Utilizing Market Research in Product Development

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ARROWPOINT-MARKET RESEARCH AND INSIGHT SOLUTIONS

• Utilizing Market Research in Product Development

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Pre-Birth Identifying Requirements Numerous
companies acknowledge the significance of
innovation and allocate considerable resources to
research and development (RD). In the
electronics sector, for example, RD budgets can
amount to 15 of sales, necessitated by the swift
evolution within the industry. Even for companies
like Boeing, Honda, or Siemens, where RD
expenditure typically ranges between 2 and 5 of
sales, these figures represent substantial
investments. Contrary to popular belief, the
majority of successful innovations don't
originate from meticulously planned RD efforts
or extensive market research. Surprisingly, over
90 of successful innovations initially head in
the wrong direction and often stem from
serendipitous discoveries. Products such as the
telephone, X-rays, bubble gum, Velcro, Viagra,
and Post-it notes are prime examples of
accidental inventions. Take the case of Post-it
notes, where a researcher at 3M set out to create
a super adhesive but instead developed a weak
adhesive that became wildly successful. Neverthele
ss, not all innovative products emerge by chance.
Market research can be instrumental in
identifying potential needs. Drucker (1993)
illustrates this point with the story of William
Conner, a medical salesman turned entrepreneur.
Through interactions with surgeons, Conner
recognized a significant challenge in cataract
surgery and subsequently developed an enzyme to
address it. By conducting market research, Conner
identified an unmet need in the medical field and
successfully capitalized on it by introducing his
innovative solution.
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Regarding cataract surgery, market research
offered crucial insights into unmet needs and
provided a deep understanding of the market
landscape. However, it's important to approach
market research with caution as it's not
guaranteed to unveil significant opportunities or
directly lead to the development and introduction
of new products. Instead, it's the responsibility
of the researcher to leverage market insights to
identify potential applications for new products
that address market needs. Market research cannot
dictate the exact nature of a new product, and
respondents cannot serve as de facto RD
directors.
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Moreover, it's unrealistic to view market
research as an exact science, as expecting
researchers to accurately predict the demand for
a new concept overlooks the myriad external
factors that can influence demand beyond their
control. Bringing a product to market and
establishing its presence takes considerable
time, not to mention achieving widespread
acceptance. Market research should be seen as an
experiment subject to potential failure if not
executed under optimal conditions. Take, for
instance, Xerox's experience when considering the
launch of a new copier. Despite consultants
advising against it or providing conservative
sales forecasts, Xerox proceeded with the launch
and exceeded expectations, installing 80,000
units in just three years. This illustrates how
market research can underestimate demand,
particularly when respondents lack firsthand
experience with the product being
researched. Innovations requiring users to
embrace new concepts, often involving shifts in
mindset, pose unique challenges for research.
Asking potential buyers or users to gauge their
interest or willingness to purchase a product
they've never encountered is inherently
difficult. Without the opportunity to fully
understand or experience the product, respondents
may struggle to provide meaningful feedback.
Consider the example of the Sony Walkman prior
to its launch, it would have been challenging for
individuals to conceptualize a portable music
player for on-the-go listening, potentially
leading to skepticism or rejection.
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However, market research plays a crucial role in
understanding the underlying needs of the market
and assessing how well a new product aligns with
these needs. Therefore, it's the responsibility
of the researcher, rather than solely relying on
potential buyers or users, to establish the
connection between unmet needs and opportunities
for new product development. In any concept
screening research, several key questions should
be addressed 1. Is the purpose of the concept
clear, and can potential users be convinced of
the product's benefits? This evaluates the
clarity and purpose of the offering. 2. Does the
product fulfill a need? What specific
requirements do potential users have? This
assesses the demand for the product. 3. How do
people currently use existing products? This
includes duration of use, frequency, and specific
usage patterns. 4. What challenges do users
encounter with existing products, and what needs
are not being met? Are users satisfied with
current products and suppliers? This helps
identify market gaps. 5. Is the price reasonable
relative to the perceived benefits of the
concept? This determines if potential buyers are
willing to pay an appropriate price for the new
product. 6. How likely are potential users to
purchase the product? This indicates purchase
intent and the potential market size, albeit
influenced by promotional efforts.
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Companies often fall into the trap of assuming
they have all the answers, as seen in the case of
Sony's e-Villa Internet appliance. Sony failed to
conduct sufficient market research before
launching this product, which aimed to provide
internet access from kitchen countertops.
However, the appliance's weight of nearly 32
pounds and size of 16 inches made it impractical,
leading to its withdrawal from the market after
just three months. More thorough market research
could have potentially saved Sony significant
resources in product development and
commercialization. In the pre-launch phase, it's
not just the product itself that requires careful
consideration, but also all aspects surrounding
it, such as packaging, services (e.g., technical
support), and marketing. Coordinating and
commercializing these elements can be a lengthy
process, especially for industrial innovations,
which often take years, if not decades, to gain
traction. For example, although carbon fibers
were discovered in 1965 and produced in the
1970s, it took around 20 years for them to have a
significant impact. It takes time for consumers
to become aware of a new product, understand its
benefits, and ultimately adopt it. The
innovation adoption curve, as illustrated by
Rogers (1995), depicts the evolution of new
adopters of a product over time, across different
stages of the product lifecycle. Innovators are
the earliest users who embrace change, followed
by early adopters, who are also open to new ideas
but tend to be more cautious. The early majority
then adopts the new product, followed by the more
skeptical late majority, who only adopt once it
becomes mainstream. Finally, traditionalist
laggards are resistant to change and only accept
new products when they are widely adopted.