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The first lesson from research is that failure rates are high. For example, a recent survey found that of the hundreds of new food and beverage products introduced in the last few years in the US, 90% had failed (and were withdrawn from supermarkets within 3 months of launch). Food and drinks is a particularly challenging market but research in other sectors—from automobiles, to pharmaceuticals, to chemical products—shows that product failure is a (far too) common phenomenon.
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Products sometimes fail because they do not function correctly. For example, although most people think of Apple as the archetypal innovative company, it has had its failures, notably the Apple Newton personal digital assistant that promised but failed to recognize handwriting.
Similarly, both Unilever and Procter & Gamble have introduced ‘power’ washing powders to remove stains but which damaged fabrics. Products must function correctly but research shows that this is a necessary but not sufficient condition for product success. Product differentiation is critical, that is products must stand out from the crowd.
Truly differentiated products, which offer unique features that provide real customer benefit, have an 80% chance of success, whereas ‘me-too’ products that replicate competitors’ features have only a 20% chance. Creating breakthrough products requires a deep understanding of customers’ needs.
Most organizations use traditional methods of market research—they carry out customer interviews, they undertake surveys and conduct focus groups. For example, over 200,000 focus groups were conducted in the US last year.
However, traditional market research relies on direct questions, where customers are asked what type of features they would like in future products. Such questions are inadequate because most customers struggle to articulate their needs, or simply ask for improvements to existing features.
Traditional market research traps companies into developing incremental, me-too products (with little chance of success).
Traditional market research traps companies into developing incremental, me-too products (with little chance of success). To get round this, leading companies are increasingly using sophisticated methods from psychology and anthropology to uncover customers’ hidden needs—those needs that they are unable to articulate or have not even recognized themselves.
Hidden needs analysis is the name given to a collection of tools and techniques for probing deeper than traditional market research. The main ones are:
Each of these techniques has major advantages compared to traditional market research tools and, when used in combination, they are very effective at uncovering customers’ hidden needs.
Repertory grid analysis was developed by psychologists as a way to understand how individuals think and to uncover their so-called cognitive maps. This technique is ideal for developing new product ideas. It uses indirect questions and stimulates users to compare and contrast their experiences of existing products.
Through the process of comparing and contrasting, customers’ hidden needs are revealed. Companies that have used repertory grid analysis in their market research include Biersdorf (the Hamburg-based manufacturer of global brands such as Nivea), Hewlett-Packard, and the IT service-provider Equant.
Another very effective technique for identifying hidden needs is ethnographic market research. This is based on the scientific methods developed in anthropology for understanding culture. When applied in a market research scenario, ethnography unveils both latent customer needs and the cultural drivers of product usage (be they national or customer segment-related). A common approach is to film customers and users using existing products and then conduct a deep analysis of what was observed and what customers said. Often it is the contradictions between what customers say they do and what they actually do, which provide the most insights. There is a systematic methodology for ethnographic market research and companies that have successfully applied it include Agilent, Bosch, Nokia, Nissan, and Unilever.
Lead users are customers who use products under far more demanding conditions than the majority. For example, to understand how better hygiene-related products could be developed for the operating room, 3M studied the requirements of field hospitals in combat zones. In demanding situations users often have to modify products to work around their limitations.
By looking at such modifications, ideas for product improvements for the broader market can be obtained. Texas Instruments, Lego, and Cobra International (a world beating manufacturer of windsurfing equipment) have all made good use of the lead user approach.
As more companies adopt hidden needs approaches, the Cranfield School of Management is studying how they can be most effectively applied.
The Cranfield research has identified two issues:
Ironically, studies have shown that marketing departments in some companies are reluctant to adopt hidden needs approaches, as they view them as a threat to their status as ‘market experts’. So in some companies it is R&D that is driving for new approaches to understanding the market.
By Keith Goffin, Professor of Innovation & New Product Development and the Course Director for Innovation Management: Strategy & Implementation
Keith Goffin is Professor of Innovation and New Product Development at the Cranfield School of Management. At Hewlett Packard Keith worked on the development of the world’s best selling patient monitor. He’s been featured in the Financial Times and is the author of two Amazon rated books. Keith has acted as a consultant on innovation management to organisations such as Agilent Technologies, BASF, BT, HSBC, Leyland-Trucks, Rank-Xerox, Sony and Unilever.
Dr. Chris van der Hoven received his Phd from Cambridge University for research on strategic technology management. He is a lecturer in Innovation and is a member of the Centre for Innovative Products and Services. Chris has worked on major high profile projects for Shell, Seagram and Argos.
This article is sponsored by Cranfield School of Management