFE: Proudly found elsewhere
 Requires competencies in communication,
learning and collaborating with customers

Biomimicry: emulating ideas from the
natural world
◦ Bio = life; mimesis = to imitate
 Inspired by nature
 Tends to generate environmentally-friendly
insights
 Biologists work with engineers, architects, and
product designers to create sustainable
solutions

Prototypes are under test for industrial
Namibian Desert insect that applications of a revolutionary material that
Desert catches water collects water from invisible mist, including
Beetle under its wings recycling water lost by the evaporating cooling
towers used by AC systems.
Scalloped flipper
proved to be a Potentially optimize airplane wings, helicopter
Humpback
more efficient wing rotors, propellers, and ship rudders for improved
Whale
design in wind safety maneuverability, and fuel efficiency
tunnel experiments
Glue that anchors May prove useful to the private marine industry,
Mussels them firmly to a medical and dental fields, perhaps to repair
rock shattered bones
Ability to fly in
Locusts dense swarms Anti-collision devices in cars
without colliding
(More details in Table 6-8)

Challenge
to Biology
Identify
Evaluate Real Challenge
Against Life’s
Principles
Interpret
Design Brief
Emulate
Nature’s Strategies Discover
Natural Models
Abstract
Design Principles © Biomimicry Guild, 2008
1. Identify the problem to be resolved.
◦ Asks a series of “why” questions to open
the process for creativity in innovation.
2. Interpret the problem in nature’s

terms.
◦ “Biologize” the issue
◦ Ask: how does nature achieve this
function in the environment?

3. Discover the best natural models that
answer/resolve the challenges.
◦ Identify as many solutions as possible
from organisms in nature that offer either
literal or metaphorical solutions to the
problem

4. Abstract from the examples in prior
step to identify patterns
◦ Clustering techniques, such as Venn

diagrams, graphs, and visual
representations can be helpful
◦ Oftentimes requires the assistance of

biologists and other scientists trained in
the biomimicry method

5. Emulate nature, apply the ideas and
solutions to the challenge at hand.
◦ The heart of the design phase
◦ Solutions can mimic forms, processes,
ecosystems

6. Evaluate and continue to improve the
design.
7. Begin the process anew.

◦ Constant learning, adapting and evolving.

 Sustainable
 Perform well
◦ Nature has been evolving designs for
billions of years
 Save energy
 Cut material costs

 Redefine/eliminate “waste”
◦ Mimic how nature transitions materials
within a habitat
 Define new product categories/
industries
◦ Opportunity for disruptive technologies
 Build company’s brand
◦ reputation for environmental compassion

Traditional
Quantitative Bass Model
Techniques: Delphi Technique
Time Series, Moving Analogous Data
Averages, Exponential
Smoothing
Incremental Innovation Breakthrough Innovation

Company has previous experience “New to the Company”
No closely competing alternatives available

Qualitative Tools:
 Delphi method
◦ Rely on a panel of experts
 Analogous data
◦ Rely on similar products with a logical connection
 Serve similar need or share important characteristics
(business factors for success, etc.)
© Mohr, Sengupta, Slater 2009

 Bass Model
◦ Forecasting sales of a new technology for which no
closely competing alternative is available
 Based on diffusion theory- why innovations

spread through markets
 Early vs. late adopters

◦ Mass media (important for early adopters)
◦ Interpersonal communication (important for later
adopters)

Cumulative
Adopters
New
Adopters
Innovators Early Laggards

Early Majority Late
Adopters Majority

 Bass model:
◦ Estimate year one adopters, total adopters
◦ Coefficient of innovation (p)
◦ Coefficient of imitation (q)
 Does make underlying assumptions that can
affect reliability
 Despite seeming complexity, widely and
easily used by professionals

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
 Biases due to personal/organizational desire
for success

 Opening Vignette: IDEO
 Technology Expert: Grupthink (technology
for customer feedback communities)

 Technology Tidbit: BioWave Power
 End-of-Book Case: Xerox

All rights reserved. No part of this publication may be reproduced, stored in a
retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior written
permission of the publisher. Printed in the United States of America.

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Chapter 6:

 What market research techniques are useful

 What market research techniques are useful

©2010 Pearson Education, Inc. publishing as Prentice Hall

 Who are lead users?

 What are the benefits of QFD?

 Why is it so difficult to develop forecasts

©2010 Pearson Education, Inc. publishing as Prentice Hall

©2010 Pearson Education, Inc. publishing as Prentice Hall

©2010 Pearson Education, Inc. publishing as Prentice Hall

©2010 Pearson Education, Inc. publishing as Prentice Hall

©2010 Pearson Education, Inc. publishing as Prentice Hall

©2010 Pearson Education, Inc. publishing as Prentice Hall

which concepts ought to be further developed

©2010 Pearson Education, Inc. publishing as Prentice Hall

2. Share concepts with sample of customers

©2010 Pearson Education, Inc. publishing as Prentice Hall

◦ Representative sample of potential customers

©2010 Pearson Education, Inc. publishing as Prentice Hall

 Used to design product features to improve

©2010 Pearson Education, Inc. publishing as Prentice Hall

2. Present each product profile with different

©2010 Pearson Education, Inc. publishing as Prentice Hall

16 product profiles possible (2 x 2 x 2 x 2)

©2010 Pearson Education, Inc. publishing as Prentice Hall

Accuracy Battery Display Price

Accuracy is least important, price is most important

©2010 Pearson Education, Inc. publishing as Prentice Hall

◦ Difference between $350 and $250

©2010 Pearson Education, Inc. publishing as Prentice Hall

 Make market share predictions

©2010 Pearson Education, Inc. publishing as Prentice Hall

©2010 Pearson Education, Inc. publishing as Prentice Hall

1. Get engineers in front of customers.

©2010 Pearson Education, Inc. publishing as Prentice Hall

4. Visit customers in their own settings: Get

©2010 Pearson Education, Inc. publishing as Prentice Hall

◦ Based on anthropology and ethnography

©2010 Pearson Education, Inc. publishing as Prentice Hall

©2010 Pearson Education, Inc. publishing as Prentice Hall

2. Capture the Data

©2010 Pearson Education, Inc. publishing as Prentice Hall

4. Brainstorm for Solutions

5. Develop prototypes of solutions

©2010 Pearson Education, Inc. publishing as Prentice Hall

◦ Intimate understanding  delivery of

©2010 Pearson Education, Inc. publishing as Prentice Hall

 Lead users tend to innovate their own

©2010 Pearson Education, Inc. publishing as Prentice Hall

Computer Industry 33% 67%

See Table 6-5

©2010 Pearson Education, Inc. publishing as Prentice Hall

 Lead users may not be within usual

 Systematic process to collect information

©2010 Pearson Education, Inc. publishing as Prentice Hall

2. Identify and question lead users

©2010 Pearson Education, Inc. publishing as Prentice Hall

4. Assess how well lead user data and

©2010 Pearson Education, Inc. publishing as Prentice Hall

©2010 Pearson Education, Inc. publishing as Prentice Hall

Som eUsersBegin FirstResponsive MarketGrowth

©2010 Pearson Education, Inc. publishing as Prentice Hall

Purpose: Ensure tight correlation between