BM050-3.5.

3 Innovation Management and New

Product Development (IMNPD)

An introduction to New Product

Development (NPD)

Lecture 7
The Role of Market Research in New
Products Development
 New Product Development- Considerations
when developing NPD strategy

Learning Objectives
 Understand the contribution market research can make
to the new product development process
 Recognize the benefits and weaknesses of consumer
new product testing
 Recognize the powerful influence of the installed base
effect on new product introductions
 Understand the significance of discontinuous products
 Understand the role of switching costs in new product
introduction

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 The Purpose of New Product Testing
Estimate market reaction to the new product under consideration
prior to expensive production and promotional costs
1. The market
Current buying patterns
Existing segments
Customer view of the products available
2. Purchase intention:
Trial and repeat purchase
Barriers to changing brands
Switching cost
3. Improvements to the new product
Overall product concept
Features of the product concept
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 Type of Customer Needs

 Basic needs e.g. A customer would expect a

new car to start every time
 Articulated needs- A customer can readily
express e.g. A customer may express a desire
for additional features on a motor car
 Exciting needs – that will surprise customers
not met by any provider at present e.g. new
financial packages enabling easy and quick
purchase of a new car

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 Market Research Activities

 Ensure that companies are consumer oriented

 New products are more successful if they are
designed to satisfy a perceived need rather than
taking advantage of technology
 With sufficient research, chances of failures are
significantly reduced
 Once a product has been carried through the
early stages, it is sometimes painful to raise
questions once money has been spent

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 Techniques Used in Testing
New Products
Concept Tests
Qualitative techniques, especially group
discussions, are used to obtain target customer
reactions to a new idea or product; to reveal most
promising feature of new product, and assessment
of purchase intent.
 Understanding and believability in the product
 Ideas about what it would look like
 Ideas about how it would be used
 Ideas about when and who it might be used

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 Techniques Used in Consumer
Testing of New Products
The most common way to assess purchase
intention is to provide a description of the
product or provide the product to respondent
and ask:
 Definitely would buy
 Probably would buy
 Might or might not buy
 Probably would not buy
 Definitely would not buy

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 Techniques Used in Consumer
Testing of New Products
Test Centers
 Used for product testing when product is too
large, too expensive or complicated to be taken
to consumers for testing
 Representative sample of consumers to be
brought to the test centre for exposure to
product and reaction testing

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 Techniques Used in Consumer
Testing of New Products
Hall Tests/Mobile Shops
 Used for product testing or testing other aspects
of marketing mix such as advertising, price,
packaging, etc
 Representative sample of consumers is
recruited, usually in a shopping mall, and
brought to mobile caravan
 Representatives are exposed to test material
and asked questions about it

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 Techniques Used in Consumer
Testing of New Products
Product-use Tests
 Frequently used in business-to-business markets(B2B)
 Small group of potential customers selected to use the
product for a limited period of time
 Technical people watch how these customers use the
product
 Manufacturer learns about customer training and
servicing requirements
 Customer asked detailed question about product and
intent to purchase

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 Techniques Used in Consumer
Testing of New Products
Trade Shows
 Draw a large numbers of buyers who view new
products in a few days
 See how buyers react to various products on
display
 Convenient and deliver in depth knowledge of
the market
 Buyers views may differ considerably from end-
user consumers

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 Techniques Used in Consumer
Testing of New Products
Monadic Tests
 Respondents given only one product to try and
asked of their opinion
 Consumer tries new product, and draws on recent
experience with the product they usually use to
judge the new product.
 May not be very sensitive in comparing the test
product with other products.

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 Techniques Used in Consumer
Testing of New Products
Paired Comparisons
 A respondent is asked to try two or more products in pairs
and asked which they prefer.
 Less ‘real’ in terms of the way consumers normally use
products
 Allow products to be deliberately tested against others
In-Home Placement Test
 Impression of how product performs in normal use is
required
 Respondent are asked to use the product in the normal way
and complete a questionnaire
 May be tested comparatively or sequentially
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 Techniques Used in Consumer
Testing of New Products
Test Panels
 Representative panels are recruited and used for
product testing
 Test material and questionnaires can be sent
through post to reduce cost of conducting in-home
placement tests
 B2B firms may use test panels of customers or
intermediaries with whom new product or service
ideas or prototypes can be tested

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 Discontinuous New Products
Major innovations
 referred to as discontinuous new products when they
differ from existing products in that field
 Sometimes creating entire new markets and require
consumer change behavior patterns
 E.g. 3M’s Post-It notes, P Computers
 Sometimes need to explain to users how product
can be used.
Major Difficulties in market research
1. The problem of selection of respondents
2. The problem of the understanding of the major innovation
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 Barrier to Discontinuous Product Adoption
– Technology-Intensive Products

Installed Base
 Massive inertial effect of an existing technology that
tends to preclude or severely slow the adoption of a
superseding technology or product.
 Creates an artificial adoption barrier to advantageous
innovation
 e.g. User prefers QWERTY keyboards despite DVORAK
which has shown to provide up to 40% faster typing
speeds

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 Barrier to Discontinuous Product Adoption
– Technology-Intensive Products

Switching Cost
 From fear of being tied to an obsolete technology
 One time cost for buyer to switch to new product
 May hinder adoption of new consumer product
 Compatibility issues
 Buyers may have to develop routines and procedures
for dealing with a specific vendor that will need to be
modified

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 Breaking with convention and
winning new markets

‘customers are notoriously lacking in

foresight. Ten or fifteen years ago, how
many of us were asking for cellular
telephones, fax machines and copiers at
home, 24 hour discount brokerage
accounts, multi-value automobile engines,
video dial tone etc?’
(Hamel and Prahalad, 1994)

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 When it may be correct to
ignore your customers?
 Critics of market oriented approach see
consumer research act as an expensive
obstacle course to product development
 ‘the significance of discontinuous new
products is often overlooked’ Marone’s
(1993)

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 Striking the balance between new
technology and market research

False Dichotomies
 That you must either lead or follow
customers
 That you cannot stay close to both current
and potential customers
 That technology push cannot be balanced
with market-pull

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 Tutorial

1. Explain why consumer market testing might not

always be beneficial?
2. Discuss the dilemma faced by all firms of trying
to listen to customers’ needs and wants and yet
also trying to develop new products for those
customers that they do not yet serve.
3. Explain why some writers argue that
organizations are the graveyard of product
innovations rather than the birthplace.

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