Idea Generation & Testing: Using Marketing Research For New Product Development

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1 Idea Generation & Testing: Using Marketing Research For New Product Development Abstract: New product development is an expensive and high-risk undertaking for corporations and organizations. Reducing the risk and increasing the probability of successful new product introduction means better understanding what consumers want and, subsequently, ensuring that your new product offering delivers on that. This paper discusses the various customer inputs available to new product developers, their strengths and weaknesses, and how each is used. This paper also discusses the testing of new product ideas, in terms of understanding customer reactions to guide further evaluation and development. Conducting new product development research can help Marketers and Product Developers work together more effectively by communicating the Voice of the Customer. POLARIS MARKETING RESEARCH, INC LINCOLN PARKWAY, SUITE 320 ATLANTA, GEORGIA

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3 Idea Generation & Testing: Using Marketing Research for New Product Development New Coke. Colgate Kitchen Entrées. Wheaties Dunk-a-Balls Cereal. Earring Magic Ken Doll. Crystal Pepsi. What do all of these products have in common? They all failed. The truth is that most new products end in failure. Estimates of new product failures range from 33% to 90% depending on the industry. So, what can companies do to improve the success rate of new products developed? One way is to conduct sound and thoughtful marketing research. Marketing research is defined as the function that links the consumer, customer, and public to the marketer through information - information that can identify and define marketing opportunities and problems; generate, refine, and evaluate marketing actions; monitor marketing performance; and improve understanding of marketing as a process. If executed correctly, marketing research can help steer companies to develop a product that consumers will buy and prevent them from wasting money on developing new ideas that will prove to be fruitless. But if not executed correctly, the results of marketing research can be useless and/or misleading. Idea Generation Idea generation, or the process of trying to come up with ideas for a new product, is the first step of new product development where marketing research should be implemented. Years ago, it was commonplace for companies to come up with an idea for a new product, develop it, and then try to figure out ways to convince people to buy it. Now most companies recognize that it makes more sense to first assess what consumers want and then (after taking into account whether it would be profitable for them, whether it fits their business and marketing strategy, etc.) produce it. One way that many companies currently develop opportunities for new product development is through Voice of the Customer research. In Voice of the Customer research used for new product idea generation, customers feedback is used as the key input for new product development. There are several different kinds of feedback that may be provided by the customer including needs, solutions, specifications, and benefits. Needs are typically expressed as adjectives communicating high-level descriptions of the overall quality of a product or service (for example, an air conditioning unit that is dependable, reliable, or effective; a dessert that is comforting). Solutions are customers interpretation of the answer to the question, What can make the product better? Solutions can also lead to a completely new product that consumers believe will make life easier. Solutions are often expressed in terms of features they think should be added to the physical product (for example, a blow dryer on a stand; a frying pan with bigger handle). Specifications are detailed instructions on what a product s particular design characteristics should be: size, weight, color, look, feel, or weight (for example, a sink that is sleeker; a washing machine that is thinner or taller). 1

4 Benefits are expressed as the value customers would like a new product or service to deliver (for example, a cell phone that is easier to use or has fewer dropped calls). Problems using Voice of the Customer research to develop ideas for new products occur if the Marketer assumes that customers know and can communicate effectively by themselves, the input that is needed to develop a product. This is not usually the case. In the case of needs and benefits, customer feedback is expressed too abstractly for designers and engineers to be able to translate it into new product development. Marketers may become frustrated because they think they are providing developers with information they need and developers may become frustrated because they feel they have no better information than before the research started. Suppose we give product developers the information that consumers need or want a vacuum that is effective. Does that mean they want it to suck up more dirt or fit into smaller places or something else entirely? The same thing would apply to designing a cell phone that consumers want to be easier to use. Do you put bigger buttons on it, reduce the number of features, or include a more detailed users manual? Another problem with needs and benefits driving the research and design process is ensuring that the new product actually meets the customers needs or provides an additional benefit. If you don t know what the customer actually meant in the first place, how can you measure that you have achieved meeting that need? Solutions and specifications provide the opposite problem: they are too detailed and specific. Here, customers are saying exactly what they want added. However, using the product doesn t make them the product development experts. They don t know what the company is capable of producing or how their ideas for changes will affect the design of the rest of the product. Their change may impact the design so that features or specifications the customer was satisfied with before may have changed. There may very well be a better or cheaper solution to the same problem that the customer hadn t thought of, because they are only product-users and not product-designers. Another problem with using Voice of the Customer research in new product development is that individuals often give the answer that they believe the interviewer wants to hear, as opposed to their real opinion. This leads to biased results that frequently do not correlate well with the customer's actual purchases. In his book, What Customers Want (McGraw Hill, 2005), Anthony W. Ulwick presents another approach to gathering customer information to use in developing new products. He suggests that in order to generate a successful new product idea, companies must obtain 3 different kinds of customer information: jobs, outcomes, and constraints. Jobs are the activities or tasks that customers are trying to get done by using the product. In everyday life, individuals have many jobs that they need to accomplish and seek out products to help them complete these jobs. A student may purchase a bike in order to get themselves to school each day. Someone else may purchase a car, or a scooter, or utilize 2

5 public transportation in order to accomplish the same thing. All of them are trying to get the job of transport between home and work accomplished. There are three different types of jobs individuals may be trying to accomplish: functional, social, and personal jobs. Functional jobs define the tasks people seek to accomplish, Personal jobs explain the way people want to feel in a given circumstance, and Social jobs clarify how people want to be perceived by others. A man may purchase a new watch to tell the time (functional), make himself feel successful (personal), and be perceived by others as wealthy (social). Or any combination of the above. Ulwick proposes that you need to know the primary job your customers are trying to accomplish in order to have a successful product, but knowing what supportive jobs individuals are trying to accomplish at the same time can also lead to ideas and innovation for successful new product development. If there is a group of individuals who have a glass of wine after dinner for the purpose of winding down and at the same time are trying prevent themselves from indulging in sweets after dinner, a beverage manufacturer may innovate a new beverage that curbs hunger while still relaxing the consumer. Customers not only want to get more than one job done at once, they also want to get their jobs done better, faster, and cheaper. Ulwick advises that learning customers outcomes is the second way to obtain information to generate ideas for a successful new product. Desired outcomes are measures that define how customers get their jobs done and what it means to get the jobs done perfectly. Ulwick suggests that companies obtain from customers every desired outcome for their products. For example, several desired outcomes for laundry detergent could be: minimize the amount that is needed to get clothes clean, minimize the fading of the colors of the clothing, increase the number of stains that can be removed, etc. Using customers desired outcomes in new product development gives product designers quantitative measures to help guide the design process to meet consumer expectations of what the new product will accomplish for them. This simplifies the process of determining whether a new product is effective in reaching the desired outcomes better than what could be attained before the new product was developed. Customers also need help overcoming constraints, or the obstacles that may prevent customers from getting a job done all the time or in certain situations. An example of a constraint would be someone with arthritis not being able to hook the clasp to a bracelet. Understanding customers constraints and using these constraints to create new products is Ulwick s third method to ensure that there is a market for your product before you develop it. 3

6 Like using jobs and outcomes, using constraints to guide product development translates well into information that developers can use, and whether the new products can actually overcome constraints is measurable. Whether you use needs, solutions, specifications and benefits or jobs, outcomes and constraints to better understand what customer want and to increase the probability of successful new product development, make sure that you are obtaining information that will be useful in new product development in that it is concrete enough to guide developers to engineer new products that customers will want without being so specific that they may stifle developers creativity and create unforeseen problems. Periodically throughout the marketing research process, stop and present the information collected from customers to the development team to help assess whether these goals are being met. Also, keep reassuring customers that they need to express their true feelings. If it is possible to keep customers blind to the purpose of the study or the sponsor, doing so will also make them less able to provide information that they think you ll want to hear instead of their true feelings. Idea Testing After ideas, or concepts, are generated for a new product idea, they need to be incorporated into the product and tested. Concept testing involves informing or showing the customer new product ideas and measuring their reaction. Reactions to different product price points can be measured as well. As in the idea generation phase, in the concept testing phase customers also have the tendency to tell you what they think you want to hear. There are also other things that can go wrong in concept testing if you don t follow the following guidelines: 1) Make the testing of concepts as close to the consumption of the actual product as possible. 2) Make sure you re asking the right questions. 3) Don t ask questions that aren t actionable. Take the taste testing of New Coke, for example. In 1985 the Coca-Cola Company, upon discovering that Coke was repeatedly losing to Pepsi in blind taste tests, decided that they needed to come up with a new, sweeter version of Coke. So, they developed different products and tested them against Classic Coke and Pepsi in blind taste tests. After coming up with a winner, they developed it and put it out onto the market, discontinuing the old version of Coke. So, if in these taste tests customers preferred the newer, sweeter coke, why was the public outraged when the sweeter product was released and the old one discontinued? No one can know for sure why, but many individuals have hypothesized that the testing methodology did not accurately reflect the usage environment and that researchers did not understand the customer s relationship to the Coke brand. 4

7 First of all, in these taste tests, consumers would take small sips of the beverages. Research has shown that people prefer sweet things in small doses, whereas most consumers actually drink large glasses of soda. Also, testers were tasting the substances by themselves and not with an food, as Coke is usually consumed. So, even though consumers may prefer very sweet beverages when drinking them alone in small doses, this doesn t translate to their preferences in the real world at all. Also, consumers were asked out of the beverages tested, which they preferred the taste of. They were not informed that choosing the new Coca Cola product would mean that they would be no longer able to purchase the original Coke that they knew and loved. They were not asked the critical question: if they had to buy the New Coke or the old Coke, which one would they purchase. Asking this question may have provided the Coca- Cola Company with entirely different results that probably would have prevented them from making their huge product development blunder. In conducting concept testing, make sure you re asking for the information that is most important: whether including these features or offering these product concepts will make customers more likely to purchase, more likely to use or more likely to increase usage. Even though customers may prefer one concept to another one doesn t mean that they will be more likely to buy it. Include price in the mix. Where consumers may strongly prefer one concept to another where all else is equal, even small increases in price may deter customers from purchasing a product with a concept they loved before they knew the price. Companies should test consumers interest of the different concepts at different price points so that they can first evaluate whether they can produce the product at a profit and secondly assess as which price point will optimize their profitability. Conducting marketing research at both the idea generation and idea testing phases of new product development, if executed properly, can guide companies decisions and HELP prevent them from creating another example of a product that seemed to be a good idea but that no one wanted to buy. The costs of product development are high but not too high to neglect the information that can increase the probability of success. For more information about new product development research, please contact us at or call us at Founded in 1989, Atlanta, Georgia based Polaris Marketing Research, Inc., is a full-service research company specializing in customer satisfaction and loyalty research, brand research, employee research, customer retention and win-back research and new product development 5