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Posts Tagged ‘NPD’

It is increasingly evident that consumers no longer care to wait for companies to have their say on new products. Consumers want to be heard earlier in the process of developing products and exert more influence on the products they are going to use. The Internet, particularly Web 2.0 and its interactive methods and tools, is clearly playing a key role in facilitating and enhancing this mode of consumer behaviour.

The engagement of consumers in the process of new product development (NPD) can be viewed as a facet in the broader phenomenon where consumers are mixing production and consumption activities, known as ‘prosumption’. Tapscott and Williams contend in their book on “Wikinomics” (1) that many consumers seek to turn from passive product users into active users who also participate in the creation of the products they use and influence their design and function. But the type of involvement hereby referred to goes beyond the personal design of selected features of product items by consumers for their own use, as applied in mass customization; the contribution made by consumers (‘prosumers’) collaborating with companies in NPD is meant to positively affect many consumers other than themselves.  Tapscott and Williams suggest that companies should encourage their customers to contribute in more profound and significant ways to the design of products that may thereafter be marketed to many more users.

Agreeably, consumers differ in the extent and quality of contribution they are capable to make as function of their knowledge and skills in the domain of every product, and therefore consumers should be invited to collaborate in forums and with methods more appropriate for them. The forms of collaboration may vary from consumer participation in NPD research to generating ideas in social media forums and up to more extensive proposals of technical designs of product prototypes. As collaboration gets more advanced and significant it can greatly help — in addition to co-creating improved products — also to produce closer and more valuable relationships between a company and its consumers or customers. More advanced collaboration has the power to elevate relationships to a form of “partnership” and to increase the level of their strength and intimacy between a company and its more loyal customers.

In an instructive and interesting paper on Internet-based collaborative innovation, Sawhney, Verona, and Prandelli present methods which they classify by the nature of collaboration (breadth and richness) and the stage of NPD in which the given level of consumer involvement is applicable (e.g., front-end idea generation and concept development, back-end product design and testing)(2):

  • Deep-rich information at the Front-End stages: Discussions in virtual communities of social media that encourage exchange of ideas allow companies to capitalise on social or shared knowledge of consumers. Another method that relies on consumer-to-consumer communication is Information Pump, a type of “game” through which a company can reveal and better understand the vocabulary of consumers in describing product concepts vis-à-vis expressions of needs;
  • Reach a broad audience at the Front-End stages: Web-based conjoint analysis and choice techniques can be applied among consumer samples to gather and analyse relatively less rich but well-structured information about consumer preferences;
  • Deep-rich information at the Back-End stages: Web-based toolkits for exercising users’ innovation let the more expert consumers configure or design original product models of their own creation, working in a specially built environment and with computer-aided design tools — this approach relies on knowledge of individuals;
  • Reach a broad audience at the Back-End stages: Particularly applicable to digital products (e.g., software, web-based or mobile applications, video games) where prototype or experimental beta versions can be tested online; however, visual-simulated depictions of alternative virtual configurations of advanced prototypes can be applied to test and evaluate the acceptance of a wider range of tangible products.

In the virtual world of the Internet, unlike the physical world, there is a less rigid trade-off between breadth of access to consumers and richness of information (e.g., small focus groups versus surveys of large samples); this advantage is stated by Sawhney et al. “…Internet-based virtual environments allow the firm to engage a much larger number of customers without significant compromises on the richness of the interaction. ” This advantage is particularly demonstrated in social media forums.

It should be emphasised, nevertheless, that new methods of collaboration should not come in replacement of  NPD research methods; research-based methods and non-research methods of consumer-company interaction can wonderfully complement each other and should continue to be applied in parallel to answer different requirements of the NPD process for consumer informational input and aid. In a leading paper for the new age of NPD research, “The Virtual Customer” (3), Dahan and Hauser describe state-of-the-art research methods and techniques for different stages of the NPD process. They distinguish, for example, between (a) conjoint types of measurement techniques and models that are most suitable for guiding product design at an early stage (feature-based), and (b) a method applicable for testing the appeal and purchase potential of candidate prototypes (integrated concepts) at a more advanced stage of product development. The latter method in particular takes the advantage of displaying images of virtual prototypes (e.g., SUV car models) to consumers , supplemented by additional product and price information, in an online survey for testing  reaction (choice) before going to production. They also explain in great detail unorthodox methods such as the Information Pump and Securities Trading of Concepts.

  • It is noteworthy that most research methods concentrate on learning from consumers about their preferences without engaging them in proposing product designs; the User Design method, however, already gives more leeway to consumers-respondents to construct their desired products using a self-design tool similar to mass customisation.

Forums or personal pages in public social media networks are widely accepted these days as an excellent arena for companies to receive ideas from consumers for new products and gather information about their product preferences and expectations. However, it is likely to turn out as a formidable task to comb and pick-up ideas of real value and practical potential for implementation from these sources as well as user-generated-content in blogs. Some good ideas may also get lost in the river of postings or comments customers upload in a company’s page on service issues, billing etc.. Dedicating a special separate page for interaction with consumers on new products, goods or services, can help to raise the level of ideas formulated and to allow peer discussions on those ideas that can lead to their further progression. But even then, the ideas proposed in such a venue may be mostly initial concepts, vague or unfocused. Such a venue is a good place to start, allowing any customer interested to contribute. Thereafter, owners of more mature or promising ideas may be referred to a company-owned virtual forum on its own website where a more advanced collaboration with the consumers-contributors may be developed.

Managing collaborative activities for NPD in a company-owned website division can offer some valuable possibilities. First, it provides better control and capabilities for moderating discussions among users or interacting directly one-to-one with the originators of product-concept proposals; it would be an environment dedicated by the company and designed by it specially for interacting with users and among themselves. Second, performing collaborative activities in this environment is likely to attract users with higher level of knowledge, competence and interest in domains of the company’s products; greater proficiency of users demonstrated in their discussions frequently leads to natural screening-out of novice and less serious users.

Third comes the sensitive issue of security and protecting intellectual property. Companies do not tend to guarantee any protection for initial ideas brought up by consumers, not even in their own websites. Particularly in forums that are founded on sharing knowledge and discussion of ideas between users, information has to remain transparent and accessible to participants and to the company. Tapscott and Williams noted that consumers get excited by the creation of their own products and enjoy it even better when they can do it together (4).  However, companies can offer some better measures to secure information such as limiting access to discussions and materials (e.g., by password permission) and preventing unauthorised extraction of content. Where proposed designs of product models are meant to be shared, originators should get the option to credit their models with their IDs. Confidentiality and rights are offered for the most progressed technical designs that are planned to be adopted by a company for manufacturing and marketing.

Fourth, a company can provide an interactive toolkit for innovation on its website for consumers-collaborators who wish to take their ideas and concepts one step or more further. With the toolkit users can apply relevant design tools to sketch plans and construct virtual 3D product models. Depending on type of collaboration program and context, users can allow their proposals to be available to other users or to the company alone. Thomke and von Hippel proposed a complete process for customer innovation that includes several iterations of developing a design with a ‘toolkit for innovation’, building a prototype, receiving feedback from the company (‘test’), and return for revisions (5). Through early iterations the prototypes built by the system would be virtual, until the design is satisfactorily advanced to manufacture a physical prototype of the product. The authors suggest that the customer-led process is likely to require fewer iterations than in a ‘standard’ NPD process, save time and money, and free the company to invest more effort in improving manufacturing capabilities.

Different schemes have been devised for collaboration programs with customers:

  • The Open Innovation Collaborative Programme of Unilever, for example, is designated for highly skilled contributors with extensive knowledge in the domains of products for which they invite proposals (list of Wants, e.g., solutions for detergents). Collaborators are referred to a special portal for submission (in co-operation with a consulting firm yet2.com that manages the review process).
  • Other programmes are more popular in nature and appear suitable to a wider audience of consumers with varied levels of expertise. Take for instance the Create & Share collaborative suite by Lego on its website. More than a decade ago Lego cleverly realised with appreciation the creativity of its leading hobbyists and enthusiasts (adults included!) who invented original models based on existing parts and suggested new forms of Lego blocks; Lego started to accept such designs and offer new models’ sets and less conventional building parts. The online suite includes today a gallery of models built by fans, message boards, and especially the Lego Digital Designer toolkit application for constructing virtual plans of fans’ own models (unfortunately Lego has terminated last year its ByME customization program that allowed users to order their own physical models).

Consumers who collaborate with companies should be rewarded for their more significant contributions of ideas and products designs. On the one hand, the reward does not have to be monetary, cash-in-hand (some may not even want to be perceived as paid contributors/employees). On the other hand, companies should not get satisfied by relying on enjoyment of contributors and their feelings of self-fulfillment and accomplishment. Furthermore, a company should not appear to be relinquishing its duties in generating genuine ideas and developing new products to its customers. First, many customers will be happy to receive credit by name in recognition of their contribution in the company’s publications and websites. Second, contributors can be rewarded with special gifts or privileges in obtaining and using their own-designed products and other products of the company. Monetary prizes will probably continue to be distributed to winners in competitions.

Collaboration for innovation changes the relations between a company and its consumers or customers because it gets them to work together, co-creating new products that thereof better fit consumer needs and wants. Particularly activities that engage consumers in developing concepts and designing products have the better potential of narrowing gaps between companies and customers.  Research, collaboration in other ways, and internal development by professional teams within the company should be used together in integration in NPD activities.Collaboration shifts the balance of control more towards the consumers, but companies who learn how to share knowledge and competencies with the latter can gain in improving innovation practices, increasing value, and not least, enjoying stronger customer relationships.

Ron Ventura, Ph.D. (Marketing)

Notes:

(1) “Wikinomics: How Mass Collaboration Changes Everything“, Don Tapscott and Anthony D. Williams, 2006, Portfolio.

(2) “Collaborating to Create: The Internet as a Platform for Customer Engagement in Product Innovation”, Mohanbir Sawhney,  Gianmario Verona, & Emannuela Prandelli, 2005, Journal of Interactive Marketing, 19 (4), pp. 1-14 (DOI: 10.1002/dir 20046).

(3) “The Virtual Customer”, Ely Dahan and John R. Hauser, 2002, The Journal of Product Innovation Management, 19, pp. 332-353.

(4) Ibid. 1.

(5) “Customers as Innovators: A New Way to Create Value”, Stefan Thomke and Eric von Hippel, 2002, Harvard Business Review, 80 (April), pp. 74-82.

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Social media networks are flourishing in activity. Most attention is given to Facebook that reached one billion members in the summer of this year. The lively arena of Facebook, humming with human interaction, and its potential to provide easy access to millions of consumers, has soon attracted the interest of marketers. A particular area of interest is the opportunity to study consumer perceptions, attitudes, preferences and behaviour through research activity in online social media networks, primarily in Facebook.

We may distinguish two tracks of research:

  • One track entails the collation and analysis of personal content created by network members with minimal or no intervention of companies. This track falls mainly within the domain of Big Data analytics that evolved dramatically in the past few years and keeps growing. Analytic processes may include text mining in search of keywords and key phrases in discussions, frequencies of “like”s, and movement between pages.
  • The other track, that is the focus of this post-article,  includes interaction between a company and consumers, usually within a community or forum set-up by the company in its corporate name or in the name of one of its brands (e.g., its “page” on Facebook). This activity may take the form of regular discussions initiated by the company (e.g., introducing an idea or a question on topic of enquiry to which members are invited to comment) but also invitations to participate in surveys and moderated focus-group discussions online.

Online marketing research is prevalent for at least ten years now and the methods associated with this field, including surveys, experiments and focus-group discussions, continue to improve. However, the belief taking hold among marketers that they can reliably and transparently shift their research studies to the environment of social media is illusive and misleading (see articles in The New-York Times, TheMarker [Israel]).

Advantages in speed and cost may be tempting marketers to replace established methods with new techniques accustomed to social media or attempt at launching the former from within social media networks. But social media has distinctive features, particularly in structure of information and the coverage of its audiences, that do not allow an easy and simple transition into the new environment, at least not so much as turning traditional marketing research methods redundant.

The problem starts with the “rules of game” typical in a social media network. The codes or norms of discourse between members in the network do not generally fit well with the requirements of rigorous tools of research for data collection. Questions in surveys usually have specially designed structures and format and are specific in defining what the respondent is asked about. They are formulated to achieve satisfactory levels of validity and reliability. The social network on the other hand gives utmost freedom of expression in writing entries or comments. It tries to avoid constraining members into particular modes of reply. Questions prompted to members are usually written in everyday friendly language, the less formal as possible. One may normally post one to three questions at most in such mode of discussion. It lacks any discipline that robust research usually demands. The mode of questioning normally feasible within the pages of the social media website may be acceptable for some forms of qualitative research but, reasonably, it takes more than a few questions to properly investigate any topic.

A marketer may get some idea of direction where consumers or customers are driving at in their thoughts and feelings by scrutinizing their answers subjectively and individually. But it would be presumptuous to derive quantitative estimates at any reasonable level of accuracy (e.g., purchase intentions and willingness-to-pay).

  • Critics of surveys argue that the reliability of responses is often compromised when respondents attempt to second-guess what the client of the survey wants to hear or they are subject to “social desirability”, that is, they are trying to give the answer believed to be approved by others. However, this problem is not any less susceptible to surface in comments in the setting of social media. When writing in their own words in the less formal setting of a social media community, members may feel more free to express their opinions, preferences, thoughts and feelings; yet they are still expressing what they are ready to share. Furthermore, the social media is a great venue for people to promote the way they wish to be perceived by others, that is, their “other-image”, so we should not assume that they are not “fixing” or “improving” on some of their answers about their preferences, attitudes, the brands they use, etc.

One may use a web application to upload a short survey questionnaire embedded in his or her own page or as a pop-up window. The functionality of such surveys is rather limited, with only a few questions, and is usually more of a gadget than a research tool. The appropriate alternative for launching a more substantive study is to invite and refer participants to a different specialised website where an online survey is conducted with a self-administered questionnaire or a remote focus-group session can be carried out. Here we should become concerned: Who answers the survey questions or takes part in a study? Who do the participants represent?

This concern is a more critical issue in the case of surveys for quantitative research than in forms of qualitative research. Firms are normally allowed and able to address members of their own pages or communities who are “brand advocates” or “brand supporters”. The members-followers are most likely to be customers, but in addition to buying customers they may also include consumers who are just favourable towards the brand (e.g., for luxury brands). If the target population of the research that the marketer wishes to study matches this audience then it is acceptable to use the social media network as a source, and at least for a qualitative study it can be sufficient and satisfactory. However, for a quantitative study it is vital to meet additional requirements upon the process of selection or sampling of participants in order to allow valid inferences. Unfortunately, the match is in many cases inadequate or very poor (e.g., the pool of accessible members covers only a faction of the customer-base with particular demographic and lifestyle characteristics). For quantitative research the problem is likely to be more severe because the ability to draw probabilistic samples is limited or non-existent, and recruitment relies mostly on self-selection by the volunteering members.

The field of online research is still in development where issues of sampling from panels for example are still debatable. There are also misconceptions about the speed of online surveys because in practice one may need to wait even for a week for late respondents in order to obtain a better representative sample. Yet advocates of marketing  research through social media networks like Facebook try, quite immaturely, to pave the way into this special territory facing even more difficult methodological challenges.

There are certainly advantages to focusing research initiatives on the company’s customers, particularly in matters of new product development. Customers, and possibly even more broadly “brand supporters”, are likely to be more ready and motivated to help their favourite company, contributing their opinions and sharing information about their preferences. They are also likely to have closer familiarity with the company or brand and obtain better knowledge of its products and services than consumers in general. Hearing first what its own customers think of an early idea or a product concept in development makes much sense to help putting the company on the right track. However, as the configuration of a product concept becomes more advanced and specific, more specialised research techniques are required to adequately measure preferences or purchase intentions. Wider consumer segments also need to be studied. Even at an early stage of an idea there is a risk of missing on real opportunities (or vice versa) if an inappropriate audience is consulted or insufficient and superficial measurement techniques are used. Using the responses from “brand supporters” in a social media network can be productive for an exploratory examination to “test the water” before plunging in with greater financial investment. But such evidence should be evaluated with care; relying on the evidence from social media for making final decisions can be reckless and damaging.

Nevertheless, marketers should distinguish between interactions and collaboration between a company and its customers and research activity. Not every input should be quickly regarded as data for research and analysis. First of all, the mutual communication between customers or advocates and a company/brand is essential to maintaining and enhancing the relationship between them, and the company therefore should encourage customers to interact and furthermore contribute to its function and performance. Hence, when product users offer their own genuine ideas for new products or product improvements (e.g., hobbyists and enthusiasts who develop and build new Lego models) their contributions are welcome, and the better ones are implemented. And when a company (Strauss food company, Israel) gives feedback on ideas by its followers on its Facebook page as to which ideas are inapplicable, to be applied “maybe another time”, as well as in initial review, this activity is commended. But these interactions belong in the domain of collaboration, not research. Survey-like initiatives in Facebook may aid in enforcing a feeling of partnership between a company and its customers (commented to TheMarker by Osem food company).  A debate extended on this issue of “partnership” questions whether the reward to originators of successful ideas is only a sense of achievement and contribution or should they receive also material rewards from the benefiting companies.

Social media networks seem foremost appropriate as a source for qualitative research. If those who advocate performing marketing research in Facebook refer primarily to qualitative types of research, then it seems reasonable and more often may be admissible. It is also generally appropriate for exploratory and preliminary examinations of marketing initiatives but when done with caution in view of the limitations of the social media forums. It is much less appropriate as a venue and source for quantitative studies.

While interesting and valid studies can be conducted on how consumers behave in social media websites (e.g., on what subjects they talk, with whom, and the narrative of discourse they use), using a social media network as a source of research on other topics is a different matter. When done for marketing purposes, there are ethical issues regarding analytics of personal content in social media that could not be discussed in the current post. Primarily at stake is the concern whether companies are entitled to analysing content of conversations between consumers-members, suggesting that they are spying on and eavesdropping to network members. Even in discussions on the company’s page the utilization of analytic techniques may not be appropriate or effective. Access to background information on members who activate web apps on the company’s page (with their permission) is another contentious issue. For most users, this is the kind of privacy they have to give up for participating in a network free of charge, but to what extent will consumers agree to go on like this?

The use of social media networks for marketing research, as well as analytics, is therefore more complex and less straightforward than many marketers appear to perceive those activities. Foremost, explorations in social media should not be viewed head-on as a substitute for the more traditional methods of marketing research.

Ron Ventura, Ph.D. (Marketing)

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Consumers can contribute valuable guiding information to the process of new product development (NPD) in almost every step of the way. By reviewing  academic literature in the areas of NPD and marketing research or by browsing the products and services of major marketing research firms worldwide, one may find an assortment of research methods designed for providing information from a consumer perspective to support product development decisions.

A suite of methods and models developed and organized by a team of researchers at MIT (Cambridge, MA) seems to incorporate the most essential and contemporary  ingredients of a comprehensive programme for NPD research. It is comprehensive in the sense that one may find in it a method most suitable for each of three core stages of an NPD process:

  • Generating ideas for the purpose of a new product (i.e., what consumer needs or desires the product will answer) and the approach taken to achieve that;
  • Selecting attributes and features to be included in the product based on what consumers value more and value less (e.g., “must have”, “nice to have”, and “better without” features);
  • Testing product prototypes, models or concepts that already reached an advanced state of their design.

That research programme is titled the ‘Virtual Customer Initiative’. The methodological approaches may not be new in principle but they have been modified and adapted to be fit for the technology as well as the lifestyle of the 21st Century. The data gathering interface is web-based, that is, the interface with consumers is transported to the virtual world of the Web. The programme further offers new techniques for gathering data on the web that take advantage of and adapt to particular properties of the web environment.

From another perspective, prospect customers or users of a product can be introduced to products in a virtual form before a physical model item has been produced. Particularly in a pretest or test stage, consumers-respondents can see a visual design of a candidate product, possibly rotate its image to be viewed from different angles, without the need yet to produce a physical demo. This can save a considerable amount of time and money for the product development (PD) team.

Conducting NPD research in virtual settings has several attractions. Consumers spend more and more time on the Web, they become more accustomed to the conventions and styles of working with the Internet, and consumers can access the study questionnaire from home or work without arriving to a central facility or be visited by an interviewer. The latter advantage implies potentially greater convenience and ease for respondents and less cost in logistic effort, time and money for researchers and PD teams. There are however some limitations: Consumer panels from which samples are drawn for studies are often still not sufficiently representative of the target populations; without supervision respondents can freely abandon the questionnaire at anytime; and, a self-administered questionnaire (SAQ) must be clear and easy to understand its instructions and informational prompts without guidance or assistance from an interviewer.

Dahan and Hauser (2002) classify the six methods in the suite along two dimensions: products described as “feature-based” or “integrated concepts”, and using “fixed design” vs. “adaptive design” (three levels).

  • A feature-based method manipulates and measures the values of features composing a product whereas a method of integrated concepts is concerned with preferences for the whole products as given.
  • Adaptive designs for constructing products are recognized as computationally more sophisticated designs compared with fixed designs — adaptive designs are flexible and dynamic,  capable of altering the product stimuli for each customer-respondent in accordance with his or her previous responses. The goal is to produce as small as possible a set of products, and thus a shorter questionnaire, for each respondent, while maintaining a sufficiently efficient design for estimating model parameters (e.g., feature part-worth values).

Dahan and Hauser recommend the use of adaptive algorithms in order to decrease burden on consumers-respondents and increase the likelihood that they complete a shorter questionnaire. Nonetheless, they add that interfaces also have to be interesting and engaging so as to attract and persuade the respondents to stay on to the end of the questionnaire.

I chose to focus below on four of the methods:

In Web-Based Conjoint Analysis (feature-based, fixed design), as since the inception of the CA methodology nearly 40 years ago, respondents are introduced to hypothetical product concepts described as profiles of the attributes or features under consideration by the PD team. A respondent is asked to rank-order or rate the full profiles while trading-off levels from the different attributes composing the product. The set of products is constructed in a fixed experimental design, that is, the set is determined in advance and is presented to all respondents. With a web-based application, researchers may include in addition to verbal descriptions also pictorial illustrations of product attributes and apply interactive displays that improve the communication and flow of the conjoint task.

The FastPace Adaptive Conjoint (more formally: Fast Polyhedral Adaptive Conjoint Estimation — feature-based, adaptive design) is an important and impressive recent development aimed at constructing ever smaller sets of product profiles, customised for each respondent. An advanced mathematical algorithm relatively quickly reduces the space of all possible feature combinations into a smaller set based on answers from earlier steps. The method promises to create smaller adaptive designs than achieved in the veteran Adaptive Conjoint Analysis (ACA) by Sawtooth Software Inc..  Apparently, Dahan and Hauser highlight FastPace by introducing it as the dominant approach to adaptive conjoint designs. But FastPace is not always better than ACA: FastPace has been shown to be superior particularly when it uses prior measures of attribute importance (i.e., additional questions) as ACA does, and there is a major concern of respondent wear out. Notably, the relatively new method of Sawtooth Software of Adaptive Choice-Based Conjoint (ACBC) for choice data is founded on the method of FastPace. They retain a prior set of questions before the adaptive conjoint task, and its combination of attribute-based questions and screening choice questions (an elimination phase of unacceptable products) creates a process that seems more intuitive and natural to consumers than that used in the older ACA.

Adaptive conjoint designs are beneficial for feature-based studies with more than 8 attributes. Because of the complexity of a method and interviewing procedure such as ACBC, it is advisable to consider carefully to what degree it is essential, not an overkill for the problem at hand, and especially see to it that implications of the model assumptions and limitations due to the adaptive process are well understood.

User Design (feature-based, intermediate adaptive design) works like a product configurator — it allows a respondent-product user to choose any feature from a list of available features (e.g., car gearbox: manual), drag and drop it in another list of his or her preferred product features. As a feature is added to his self-designed product the total price is updated. If the respondent regrets, he can return a feature to the availability list. And when he reaches a satisfying design and no longer wishes to make changes, he is asked for the likelihood of purchasing the designed product. It is a feature-based method with a moderate level of adaptation. This method  is advantageous particularly when there are many features to be considered, and furthermore, if there are potential interactions between attributes that need to be considered (estimating interactions in conjoint studies can have a substantial effect on the size of the design). The task is engaging because the participating customer  learns his preferences as he tries out features and builds a product to his liking. This method may be used for a preliminary exploration of preferences for plausible features before a conjoint study. Since in User Design each customer-respondent constructs only a single “ideal” product, this method is more limited when making predictions of preference shares by simulation than conjoint methods.

Virtual Concept Testing (integrated concept, fixed design) is concerned with whole product models that are already fully configured. But there are holistic aspects of a candidate product concept — its design, style and appearance — that need to be tested before a product can be approved. These holistic aspects are matters of impression and appeal that are difficult to breakdown into technical or functional features. Each product in a set is represented primarily by its brand name and a visual image (i.e., identifying the concept), and a price tag. It works similar to a conjoint study but with only two attributes: concept and price. Any additional information on specific attributes, such as ratings of performance, are pre-determined for each concept. Only prices may vary in a controlled manner. In a web-based application there is excellent opportunity to make the display of concepts more engaging and realistic with the use of rich media. Dahan and Hauser refer to an earlier study showing that preferences measured with this method are highly consistent with concept tests based on physical prototypes.

A sensible programme of NPD research reveals itself: User Design provides an initial but broad glance at configurations of features customers would like to find in the proposed type of product ; followed by Web-Based Conjoint Analysis or FastPace Adaptive Conjoint to measure more rigorously preferences for hypothetical product profiles, and estimate the values of attributes; and finally complemented with a Virtual Concept Test to examine how a candidate product model designed by the PD team fares against competing products at a target price.

For more information on these and other methods, I encourage interested readers to visit the website of ‘Virtual Customer Initiative’. You will find in the site brief explanations of each method, more detailed and technical information in published papers and white papers, demonstrations and open-source programme codes to download.

Ron Ventura, Ph.D. (Marketing)

The Virtual Customer, Ely Dahan and John R.  Hauser, 2002, The Journal of Product Innovation Management, 19, pp. 332-353

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In product categories crowded with brands and models, entering a new alternative for consumer choice is a serious challenge. Whether one thinks of shampoos, TV screens, or cars, the competition on consumers’ minds, hearts, and pockets is tough. Consumers also have become more experienced and more critical about products and services made available to them. While the knowledge of the majority of consumers in any particular category is likely to be partial and lacking in detail about brands, models and product attributes, they can rather easily gather additional information as needed by reading articles online and offline, visiting stores or company websites, and by consulting with savvier (‘expert’) consumers. Trying to launch a product without having the consumer point-of-view would be under these contemporary market conditions an irresponsible if not reckless move.

Large corporations are already persistent in using research to learn about consumers’ preferences and expectations when developing many of their new products (i.e., at least when those are new concepts, lines or generations of products). Medium- and small-sized companies are much less committed.  Nevertheless, it seems that companies of every size recognise the potential of social media and other forms of direct interaction between a company and its customers as a source of feedback from consumers. In many cases using these channels would be more convenient, readily accessible and less expensive than application of research methodology. So, it can be quite tempting to shift from research to these new modes of interaction.

But research is not like social media and other channels of interaction with a company where consumers can voice their preferences and expectations. The latter lack the rigour of research methods in collecting input from consumers. In addition, the pool of consumers who contribute their feedbacks via these channels may not represent closely enough the target segment for the new product. Thus information received can be grossly biased and misleading. Consumers should be allowed to participate in the process of developing new products for their utility and enjoyment. Yet, great care should be taken as to how such participation takes place.

Modes to be considered include:

  • Social media in a public domain (e.g., Facebook) or as a private community hosted by the company;
  • Interaction or dialogue with customers via e-mail or a message web-interface built originally for service and support;
  • Focus group discussions and in-depth interviews;
  • Customer and market/consumer surveys employing methods and techniques designated for New Product Development (NPD) research.

Companies should aspire to use more of these modes by advancing down the list: Any approach lower on the list may be used in addition or at the expense of a solution upper on the list, depending on budget.

For small-size businesses social media may be the only feasible and efficient option for hearing from consumers, and it is better than relying only on their own conceptions.  Still, managers who rely on this approach should be aware of its limitations and disadvantages.

Primarily it is the lack of structure and consistency that characterises information derived from contribution of participants in social media as well as messages in other forms of interaction. The consumers participating in the process may be good-willing but their contributions should be carefully scrutinized to derive real value. But even if we did try to get some order in contributions by prompting participants with guiding questions, there could be problems with the validity of our inferences.

The ability to control and correct for biases in characteristics of the participants in social media and other forms of interaction  is very limited when the participants volunteer to contribute their viewpoints. This means that the validity of the marketing conclusions drawn from these inputs is in jeopardy. The suggestions and expectations traced in social media can be used in a manner similar to focus groups, that is, to screen possibilities, set priorities and guide further investigation with quantitative research methods. However, generalization to a target population for the product will not be valid no matter how many hundreds or thousands of consumers contributed feedback to the company.

Furthermore, convenience, availability and cost should be balanced against confidentiality and protection from competition. Management can use contributions from social media to guide internal product ideation. However, the inputs would be quite unfocused, spread in different directions, sometimes at the whim of the community members. As feedback is desired on a more mature and specific product concept, the more restrictive and secured forums are preferrable (e.g., a social media website sponsored by the company and dedicated to its areas of activity). As we go down the proposed list of modes for consumer participation, fewer consumers or customers will actually be exposed to the particular product, and actually without decreasing the value and validity of the information gathered.

Conducting research among customers chosen from a customer database of the company has its advantages. These can be members of a loyalty club or a customer community on the web. Importantly, they should be consumers identified as customers prior to the research. It can be a good start to turn to existing customers compared with consumers in general, as the customers already have some level of commitment to the company, and are therefore more likely to be willing to participate and contribute. They also are likely to be more familiar with the company, its brands and products to make their expectations, suggestions and other forms of feedback more valuable and meaningful to the company. In a survey, the sample should be randomly drawn from the customer database.

On the other hand, there are limitations to customer research for which reliance on customers is insufficient. First, the so-called “inside” perspective of customers can be a drawback because they see things too much like the company, or they may be willing to please and compliment the management for their ideas. A partial solution to this pitfall could be to ensure a mixture of customers having different levels of satisfaction with and loyalty to the company and brands. Second, the preferences and expectations of existing customers may not be similar or representative of those of the target segment of consumers as a whole for the new product. If the company wishes, as is normally expected, to attract new customers with its new product, then research should be conducted among existing customers and consumers from the general public. A research program for a company developing a new product may involve an initial customer survey followed by a consumer survey. Respondents who reported they were users of a brand by the company should be compared on some key characteristics to the customer sample and the researchers should decide how to evaluate and incorporate their responses.

Various methods and techniques have been developed over the past few decades for generation ideas (e.g., brainstorming, creative workshops), measuring and modelling preferences, evaluating model designs, and not less important, setting appropriate prices for candidate products. In the next post I will refer more extensively to a particular set of methods and techniques developed and organized as a comprehensive programme by a team of researchers at MIT, namely the “Virtual Customer Initiative”.

Letting consumers participate in a process of new product development should be encouraged because it can contribute refreshing viewpoints to the product developers and it can allow the company to create a product that better fits the needs and preferences of consumers. Engaging consumers in the process can increase considerably the chances that the product developed will be useful,  beneficial, and its design will be visually appealing  to the target consumers. For that purpose it is desirable that a number of modes for participation and gathering information will be employed and the appropriate combination of them will be carefully selected.

Ron Ventura, Ph.D. (Marketing)       

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