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  1. Marketing of High-Technology Products and Innovations Chapter 5: Marketing Research In High-Tech Markets

  2. 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

  3. 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 Studies © Mohr, Sengupta, Slater 2005

  4. 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) Aligning Market Research with Type of Innovation © Mohr, Sengupta, Slater 2005

  5. 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

  6. 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

  7. 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 None: I Wouldn't Choose Any of These 2.4 GHzProcessor 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

  8. 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

  9. 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

  10. Empathic Design • Because users may be unable to articulate their needs, this technique focuses on observations of customer behavior and workaroundsto 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

  11. 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

  12. 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

  13. 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

  14. 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

  15. Lead Users © Mohr, Sengupta, Slater 2005

  16. 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

  17. 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

  18. 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

  19. 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

  20. 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

  21. 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

  22. 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

  23. 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

  24. 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

  25. 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

  26. Steps to Building The House of Quality • 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? • Conduct research to determine the target values for the design requirements. (try-out) • Complete and evaluate new design. © Mohr, Sengupta, Slater 2005

  27. 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

  28. 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

  29. 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

  30. 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

  31. 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

  32. 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

  33. Customer excellence • Tied to being customer-focused and market-oriented • Knowledge of customer environment and product usage © Mohr, Sengupta, Slater 2005

  34. 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

  35. Relationship between Entries in the Market and Quality © Mohr, Sengupta, Slater 2005

  36. 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

  37. 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

  38. Kano’s House of Quality Objectives Customer satisfaction • QFD,… • Quality Circle,… PDCA, … Approach Organizations Techniques Concepts Motivation Incentive mechanism Base technology & IT infrastructure © Mohr, Sengupta, Slater 2005

  39. 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 experimentbefore deciding on a final design. © Mohr, Sengupta, Slater 2005

  40. 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

  41. 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

  42. Competitor Analysis Competitor’s goals and objectives Competitor’s strategy What strategic changes will the competitor initiate? How will the competitor respond to our initiatives? Competitor’s assumptions about the industry Competitor’s key strengths and weaknesses How can you develop this information? © Mohr, Sengupta, Slater 2005

  43. 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

  44. Forecasting Customer Demand for High-Tech Innovations Failed! • “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 © Mohr, Sengupta, Slater 2005

  45. 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

  46. 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

  47. 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

  48. 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

  49. 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: © Mohr, Sengupta, Slater 2005

  50. 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