Customer participation in new product development – is it really a good thing?
We’ve all heard the service industry’s clarion call, “the customer’s always right”. But is that really the case? I’ve always believed good service provision does not necessarily mean “doing everything the customer wants” so much as bringing the expectations of the service provider and the customer closely into line.
Over recent years there has been a significant increase in the involvement of customers in new product development (NPD) in an attempt to enhance the innovative appeal of new products and speed up the development process. Conventional wisdom says this is a good thing… but I’m sure I’m not the only one to have witnessed instances when customer participation has had an adverse impact on project outcomes.
Our company specialises in brand positioning and design and, typical of service companies, we work closely with many of our clients. But the design business has some interesting, perhaps unique characteristics. One being that almost everyone has a belief in his or her own design aesthetic (“I know what I like”).
When clients become involved in design projects it usually adds value and improves outcomes, but there are also times when a client’s insistence that we run with their own personal preferences is to the detriment of the project overall. The hard part, of course, is deciding when to tell a client they’re making a mistake (the “why have a dog and bark yourself” gambit).
So it was with a degree of vested interest that I began to read the research published in the Journal of Marketing by Eric Fang from the University of Illinois. Fang’s research assessed the value of customer participation in terms of its impact on new product innovativeness and speed to market. It makes for interesting reading for manufacturers and marketers alike.
Fang structured his research to answer two key questions:
- Are there trade-offs associated with customer participation in NPD; and
- Can customer participation undermine new product innovativeness and speed to market, even as it facilitates one but not the other?
As a starting point, Fang differentiated between two different kinds of customer participation in OEM manufacturing—customer participation as an information resource (CPI), and customer participation as a co-developer (CPC), and examined their effects on new product innovativeness and speed to market. His analysis generated two key findings.
Involving OEM customers in product development is not always desirable.
The trade off between new product innovativeness and speed to market, he believes, is explained by how the network between OEM customer’s retailers and distributors is structured. “CPI has a negative influence on innovativeness when downstream customer network connectivity is high, but a positive effect when it is low”, says Fang, “In contrast, CPI has a positive effect on speed to market when downstream customer network connectivity is high and no significant effect when it is low”.
His research also suggests that when process interdependence is high, CPC has a positive influence on product innovativeness but slows speed to market. When process interdependence was low, CPC significantly improves speed to market but has no effect on innovativeness.
These findings, Fang believes, have clear implications for management. Firstly, the involvement of OEM customers in the product development process is not always desirable.
CPI is likely to be beneficial in circumstances where the manufacturer’s retailers and distributors are disconnected and not in regular communication, as the diverse exchange of information generated by CPI can enhance product innovativeness. The risk, however, is that incorporating diverse and conflicting information into the development process may also slow down NPD to a material degree.
The involvement of OEM customers in a significant proportion of NPD tasks also delivers its own set of pros and cons. Clearly, if development requires a high level of interaction and coordination that involves customers, CPC has the potential to delay the development process. On the other hand in circumstances where it is possible to partition tasks between the OEM manufacturer and the customer, and leverage each party’s specialist knowledge, then the speed of NPD may actually increase.
Sadly, Fang’s research findings do not solve the dilemma that faces design companies when clients insist on the use of their own personal favourite colours or typefaces. However (and more importantly I concede), it certainly does provide manufacturers and marketers with guidance about how best to manage customer participation in new product development to deliver improved innovativeness and enhanced speed to market.