Innovation Management and New Product Development

Innovation Management and
New Product Development

Market research and its influence on
new product developement
Fabio Emanuele Noia 1

Innovation Management and NPD 2004-2005
Market research and its
influence on NPD
Learning outcomes
1. Understand the contribution market

research can make to NPD process
2. Identify the benefits and weaknesses of
consumer new product testing
3. Understand the significance of
discontinuous products
4. Recognise the role of switching costs in
new product introductions
influence on NPD
Content of presentation
1. Market research and NPD

2. New product testing
3. Techniques used in consumer testing
4. When market research has too much
influence
5. Discontinuous new products

influence on NPD
Content of presentation
6. Technology intensive products

7. Breaking with convention and winning
new markets
8. When it may be correct to ignore
customers
9. Striking the balance between new
technology and market research
10. The challenge for senior management
influence on NPD
Market research and NPD
In the NPD process the activities of

concept testing, prototype development
and product testing are inter-linked
Product concepts are developed into
prototypes and redeveloped following
inputs from production or R&D
Product prototypes are changed as a
variety of market imputs are received

influence on NPD
New product testing
The main objective is to estimate the

markets reaction to the new product
under consideration
Factors:
The market
Purchase intention
Improvement to the new product
influence on NPD
New product testing
Customers needs and preferences:

Basic needs: those that a customer
would expect
Articulated needs: those that a
customer can readly express
Exciting needs: those that will surprise
customers and are not being met by
any provider

influence on NPD
New product testing
Food industry: developers of new

products and user of consumer research
In the food industries a new product not
liked by consumer may be a potential
flop, in other industries initial rejection
by consumer may not be a good
indication of future success

influence on NPD
Techniques used in consumer testing
Concept tests
Test centers
Hall tests\mobile shops
Product-use test
Trade shows
Monadic tests
Paired comparisons
In-home placement tests
Test panels
influence on NPD
When market research has too much
influence
Only extensive consumer testing of new

product can help to avoid large-scale
losses
Most new products fail in the market
because consumer needs and wants are
not satisfied

influence on NPD
When market research has too much
influence
Many major market innovations appear in

practice to be technologically driven
If potential customers are unable to understand
the product, market research can only provide
negative answers
Consumers frequently have difficulties
articulating their needs
Suppliers as well
influence on NPD
Discontinuous new product
Innovations that differ from existing

products in the specific field sometimes
create entirely new markets and require
buyers to change their behaviour
patterns
Such products usually require a period of
learning on the part of the user

influence on NPD
Selection of respondents and

understanding of the major innovations
Consumer may not understand what
needs the new technology can satisfy
Experts are better able to understand
potential benefits

influence on NPD
In the case of discontinuous product

innovations the use and validity of
market research is questionable
Technology-push model of innovation:
products that emerge from a technology-
push approach are generated with little
consideration of the market

influence on NPD
We often view a product in isolation from

its context, the way it is used and the role
of the customers-supplier relationship
Product developers and product testers
need to recognise that a product will be
viewed differently by channel members
and by end-users

influence on NPD
Technology-intensive products
A technology push approach to product
innovations can allow a company to:
Target and control premium market
segment
Establish its technology as the standard
Build a favourable market reputation
Determine the industrys future evolution
Achieve high profits
influence on NPD
Technology-intensive products shift

market structure, require consumer
learning and induce behaviour changes
Difficulties for consumer if they are
asked to pass judgement: new
information is interpreted in the light of
ones prior knowledge and experience

influence on NPD
Installed base effects: discontinuous or

radical product innovations frequently
have to overcome the currently installed
technology base.
Switching costs: one time cost to the
buyer who converts to the new product,
it may be a significant impediment to the
adoption of a new consumer product

influence on NPD
Breaking with convention and winning
new markets
Many companies were successful
because they took the decision to ignore
their customerss view: success for new
products suggested that customers were
unable to peer into the future
Market research results frequently
produce negative reactions to
discontinuous new products
influence on NPD
Breaking with convention and winning
new markets
Market research can be used to support
conservative product development
decision making
Emphasis on cutting costs and
improving efficiencies in the immediate
future, rather than on creativity and
development of innovative new product
ideas for the long term
influence on NPD
When it may be correct to ignore
customers
The traditional NPD process costrains

rather than facilitates innovative thinking
and creativity
Over-emphasis on minor product
modifications and on competition that
tend to focus on price

influence on NPD
When it may be correct to ignore
customers
Large companies are not short of new
ideas, the problem lies in deciding in wich
ones to invest: market research is used to
justify decision to senior managers
In small companies new product ideas are
scarce: hence such companies support
ideas based upon their intuition and
personal knowledge

influence on NPD
Striking the balance between new
Market research provide a valuable
contribution to development of innovative
products, the difficulties lie in the selection
of research methods
Customers respond positively to what is
familiar and view the high costs of new
technology in a largely negative way
Good management should be capable to
select the appropriate market research
techniques to avoid superficial reactions
influence on NPD
Striking the balance between new
Firms become myopic towards their

current cusomers and fail to see the
larger slowly changing market
It is a responsability of senior
management to try to understand the
wider and future environment of the firm

influence on NPD
The challenge for senior management
Applying pressure on product managers
to seek high profits from quick volume
sales rather than develop business
opportunities for the future is a common
mistake made by senior management
A heavy reliance on market reserch to
minimise risk when developing new
products ideas contributes to an early
grave for product ideas
influence on NPD
The challenge for senior management
Adjustments wich need to be made in

order to incourage innovation in large
companies may break some of the
established rules of corporate life
They will require changes to internal
systems and structures and the culture
of organisation

Conclusion
We have learned the following concepts:
Great care must be exercised in market

research, for there are times when market
research results produce negative reactions to
discontinuous new products that later become
profitable for the innovating company
Some new products have particularly difficult
problems to evercome if they are to be
successfull, like switching costs


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Innovation Management and

New Product Development

Fabio Emanuele Noia 1

1. Understand the contribution market

1. Market research and NPD

6. Technology intensive products

In the NPD process the activities of

Fabio Emanuele Noia 5

The main objective is to estimate the

Customers needs and preferences:

Fabio Emanuele Noia 7

Food industry: developers of new

Fabio Emanuele Noia 8

Only extensive consumer testing of new

Fabio Emanuele Noia 10

Many major market innovations appear in

Innovations that differ from existing

Fabio Emanuele Noia 12

Selection of respondents and

Fabio Emanuele Noia 13

In the case of discontinuous product

Fabio Emanuele Noia 14

We often view a product in isolation from

Fabio Emanuele Noia 15

Technology-intensive products shift

Fabio Emanuele Noia 17

Installed base effects: discontinuous or

Fabio Emanuele Noia 18

The traditional NPD process costrains

Fabio Emanuele Noia 21

Fabio Emanuele Noia 22

Firms become myopic towards their

Fabio Emanuele Noia 24

Adjustments wich need to be made in

Fabio Emanuele Noia 26

Great care must be exercised in market

Fabio Emanuele Noia 27

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