Insights: AMA's digest of the latest findings from marketing's top
As an executive, you are constantly faced with new marketing ideas and processes. Some you should pursue. Some you shouldn’t. And it can be difficult to know the difference between the two.
Colorful anecdotes and universal success claims that are shared by consultants – and that often get published in popular press articles – make it seem like only the most backward company would resist adopting the latest must-have best practice. And then academic research reveals a different story.
Such has been the case with claims that NPS is the one number you need to know. Such has also been the case with claims that only small companies can successfully introduce radical innovations.
And such may now be the case with claims that success in innovation requires customer participation at every stage of new product development (NPD).
Should Customers Participate at Every Stage of New Product Development?
Using stories of success at companies like Legos and Starbucks, the argument for increasing customer participation in NPD claims that traditional customer inputs are no longer enough. Rather, in the new age of marketing, it is maintained that success requires involving customers as co-creators at every step along the way.
But is customer participation at each point in the NPD process actually beneficial? Are there situations where customer participation is more or less beneficial – or even harmful?
These are the questions that guided a research study published in the January 2016 issue of the Journal of Marketing. The paper, “The Effectiveness of Customer Participation in New Product Development: A Meta-Analysis,” reports the results of a study that looked at the relationship between customer participation and NPD performance across 39 different independent samples.
On the basis of their findings, Professors Woojung Chang and Steven Taylor, both of Illinois State University, conclude that “Despite the value of customer input, customer participation may not be an imperative for every firm in every industry” (p. 61). And a parallel conclusion is made about every stage of the NPD process.
Specifically, the research shows that customer participation in NPD is significantly related to three different types of performance – new product innovativeness, speed to market, and new product financial performance. However, this impact depends on the stage of NPD at which customers participate.
In fact, whereas both customer participation during ideation (e.g., idea generation) and during launch (e.g., prototype testing) have a net positive impact on new product financial performance via speed-to-market, customer participation during development (e.g., product design) negatively impacts speed-to-market which leads to an overall negative impact on new product financial performance.
In addition, the effect of customer participation depends on characteristics of the firm, market, and customers. Customer participation is shown to be more beneficial when (1) there is a lot of technological uncertainty, (2) the new product is being introduced in an emerging market, (3) the industry is relatively low-tech, (4) the focus is business customers rather than end consumers, and (5) it is a small firm rather than a large firm doing the development.
Customer Participation in New Product Development – A Project Decision
Overall, the results indicate that customer participation in early and late stages of development is most beneficial, contrary to the assumption that traditional customer inputs into NPD are no longer enough for success.
Further, the results reveal that customer participation in NPD is unlikely to be universally beneficial for all firms, and it is unlikely to be beneficial for all projects within the same firm. Rather, the merits of customer participation in NPD should we weighed for distinct projects.
Specifically, customer participation is most beneficial when customer insights are especially diagnostic and when the business is especially willing and able to incorporate outsider knowledge into the development process. In this regard, the research suggests the following questions for consideration, with a ‘yes’ in each case pointing toward more value from customer participation.
Is there considerable uncertainty or disagreement within the firm about customer needs?
Is there considerable uncertainty about how customers would desire to have their needs satisfied?
Is there a group of customers who are motivated and able to share knowledge that the development team is lacking?
Is the development team motivated to rely on customer inputs in the development process?
Does the development team have the skill to gather and incorporate useful customer inputs?