Generating New Product Ideas — Business Marketing
A core distinction between
business market customers, vis-à-vis consumers of consumer products, is their
focus on functionality and performance. They have systems and processes for
evaluating their purchases in a fairly rational manner. To succeed, new offerings
need to deliver value and suppliers need to demonstrate exactly how the value
is derived. This requires a deep understanding of customers and how they derive
value from their products.
The analysis of customer transaction data, via
customer satisfaction and relationship management methods, can provide an
appreciation of customer needs and preferences, leading to ideas of products or
services to better serve the customers.
Value-in-Use analysis
provides for a comprehensive understanding
of the value customers derive from a product or service. Value-in-Use (VIUA versus B)
is the difference in value (ValueA − ValueB) minus the
difference in price (PriceA − PriceB) that a supplier’s
new offering provides a customer relative to an alternative offering. And value is the
economic, technical, service and social benefit net of all the costs incurred in extracting
the benefit.
The computation of VIU requires a thorough understanding of each step in
the use of the product or service, i.e., all benefits and cost elements need to be accounted
for to arrive at the total cost of ownership (TCO) of the offering by the customer. Moreover,
the results cannot be generalized since VIU varies from one type of customer to another and
their usage and cost elements differ.
Activity-based costing (ABC) methods that quantify all expenses related to the
use of a product or service, are often used for deriving VIU and estimating TCO.
Customers as a Source of Ideas
Exhibit 9.15 US Army’s Signal’s Corps needing miniaturized communication equipment, seized on
the idea of PCB, designed, produced it and then sought potential suppliers. (Photo courtesy T/4 Harold Newman, U.S. Army Signal Corps).
Considering the nature of
business markets, it is not surprising that the highest proportion of new product
ideas originate with customers. Customers however do differ in many
ways, and some are more innovative than others.
“Organizations, by their very nature are designed
to promote order and routine. They are inhospitable environments for innovation.”
This observation by Levitt applies especially to big companies that tend to be process-centric,
focusing on streamlining and minimizing costs. Their heavy investments in
existing technologies become a burden when disruptions occur in their markets.
Big customers therefore can be relied more on incremental innovations that help
improve processes, rather than breakthroughs that disrupt the existing
market dynamics.
Lead users on the other hand tend to be innovative
companies that identify solutions well before their competitors and suppliers.
For example, the U.S. Army Signal Corps (Exhibit 9.15), needing miniaturized communication
equipment, conceived of the use of the PCB (printed circuit board) in
their equipment, designed and produced the required PCBs, and sought potential
suppliers.
Leap-Frog users are aggressive companies, possibly
new entrants pursuing riskier development strategy. Tesla was
an apt example of a leap-frog user of lithium batteries, which changed public
and industry perception of what an electric car can be.
Salespeople, suppliers, market research agencies
and competitors are also important sources that need to be regularly tapped for
new product ideas.
Importantly, for ideas to flow, it requires the
development of systems to encourage sourcing, and facilitate the submission of
ideas.
At the most basic level this requires a destination such as the NPD
department, where the ideas may be submitted.
