What Good is Market Research for New Product?

Published by MBA Skool Team, Published on January 18, 2013

According to Kozo Ohsone, Sony executive credited as the creator of the Walkman, “When you introduce products that have never been invented before, what good is market research?” Walkman was launched without customer research. In its 30-years reign on the market, till the introduction of iPod, it sold 200 million units and changed the way people experienced music.

Market research is a process used to define the size, location and other whereabouts of the market for a product or a service. Market research is a common practice for new and old products alike. Among others, IDEO, an international design and innovation consultancy firm believes in the merit of market research. It designed the first laptop and the first mouse (for Apple) apart from other design marvels. In order to create design which consumers would actively want to use, IDEO tries to uncover deep insights through a variety of research methods to understand how consumers purchase, interact with, use, and even dispose of products. Why do some companies favor market research for new products whereas others don’t?

Clayton Christenson in his book Innovator’s Dilemma, writes “Markets that don’t exist cannot be analyzed”. According to his research work, market research makes complete sense in case of sustaining innovation whereas it fails miserably in case of disruptive innovations. Sustaining innovations can be radical or incremental in nature and they would invariably improve the performance of established products. They ensure their competitive status by improving and enhancing product’s performance in an expected way. On the other hand, disruptive technologies bring a very different value proposition than had been available previously. They upset the market by fundamentally altering the way customers think about product performance by exceeding their expectation in an unexpected way. Consider iPod; is it a sustaining innovation or disruptive? Well, iPod is a disruptive innovation as it exceeds customers expectation in terms of performance of key elements of digital audio player i.e. storage capacity, size, battery life. Apple has pioneered disruptive innovations like iPod, iTunes music store, iPad, IPhone etc. Steve Jobs had once said that Apple never does market research. ‘It isn’t the consumer’s job to know what they want; it’s Apple’s job’. Could we say, for sure, that market research is useful for sustaining innovation and not for disruptive innovation?

In what market conditions are sustaining and disruptive innovations relevant for a company? According to Ansoff’s Product-Market Expansion Grid, new products are made for current markets through product development strategy. This strategy is employed to meet the latent need
(need that has not been met by other products in same category) of the consumer. Product development is done by virtue of sustaining innovation. As evident, market research is vital for product development. On the other hand, new innovative products can be created for new markets by following diversification strategy. The diversification strategy for creating new innovative product is disruptive innovation. There are two possible ways of disrupting a present market scenario:

  1. Develop a disruptive technology e.g. iPod, iPad, Blackberry etc
  2. Create a disruptive business model e.g. Southwest Airlines, Cirque du Soleil and flipkart.com etc

In-case of disruptive technology, in agreement with Clayton Christenson, one could safely conclude that market research is not as useful, based on the evidence from disk drive, motorcycle and microprocessor industry. But then, what about creating disruptive business model?

A strategic framework for disruptive innovation in value proposition or business model has been provided by W. Chan Kim and Renee Mauborgne in their book Blue Ocean Strategy. This strategy can be used to create uncontested market place and make competition irrelevant. Blue Ocean Strategy provides the four-action (Eliminate-Reduce-Raise-Create Grid) framework and the strategy canvass which can be used to perform value innovation creating new markets. For example, Southwest Airlines created a blue ocean by breaking the trade-offs customers had to make between the speed of airplanes and the economy and flexibility of car transport. They achieved this, by offering high-speed transport with frequent and flexible departures at prices attractive to the mass of buyers. By eliminating and reducing certain factors of competition and raising others in the traditional airline industry, as well as by creating new factors drawn from the alternative industry of car transport, Southwest Airlines developed a low-cost business model. Thus the frameworks of blue ocean strategy would invariably need the use of market research for the purpose of competitor and market analysis.

Conclusion: Market research is essential for new product development in old market. This would help in identifying the latent needs of customers and by virtue of sustaining innovation, these needs can be met. In developing new innovative products for new markets, companies use disruptive innovation. Whereas market or consumer research for new disruptive technologies failed in most cases, the same is essential for creating disruptive business model.

This article has been authored by Sayantan Chattopadhyay from DoMS IIT Roorkee.

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