How far can market research help to evaluate the potential of industrial innovation? Here we look at the strengths and weaknesses of its possible contribution: specially for marketers under threat of innovation-by-imposition.
Company chairmen are particularly prone to becoming obsessed by a "good idea." One of their roles in life is ensuring the forward direction of the company they control, and so it is reasonable they should seek new ventures. The problem arises because, through the nature of their work, they cannot involve themselves in detail. Thus, if a good idea seems generally to offer potential, it may be taken on with no more justification than gut feel.
It is the hapless marketing director and his staff who are then landed with the task of marketing the new product or service. The company is stuck with the project and the marketing department becomes involved in showing how the product will be sold rather than determining whether or not there is a market for it.
Obviously the more professionally run the company the greater the probability that the marketing department will be called in to assess the new product’s market potential before it becomes a fait accompli. This article is written more for the less happily placed: marketing men working against the corporate grain, in a predominantly non-marketing environment - who may find a statement of what market research can and cannot do in the marketing of innovative products useful material for the nursing - or smothering - of the chairman's baby. We confine ourselves here to the problems of assessing the potential for innovations rather than the researching of products or services which, although new to a company, have an already established demand.
Innovations can be classified into those which are a modification of an old design and those which are conceptually brand new. A franking machine with automatic this and that illustrates the first type of innovation. A laser franking dot imprinted on an envelope by a computer exemplifies the second.
Assessing the demand for product improvements is much easier than measuring the potential for a new concept, for fairly obvious reasons. The user of a modified product can relate easily to the benefits and how these have now changed as a result of the innovation. If the product is revolutionary, the potential user of the product must be able to recognise a latent demand, otherwise a negative reaction will be given. Consider, for example, a company making steel components from bar. The process is simple, flexible and can be automated. The invention of powder metallurgy in the 1940s meant that the buyers of orthodox machined parts from bar had to reorientate themselves to a process which gave them a component which looked the same but, because it had been manufactured by a different route, had a performance which was not entirely comparable.
A marketer assessing the potential for powder metallurgy 30 years ago would have had to consider the areas where simple substitution could take place and also the new opportunities which the process offers to designers starting with a clean slate.
Substitution, though in theory a simple matter, can, for many reasons, take a number of years in industrial markets. Loyalty can be strong to suppliers of the traditional products who may stem their loss of sales with aggressive marketing policies. On occasions, the replacement of an old product by a new one may make machines redundant and require changes in manufacturing practices which have been inbred over many years. From the date a buyer becomes aware of an industrial innovation, which proves without any snags to be capable of simple substitution for another product, a period of at least one year is required for a significant level of penetration to be made. More typically the substitution period in industrial markets could be between three and five years.
Industrial innovations which are revolutionary in their concept take much longer to reach take-off point. Acrylic plastics, discovered in 1901, took 30 years to reach the production stage. Steel fibres for reinforcing concrete have still made little penetration despite the fact they have been marketed for years and were discovered in the early 1960s. Carbon fibres, discovered in 1965 and brought to production in the 1970s took 20 years to make a significant impact in industrial markets. As a generalisation industrial innovations which are totally new in concept are likely to take a decade between invention and initial production and possibly the same lapse of time again before sales build up to commercial levels. This will certainly test the patience of the Chairman.
Researching the potential for innovations which are substitutes is relatively simple. It is necessary to quantify in detail the market for the product which will ultimately be replaced and then to consider, through discussions with decision makers, what they believe to be the potential for substitution. The new product may have a different length of life, it could perform more or less efficiently, it may be restricted to certain sizes and a host of other limitations or advantages which will have an effect that can be built into the forecasting model.
Innovations which require the buyer to change mental attitudes to a new way of making or doing things are much harder to research. In an interview, potential buyers can hardly be expected instantly to imagine possible uses for a new product which has only just been described and then to state the possibility of their purchasing it in the future. They have insufficient time to consider the product and to relate it to their own environment. One can envisage the results of new product research for the Xerox process if it had been carried out in this way. Respondents might have identified obvious needs such as copying correspondence, reports and the like. They would almost certainly have missed the many extra roles which are found for the copier once it has been installed. Researching this type of innovation must be highly interpretative. It is necessary to consider all aspects of how the potential buyer operates at the present, to seek to identify any problems that exist in his modus operandi, how he costs his products and the extent to which he recognises the limitations of his current practices. The researcher can then relate the innovation to the environment as it stands today and rationalise the extent to which the product could fit into it. It is, therefore, the researcher and not necessarily the potential buyer who identifies the latent demand (though clearly the buyer would be asked for his comments as one element of the research input).
Assessing the future demand for industrial innovations is particularly hazardous for two reasons. A high level of interpretation and judgement is required on the part of the researcher, and as a result, the findings are open to the very obvious possibility of human error. Secondly, because innovations take such a long time to reach commercial fruition, the demand environment, competitive products or even the innovation itself may be modified beyond recognition by the time it comes to market. It would therefore be unrealistic for the researcher to make a narrow prediction as to the future demand. More realistically the forecast should be much qualified and demand levels given between minimum and maximum bands. The lack of precision need not detract from the value of the exercise. Because the marketer takes a critical, rational and unbiased view of the future for the innovations, the risks in developing the market will be minimised. This appraisal should be a good complement to the chairman's gut feel.