FROM EXPERIENCE The Customer's Eye View of Innovation

Currently, "working close to the market" is in vogue. Yet often we ignore the single most important premise of this basic operating philosophy. Donald Potter reminds us that it is essential that our new product development efforts key on the basic principle of lowering our customers' costs. He describes one way to achieve this objective while referencing his study of over 500 corporate strategies. Too often, marketing research investigates customers' reactions to existing products, not future needs. A better approach is to develop a deep understanding of the customers' economics of using a product over its entire lifetime.     

An experimental investigation of valuation change due to commonality in vertical product line extension

Commonality in product line design refers to using identical product features or modules in multiple products. The use of commonality in product line extensions is a growing practice in many industries. We consider vertical product line extensions to lower- and higher-end products, and study the effects of identical feature levels on consumers' evaluation of original products. Using a between-subject experimental design, we examine the effect of commonality using the bicycle as the example product. This experiment is then extended to eight different service and manufactured products. Results show that in many cases identical feature levels increase the perceived similarity between original and extension products. This influences the valuation of original products: valuation of the original low-end product increases while valuation of the original high-end product decreases. However, the amount of valuation change is not necessarily the same for the original low- and high-end products. This valuation change occurs regardless of buyers' knowledge level of the product and is sometimes moderated by a large difference in a differentiated feature.
This study suggests the importance of accounting for the demand-side effect of commonality in product design decisions. Change in customers' valuation may call for an adjustment in price—the price of a high-end product may have to be lowered due to valuation discount, and the price of a low-end product could be raised to take advantage of valuation premium. This change in valuation does not occur for every feature in every product. Therefore, by properly selecting the features that are identical, a firm may be able to take advantage of valuation premium without sacrificing valuation discount and enjoy the economies of scale in manufacturing and logistics due to commonality.     

A method for identifying and assessing key customer group needs

This paper presents a methodology for identifying and weighing the importance of product attributes used by a key customer group of a company. A central feature of the technique is the introduction of a new concept: competition factors (CF). These factors address the influence of substitute products in the specific product attributes that a customer group considers. A better knowledge of substitute products can surface previously hidden or latent customer needs. CF allow dealing with this problem, providing a powerful tool for market-oriented businesses that seek to understand customers' expressed and latent needs. The wood products industry and architects are used to illustrate the technique.     

Redesigning Product Lines with Conjoint Analysis: How Sunbeam Does It

Sunbeam Appliance Company, faced with the task of redesigning its lines of small appliances, developed a procedure that couples consumers' evaluations of possible new designs with a marketing research technique—conjoint analysis. In this article, Albert Page and Harold Rosenbaum describe Sunbeam's redesign of its food processor product line. They report detailed information, including key design attributes, alternative product designs, market segments, and competitive positions, and describe the use of a simulation model that predicts the market share of alternative product line configurations before they are even developed or introduced into the market. The procedure provides product line managers with a powerful tool to assist them in redesigning their lines.     

Seeking the Ideal Level of Design Newness: Consumer Response to Radical and Incremental Product Design

To develop successful new products, new product development managers need to have a thorough understanding of the consumer adoption process, specifically in how consumers evaluate new products. This research examines the value of product design for consumers' evaluation of radical and incremental innovations. The primary goal was to empirically test how design newness affects consumer response to product innovations. Design newness (also referred to as novelty or atypicality) is defined as the deviation in a product design from the current design state of a certain product category. Although prior research has suggested that higher levels of design newness may have a positive effect on consumers' evaluations of new products, higher levels of design newness may also have negative consequences for consumer response to radical innovations. An experimental context (n = 130) using systematically designed products for three product categories was used to test how consumers respond to high and low levels of design newness for both radical and incremental innovations. The findings show that for radical innovations, embodying the product in a design with a low (versus high) level of design newness led to more positive evaluations and less learning‐cost inferences. Because the functional attributes of a radical innovation are incongruent to existing products, consumers find it difficult to access the relevant product category schema in order to transfer knowledge to the new product. Because of this poor knowledge transfer, consumers may feel that they lack the ability to make effective use of the radical innovation, resulting in greater learning costs. In this case, a product design with a low level of design newness can provide consumers with a frame of reference for understanding the radical innovation. Contrasting this result, no difference was found between a low and a high level of design newness for incremental innovations. For incremental innovations, by definition the functional attributes characteristic to the innovation are highly comparable with those products that are already stored in consumers' memory. Thus, there is no need for an additional reconfirmation of the preexisting schema through product design, and consumers are able to access the relevant schema regardless of the level of design newness inherent in the product. These findings are integrated into a discussion of the managerial implications and the potential avenues for future research.     

Enhancing Concept Test Validity by Using Expert Consumers

In standard concept testing practice, consumers may be invited to participate in a test if they use or possess the product. However, merely using or possessing a product is no guarantee that a consumer has the level of product knowledge that is necessary for judging the concept. Conducting a concept test with consumers who lack the necessary product knowledge may jeopardize the validity of the test results. That is, the results of such a concept test may not accurately indicate how consumers will evaluate the real product. To ensure the validity of concept test results, Jan Schoormans, Roland Ortt, and Cees de Bont suggest that consumers who are invited to participate in a concept test should possess a degree of product knowledge. When a consumer is asked to evaluate a concept, their product expertise allows them to understand product information faster, fill in missing information, and learn more easily. Consumers with product expertise are better able to discriminate between important and unimportant aspects of a product. They are also better able to infer benefits from a product's physical attributes. To explore the effects of consumer expertise on the quality of the evaluations provided by concept tests, the authors conducted two experiments, both of which resemble actual concept tests. The first experiment examines the effect of consumer expertise on the results of a concept test for a major innovation, Videotext. This experiment tests the hypothesis that the similarity between the evaluations of a concept and an actual product will be greater for consumers with a high level of product-category expertise than for consumers with low product-category expertise. The results of the experiment clearly support the idea that product-category expertise enhances a respondent's ability to evaluate concepts in a test of major innovations. From this, it is concluded that only respondents with high product-category expertise should be used for concept tests of major innovations. The second experiment explores the effects of product expertise on consumers' evaluations of a minor innovation, a redesigned coffee maker. This experiment tests two hypotheses. First, it is proposed that consumers with high product expertise give more consistent evaluations in a concept test than consumers with low product expertise. Second, it is suggested that consumers with product expertise generate more stable evaluations over time than consumers without product expertise. The results of this experiment clearly indicate that using consumers with moderate to high levels of product expertise is beneficial to the validity of the results from concept tests of minor innovations.     

Research Opportunities Related to Consumer Response to Product Design*

This essay identifies five research opportunities that concern consumer response to product design. The first opportunity involves the need for more research on the interaction between form and function in consumer product evaluations. To this end, more knowledge about how product appearance characteristics influence consumer evaluation of both product form and function, and how this differs between countries and in time, is needed. The second research opportunity concerns the influence of consumer input in the front end of new product development on product success. Although the positive effect of market information use on product success is known, more actionable insight into which consumer information or input is beneficial in which circumstances is largely missing. The third opportunity for research concerns how to include subjective product attributes in concept testing. Getting valid feedback from consumers, which includes functional as well as emotional and experiential aspects, can improve proficiency in the early stages of product development. In this essay, several ways of approaching this research endeavor are highlighted. Next to enhancing market receipt and the assessment of product design, two topics that concern consumer response to product design from a more managerial viewpoint are identified. The first of these is strategic management of product styling. The importance and opportunities of visual design for brand management has gained more attention in the literature; different strategies and the cases in which they are beneficial are issues for further research. And finally, the design of product service systems (PSSs) provides opportunities for future research. Here, engendering perceptual unity between products and services and an explicit managing of meanings and feelings that PSSs should communicate are issues at play.     

Competitive Advantage Through Product Performance Innovation in a Competitive Market

Superior product performance does not necessarily ensure commercial success. In many industries, companies seek competitive advantage primarily through product innovation. Competition in such markets is based on claims of technological superiority. However, unless a company can clearly establish the superiority of its products in its customers' minds, a differentiation strategy based on relative product performance is likely to be ineffective. This is particularly true in markets characterized by numerous product introductions from many competitors.
Product innovation success declines as the intensity of market competition increases. This may be caused by customers' inability to differentiate products on the basis of functional performance. John H. Friar tests this hypothesis by examining an industry, medical diagnostic ultrasound equipment, that is characterized by frequent product introductions from numerous companies.
Technical experts from the competing manufacturers believe there are differences in the image quality of their equipment and strongly agree on the factors that distinguish better performance. In most cases, however, customers could not distinguish product performance. Ironically, in a market where everyone is competing by improving product performance, product performance innovation alone may not be enough to create meaningful differentiation.
To succeed in such an environment, companies must compete on two levels. Continued emphasis on product innovation is necessary to keep pace with the competition. However, because product innovation alone is not sufficient to provide market differentiation, companies must shift their competitive thrust to other dimensions.     

Detecting Buyer Preferences to Guide Product Development and Advertising

If you could tell which product characteristics consumers would prefer, product development could be targeted sharply and positioning the product competitively could be done with more confidence. This article describes one approach by which a relatively large set of test products is evaluated by consumers in order to identify the most acceptable combination of product attributes. Identification of this combination provides the product developer with guidelines as to which test product should be selected for subsequent introduction. The focus is on the discovery of discernible attributes of a product in a fragmented category to support the advertising claim.     

Customer‐Perceived Positioning Effectiveness: Conceptualization,Operationalization, and Implications for New Product Managers

An extensive body of literature documents that positioning is a central success factor for the launch and overall performance of new products in the marketplace. Under certain circumstances, however, the measurement of positioning success can be problematic. Specifically, the application of attribute‐based measurement methods, which are frequently used in practice for this purpose, is subject to limitations in certain situations. For example, these methods can be problematic in product categories where products are evaluated as a whole or where they even lack attributes that create valuable differentiation. Their application can also be difficult in product markets in which the importance of product attributes is constantly shifting or in a cross‐national context where the importance of various attributes is likely to differ across countries. This paper introduces a new approach for measuring positioning effectiveness that helps overcome some key limitations of extant approaches and serves as a support tool for positioning‐related decisions. Positioning effectiveness is modeled as a customer‐based multidimensional construct capturing conceptually relevant dimensions of positioning success (namely dissimilarity, uniqueness, favorability, and credibility) at the holistic product level rather than the individual attribute level. Altogether seven studies show that the proposed positioning effectiveness measure is reliable, valid, and viable to be used across various types of branded products and distinct product categories. The results of the studies indicate the measure's ability to successfully predict important consumer behavior variables such as overall superiority or purchase intentions and demonstrate superior predictive performance compared with common attribute‐based approaches. The recognition of the relevance of different dimensions of positioning effectiveness should also enable new product managers to detect strengths and weaknesses of a product's current positioning, and thus serve as a tool to develop more effective product strategies. The general nature of the measurement instrument makes it particularly suitable for application in (1) longitudinal product‐tracking studies; (2) cross‐national studies involving comparisons of positioning effectiveness between products in different countries; (3) product categories characterized by technological turbulence (and hence attribute instability); and (4) studies aimed at comparing the positioning effectiveness of different products in a portfolio. Boundary conditions for the application of the measure and potential areas for further study are finally considered.     

Services growth options for B2B product-centric businesses

Many B2B companies that have traditionally been product-centric businesses (PCBs) are addressing the services opportunity (servitization), providing services aligned with customers' operations and/or that address products from other suppliers. The purpose of this paper is to create a new typology through which PCBs' services strategies can be categorised using these two dimensions, which is used to explore four services strategies and three growth options. Companies selling less complex products predominantly use services to enhance product differentiation, whereas those selling more complex products often undergo servitization, with opportunities and risks from each growth option. The risks of providing operations services are particularly noted since their successful provision requires significant changes to a PCB's activities. The results provide a critique of resource-based theory, specifically those resources that enable PCBs to create market differentiation through services. The importance of relational resources increases as services strategies involve products from other suppliers and customers' operations.     

Using Conjoint Analysis to Help Design Product Platforms

This article illustrates how one can combine different conjoint analysis studies, each containing a core of common attributes, to help design product platforms that serve as the foundation for multiple derivative products. The illustration is based on actual, but disguised, data from a small company that makes electronic test equipment.
This article demonstrates that decisions that consider products individually are likely to be suboptimal and can be significantly different than those based on product platforms. Suboptimality can occur either when preferences for product features differ across markets or when a technology is more important to the overall company than it is to an individual product. Additionally, we show the importance of considering both fixed and variable costs when performing this type of analysis as sales, contribution, and profit-maximizing products are quite different. Finally, sensitivity analyses show that these results are robust with respect to assumptions about price sensitivity, fixed costs, and timing of entry. © 1999 Elsevier Science Inc.     

QFD—linking the customer to the product development process as a part of the TQM concept

LKAB is one of the world's leading sup-pliers of advanced iron ore products. Its most important markets are the blast furnace based steelworks of Europe. As a result of customers' demands for ever-better products, LKAB has begun to apply Quality Function Deployment (QFD) to its product development pro-grammes. QFD, originally developed in Japan, is a technique which utilises a series of matrices to translate customers' requirements into technical specifications that the producer can use. So far the methodology has mainly been used in the manufacturing industry, with very few applications in process industry.
When launching its QFD project, LKAB began by making strenuous efforts to acquire credible and relevant customer data. Experience after one year's work has been encouraging; the QFD technique has proved to be an effective instrument for feeding customers' requirements into the product development process. In addition, it serves as a guide to setting priorities for research projects. The technique promises to become an established tool in the cornpany's Total Quality Management programme.     

The Predictive Power of Internet-Based Product Concept Testing Using Visual Depiction and Animation

One critical step in new product development is selecting from among multiple possible product concepts the one that the firm will carry forward into the marketplace. There is a need for low‐cost, parallel testing of the appeal of new product concepts, the results of which closely mirror ultimate market performance. In this article, the authors first describe an Internet‐based product concept testing method they developed that incorporates virtual prototypes of new product concepts, substituting them for physical prototypes. The method can be used with either static representations of the products or with dynamic representations that demonstrate how the product works through a simulated video clip of its operation. The objective of this method is to allow design teams to select the best of several new concepts within a product category with which to proceed, without having to develop physical prototypes. The authors then provide a rigorous test of both virtual prototype methods against tests using both physical prototypes and attribute‐only (i.e., no visuals), full‐profile conjoint analysis. Nine concepts compete against two actual products in the tests. Market shares from the test using the physical prototypes are defined as the “actual” market shares. Predicted market shares for the attribute‐only, full‐profile conjoint analysis and each of the two virtual prototype methods are compared to those obtained for the physical prototypes. Both static and animated virtual prototype tests produced market shares that closely mirrored those obtained with the physical products, outperforming the set of predictions across the full range of products produced in the attribute‐only conjoint analysis. Interestingly, the attribute‐only conjoint analysis identified the top three products, in correct order. It was unable to differentiate performance below these top three products. Furthermore, it predicted market shares for the top three products to be well below those achieved using physical prototypes. As virtual prototypes cost considerably less to build and test than their physical counterparts, design teams using Internet‐based product concept research may be able to afford to explore a much larger number of concepts. Virtual prototypes and the testing methods associated with them may help reduce the uncertainty and cost of new product introductions by allowing more ideas to be concept tested in parallel with target consumers.     

The virtual customer

Communication and information technologies are adding new capabilities for rapid and inexpensive customer input to all stages of the product development (PD) process. In this article we review six web‐based methods of customer input as examples of the improved Internet capabilities of communication, conceptualization, and computation. For each method we give examples of user‐interfaces, initial applications, and validity tests. We critique the applicability of the methods for use in the various stages of PD and discuss how they complement existing methods. For example, during the fuzzy front end of PD the information pump enables customers to interact with each other in a web‐based game that provides incentives for truth‐telling and thinking hard, thus providing new ways for customers to verbalize the product features that are important to them. Fast polyhedral adaptive conjoint estimation enables PD teams to screen larger numbers of product features inexpensively to identify and measure the importance of the most promising features for further development. Meanwhile, interactive web‐based conjoint analysis interfaces are moving this proven set of methods to the web while exploiting new capabilities to present products, features, product use, and marketing elements in streaming multimedia representations. User design exploits the interactivity of the web to enable users to design their own virtual products thus enabling the PD team to understand complex feature interactions and enabling customers to learn their own preferences for new products. These methods can be valuable for identifying opportunities, improving the design and engineering of products, and testing ideas and concepts much earlier in the process when less time and money is at risk. As products move toward pretesting and testing, virtual concept testing on the web enables PD teams to test concepts without actually building the product. Further, by combining virtual concepts and the ability of customers to interact with one another in a stock‐market‐like game, securities trading of concepts provides a novel way to identify winning concepts. Prototypes of all six methods are available and have been tested with real products and real customers. These tests demonstrate reliability for web‐based conjoint analysis, polyhedral methods, virtual concept testing, and stock‐market‐like trading; external validity for web‐based conjoint analysis and polyhedral methods; and consistency for web‐based conjoint analysis versus user design. We report on these tests, commercial applications, and other evaluations. © 2002 Elsevier Science Inc. All rights reserved.     

Continuity,Change, and New Product Performance: The Role of Stream Concentration*

Product development teams often face the challenge of designing radically new products that cater at the same time to the revealed tastes and expectations of existing customers. In new product development projects, this tension guides critical choices about continuity or change concerning product attributes and team composition. Research suggests these choices interact, but it is not clear whether they are complements or substitutes and if the level of change in one should match or not the level of change in the other. In this article, we examine the interaction between product attribute change, team change, and a new team-level factor, which we term stream concentration, as it captures differences among team members in terms of familiarity with the knowledge domain of the new product being developed. We measure stream concentration as team members’ prior NPD experience within a given set of products and assess its impacts on the management of change in new product development projects using longitudinal data from the music industry. We analyze 2621 new product development projects between 1962 and 2008 involving 34,265 distinct team members. Results show that stream concentration is a critical factor in new product development projects that, together with product attributes and team composition, affects new product performance. We discuss implications for research and practice.     

Intelligent product cross-selling system with radio frequency identification technology for retailing

This paper presents a combined use of both RFID technology and product cross-selling system to perform cross- and up-selling for retail industry. In this study, two systems, namely the Smart Dressing System (SDS) enabled by RFID technologies, and Intelligent Product Cross-selling System (IPCS), have been developed. The SDS demonstrates a research endeavor in which, unlike the previous studies focusing on transactional data, customers' in-store data can be collected using RFID-enabled SDS and used for promoting or cross-selling new products to the customers effectively and efficiently. The IPCS, integrating a rule-based expert system and a fuzzy screening technique, can handle the difficulty of processing linguistic and categorical information to simulate fashion designers to recommend appropriate fashion product items for cross-selling effectively. The proposed systems are evaluated to execute the selling strategies more effectively, which in turn improve sales performance in fashion retail industry.     

品牌原产地效应及其市场策略建议--基于欧、美、日、中四地品牌形象调查分析

品牌原产地是国际市场营销领域重要研究议题。在欧、美、日等地区广泛实证和推广 ,但迄今仍缺少对中国市场品牌原产地评价及其对品牌信念及购买的效应的系统研究。本文在文献回顾基础上 ,建立了品牌原产地效应的理论模型 ,提出理论关系假设 ,抽取京、沪、穗、渝四市共 10 0 5个成人消费者样本 ,运用相关分析、T检验等方法进行实证研究。研究测量出中国市场对欧、美、日、中四地的原产地评价 ,发现国产品牌形象评分总体上为负面 ,并低于美日品牌 ,但在某些产品类别已显示出相对优势。研究结论证实了品牌原产地对消费者品牌信念和品牌购买意向的显著性作用。本文讨论上述研究结论对中外企业市场营销策略的借鉴 ,并提出进一步研究的方向。     

Context effects in the evaluation of business-to-business brand alliances

Brand alliances in the business-to-business domain are becoming increasingly popular. This study investigates the impact of context-related effects on the formation of evaluation perceptions in B2B brand alliances. Assimilation and contrast effects represent the conceptual framework. Employing an experimental design we test the influence of two contextual factors on a range of product attributes: quality perceptions of the known brand ally (valence), and amount of information provided for the brand alliance. Using data collected from a cross section sample of large B2B UK companies we report assimilation effects across different product attributes of the alliance. Positive valence of the known brand ally results in higher evaluations of the brand alliance. In terms of provision of information, we find that, (a) unlike consumer markets, in the B2B domain higher evaluations are the result of detailed information, and (b) the impact of detailed information is significant only for tangible product attributes. Further, we find that valence of the known brand ally and amount of information provided are independent factors. The results add significantly to the knowledge on context effects in B2B brand alliances and lead to a number of managerial recommendations on partner selection and marketing communication of new brand alliances.