Does your business identify your customers' needs for new product development (NPD)? And how can customer involvement in the process of NPD be effective?
The idea seems simplistic in real-life marketing experience. Experienced managers may say, "Of course, we design our products based on our customers' needs! The ultimate momentum behind the whole idea of business management is revolving around the customers and their needs."
However, research from the Journal of the Academy of Marketing Science may have more to say about that than the experienced managers do. Professor Anna Shaojie Cui and Professor Fang Wu conducted research to analyze the influences on and the effects of customer involvement in the innovation of new products.
Three types of customer involvement strategies in NPD are identified as:
- Customer involvement as an information source
- Customer involvement as co-developers
- Customer involvement as innovators
1. Customer Involvement as an Information Source (CIS)
The traditional and most-widely used method for using customers' knowledge in NPD is acquiring the information from them. This could be directly done (as in the case of feedback or ratings by customers) or indirectly done (as in the idea of gathering and analyzing the most implicit data from the customer behavior, mindset, decision-making, etc.).
Easy and manageable as it seems, this method has some shortcomings, such as:
- Customer need heterogeneity. The wide range and diversity of the customers' needs might make it unthinkable to involve all of them in the NPD process. Consider Nike and its $28 billion in annual sales. How could it possibly be able to consider the whole range of customer need heterogeneity it faces?
- Customer need tacitness. The second problem is the difficulty in interpreting the customer needs for the employees to work on. Due to the cultural diversity, over-personalized expectations, or special physical or mental situations, customers' ideas might not be well understood by the company's employees or they might even think them absurd and not worth trying.
2. Customer Involvement as Co-developers (CIC)
This strategy involves customers in the process of NPD more actively. Companies might want to involve selected groups of people in different phases of product development from idea generation to marketing activities.
Microsoft's Most Valuable Professional (MVP) Award is given to professionals who passionately share their knowledge with the community. More than 4,000 MVPs help people get along with their technical difficulties in using Microsoft products, according to the MVP website.
In return these people receive many benefits including early access to Microsoft products and direct communication channels with the product teams, and are also invited to the Global MVP Summit, an exclusive annual event hosted in its global headquarters.
What’s interesting is that MPVs are the consultants for the Microsoft employees and often work in collaboration with them. Microsoft's role changes from a mere product designer in CIS to a facilitator of customer involvement with the employees in CIC.
The CIC strategy might be said to help compensate for those two shortcomings in customer involvement as an information source (CIS) strategy. With MVP program, Microsoft has expanded its typical customer community to 4,000 experts from all over the world, with heterogeneous tastes and conceptual frameworks, who would directly collaborate with the company's employees to jointly put their technical knowledge to work.
3. Customer Involvement as Innovators (CIN)
Another model for incorporating customers’ ideas into the NPD process includes using the customers as the only designers of the product. This way, the company is chiefly a supplier of technologies needed for the designing process. Customers then use the technologies and innovation platforms to make and submit their personalized products to the company.
For example, consider NikeID, which is a service provided by Nike that enables its customers to personalize and design their own Nike products. The online services through its website or the physical studios built around the world (e.g., UK, Italy, France, Japan, Spain, Germany, China, USA, Canada, and Australia) provide the technologies and platforms for the customers to design their own products based on their own needs.
The highest degree of customer involvement is made possible through CIN where the customer is given full authority over the product designing process, hence addressing the heterogeneity and tacitness of customers' needs.
Yet, this method might seem a bit out-of-reach for all businesses.
The same research shows that whereas a high level of technology restricts the use of the customer insight in CIS and CIC, it is extremely important for CIN. This way, only the wealthy companies can afford to use CIN in their product development process. Plus a high level of strategic flexibility is needed in the management of the company because of the heterogeneous designs of the new products.
Choosing a Strategy
Which of the aforementioned customer involvement strategies is suitable for a company?
If the company is intent on facing the challenges of customer need heterogeneity or tacitness, the traditional strategy of customers as an information source (CIS) is not a suitable approach. Customer involvement as co-developers (CIC) or customer involvement as innovators (CIN) may be better choices, yet they require some prerequisites such as a high level of organizational support including inter-functional coordination, or management flexibility.
Interfunctional coordination in a company is the idea that different parts of an organization should function in coordination with each other. Organizational functions such as management, marketing, manufacturing and R&D, when in-line, enable the employees to work more efficiently to collaborate with the customers to produce their desired products.
Management flexibility is also important for CIS or CIN because the odd personalized designs of the customers need incorporation of new methods, technologies, or researches. So, two of the many prerequisites for using CIC or CIN might be the provision of interfunctional coordination and management flexibility in the company.
The answer depends on the problems the company faces or the capabilities it has for provision of the strategies.