Market research

and its influence

on new product
development
 Introduction
The role and use of market research in the development of
new products is commonly accepted and well understood.
There are times, however, when market research results
produce negative reactions to discontinuous new
products (innovative products) that later become
profitable for the innovating company. The debate about
the use of market research and, more importantly, what
type of research should be used in the development of
new products is long-standing and controversial. This
chapter will explore these and other related issues.
Market research and new product
development
Market research plays a role at every stage of product development, from
identifying needs and opportunities to how you go to market.
You can apply both qualitative and quantitative data to create a product that will
satisfy your customers’ needs and align with their motivations. Market research
also provides insight into what factors influence purchase intent and how to
strategically price your new or enhanced product to appeal to your target
audience.
Further, identifying where there are gaps in the market or where demand decline
could signal a need for true innovation are common insights gained from custom
market research.

The purpose of new product testing

The main objective here is to estimate the market’s reaction to the new product under
consideration, prior to potentially expensive production and promotional costs. To
achieve this objective, it is necessary to consider a number of other factors:

01 The market: current buying patterns; existing segments;

and customer’s view of the products available

02 Purchase intention: trial and repeat purchase; barriers

to changing brands; and switching costs (more about
this later).

03 Improvements to the new product: overall product

concept; and features of the product concept.
The purpose of new product testing
All these factors are linked and usually are covered in consumer new product testing and
referred to as customer needs and preferences. This, however, raises an important issue:
the type of needs required would, surely, depend on the type of product under
consideration and the consumer. King (1985) argues needs can be classified into three
types:

Basic needs: those that a customer would expect. For example, a customer
would expect a new car to start every time.

Articulated needs: those that a customer can readily express. For example,
a customer may express a desire for additional features on a motor vehicle.

Exciting needs: those that will surprise customers and are not being met by any
provider at present. In the example here it may be finance packages enabling easy
and quick purchase of a new car.
 Testing new Products
Concept testing is a crucial stage when developing new
products. Before you launch a new product in the market,
you must understand how your customers will respond and
how the product will perform.

Concept testing helps you avoid costly errors and nasty

surprises; it is much better to understand your market and
make a more confident and successful product launch.
 Techniques used in consumer
testing of new products
Concept tests
Qualitative techniques, especially group discussions, are used to obtain target
customer reactions to a new idea or product.
Test centres
These are used for product testing when the product is too large, too
expensive or too complicated to be taken to consumers for testing.
Hall tests/mobile shops
These are used commonly for product testing or testing other aspects of the
marketing mix, such as advertising, price, packaging, etc.
Product-use tests
These are used frequently in business-to-business markets. A small group of
potential customers are selected to use the product for a limited period of time.
 Techniques used in consumer
testing of new products
Trade shows
Such shows draw large numbers of buyers who view new products in a few days.
The manufacturer can see how buyers react to various products on display.
Monadic tests
The respondents are given only one (hence the name) product to try, and are
asked their opinion of it.
Paired comparisons
A respondent is asked to try two or more products in pairs and asked, with each
pair, to say which they prefer.
In-home placement tests
These are used when an impression of how the product performs in normal use
is required.
 Discontinuous new
products
Major innovations are referred to as discontinuous
new products when they differ from existing
products in that field, sometimes creating entirely
new markets and when they require buyers to change
their behaviour patterns. For example, the personal
computer and MP3 players created entirely new
markets and required consumers to change their
behaviour. Such products usually require a period of
learning on the part of the user. Indeed, sometimes
the manufacturer has to explain and suggest to users
how the product should and could be used.
 Market research and
discontinuous new products
In the case of discontinuous product innovations, the use
and validity of market research methods is questionable. As
far back as the early 1970s, Tauber (1974) argued that such
approaches discourage the development of major
innovations. It may be argued that less, rather than more,
market research is required, if major product innovations are
required. Such an approach is characterised by the so-called
technology push model of innovation. Products that emerge
from a technology-push approach are generated with little
consideration of the market. Indeed, a market may not yet
exist, as with the case of the PC and many other completely
new products.
Circumstances when market research may
hinder the development of discontinuous
new products

Product developers and product testers tend to view the

product offering in a classical layered view, where the product
is assumed to have a core benefit and additional attributes
and features are laid around it, hence layered view. Saren and
Tzokas (1994) have argued that much of the problem is due to
the way we view a product. They state that often we view it in
isolation from:

● its context;
● the way it is used; and
● the role of the customer–supplier relationship.
 Technology-intensive products

Adopting a technology-push1 approach to product

innovations can allow a company to target and control
premium market segments, establish its technology as the
industry standard, build a favourable market reputation,
determine the industry’s future evolution, and achieve
high profits. It can become the centrepiece in a company’s
strategy for market leadership. It is, however, costly and
risky. Such an approach requires a company to develop
and commercialise an emerging technology in pursuit of
growth and profits. To be successful, a company needs to
ensure its technology is at the heart of its competitive
strategy.
Breaking with convention and
winning new markets
There is evidence to suggest that many successful companies
were successful because they were prepared to take the risky
decision to ignore their customers’ views and proceed with
their new product ideas because they passionately believed
that it would be successful. Subsequent success for these new
products suggested that the firm’s existing customers were
unable to peer into the future, recognise that a different
product or service would be desirable and articulate this to the
firm. On reflection, this seems a lot to ask of customers and,
indeed, is extremely difficult.
 When it may be correct to
ignore your customers
Many industry analysts and business consultants argued that
the devotion to focus groups and market research had gone
too far (Christensen, 1997; Francis, 1994; Martin, 1995). Indeed,
the traditional new product development process of market
research, segmentation, competitive analysis and forecasting,
prior to passing the resultant information to the research and
development (R&D) department, leads to commonality and
bland new products. This is largely because the process
constrains rather than facilitates innovative thinking and
creativity.
 Striking the balance between
new technology and market
research

Market research can provide a valuable contribution

to the development of innovative products. The
difficulties lie in the selection and implementation of
research methods. It may be that market research has
become a victim of its own success, that is, business and
product managers now expect it to provide solutions to
all difficult product management decisions. Practitioners
need to view market research as a collection of
techniques that can help to inform the decision process.
 The challenge for senior
management
Innovation is clearly a complex issue and, sometimes, it is a
concept that sits uneasily in organisations. Indeed, some writers
on the subject have argued that organisations are often the
graveyard rather than the birthplace for many innovations.
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.
Similarly a heavy reliance on market research to minimise risk
when developing new product ideas also contributes to an early
grave for product ideas. The use of financial systems that
minimise risk and avoid investment in more long-term projects is
another common preference, which frequently emanates from
senior management.
Thank you!