Marketing of High-

Technology Products and

Innovations
CHAPTER 7:
MARKETING RESEARCH IN HIGH -TECH MARKETS
 Questions to Consider

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?
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?

©2010 Pearson Education, Inc. publishing as Prentice Hall

 Technology 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
 Gathering Information:
Market Research Expenditures and Staffing
# 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
 Gathering Information:
Aligning Market Research with Type of Innovation

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)
 Gathering Information:
Aligning Market Research with Type of Innovation
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
 Traditional Tools of Marketing Research:
(i) Concept Testing – (G1)
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
Traditional Tools of Marketing Research:
Concept Testing
3. Further reduce number of concepts to a manageable
set

◦ Representative sample of potential customers assess

finalists
 Traditional Tools of Marketing Research:

(ii) Conjoint Analysis (G2)

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
Traditional Tools of Marketing Research:
Conjoint Analysis
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
Traditional Tools of Marketing Research:
Conjoint Analysis
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)

Traditional Tools of Marketing Research:
Conjoint Analysis
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:
Use to determine product
feature set and price
Price 40.6
◦ Difference between $350 and $250
◦ 100/40.6 = $2.46 value per increment of
attribute Make market share
Accuracy predictions
◦ 9.6 x 2.46 = $23.65
◦ Predict cannibalization
Display and substitution effects
◦ 14.9 x 2.46 = $36.65

Battery life
◦ 30.4 x 2.46 = $74.78
 Marketing Research Tools for Midrange Products:
(i) Customer Visit Programs (G3)
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
Marketing Research Tools for Midrange products:
Customer Visit Programs
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)
Marketing Research Tools for Midrange Products:
Customer Visit Programs
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)
Marketing Research Tools for Midrange Products:
(ii) Empathic Design (G4)
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
Marketing Research Tools for Midrange Products:
Empathic Design
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
Marketing Research Tools for Midrange Products:
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.
Marketing Research Tools for Midrange Products:
5 Steps in Empathic Design
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
Marketing Research Tools for Midrange Products:
(iii) Lead Users (G5)
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
Marketing Research Tools for Midrange Products:
Innovations Developed by Lead Users
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

Marketing Research Tools for Midrange Products:
Lead Users
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)

Marketing Research Tools for Midrange Products:
Lead-User Process

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
Marketing Research Tools for Midrange Products:
Lead-User Process
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
Marketing Research Tools for Midrange Products:
Lead Users
New insights from gathering and using information
in new ways

Cross-functional in nature

Collaboration with innovative customers

Requires corporate support, skilled teams, time.

Marketing Research Tools for Midrange Products:
Lead Users
Time
"LEAD USERS"
of later commercialized
NUMBER OF USERS WITH NEED modifications and enhancements
FOR NOVEL PRODUCT

"LEAD USERS" of
novel products

Some Users Begin First Responsive Market Growth

To Experience/ Commercial
Respond To Need Product Introduced
 Marketing Research Tools for Midrange Products:
(iv) Quality Function Deployment (QFD)-
(G6)
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.
 Marketing Research Tools for Midrange Products:
QFD—Using the Kano Concept
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
 Marketing Research Tools for Midrange Products:
QFD—Using the Kano Concept
 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
Marketing Research Tools for Midrange Products:
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