Revised November 2007
prepared for Shane, S. (ed.), Blackwell Handbook of Technology and Innovation Management, Cambridge, MA: Blackwell Publishers
The comments of the following people on an earlier draft are greatly appreciated: Sridhar Balasubramanian, Dick Blackburn, Paul Bloom, Ed Cornet, Ely Dahan, Abbie Griffin, Steve Hoeffler, Erin MacDonald, Jackki Mohr, Bill Moore, Vithala Rao, Allan Shocker, and Gal Zauberman.
Touted as the “most significant category innovation since toilet paper first appeared in roll form in 1890,” dispersible (flushable) moist toilet tissue on a roll was introduced in the United States by Kimberly Clark in 2001. According to a corporate press release, Cottonelle Fresh Rollwipes was a breakthrough product that “delivers the cleaning and freshening of pre-moistened wipes with the convenience and disposability of toilet paper.” Internal market research seemed to indicate that there was a clear customer need for a new product to supplement dry toilet paper. Surveys and focus groups revealed that over 60% of adult consumers had experimented with a moist cleaning method (e.g., using baby wipes, wetting a washcloth, sprinkling water on dry toilet paper) and one out of four used a moist cleaning method daily. Kimberly Clark made the obvious connection that a majority of US consumers found dry toilet paper to be limited for their real needs. Convinced that there was a huge market opportunity for a more convenient product that addressed this consumer need for a cleaner and more refreshing bathroom tissue, Kimberly Clark obtained more than 30 patents on a new product and dispenser and invested over $100 million in R&D and manufacturing to bring their Cottonelle Fresh Rollwipes to market. Backed by over $40 million in marketing programs, sales were expected to reach $150 million in the first year and $500 million by six years. Perhaps more important, a significant increase in the $4.8 billion US toilet paper market was anticipated since this innovation was a supplement, not substitute, for existing products. Procter & Gamble also believed that there was a market opportunity for moist bathroom wipes; they quickly followed suit by introducing a similar product, Charmin Fresh Mates, later that year.
But, consumers were unimpressed with these new products. Sales were well below forecasts: Procter & Gamble abandoned its product after only two years and Kimberly Clark’s product is confined to a regional market where executives say that sales are so small that they are financially insignificant. Despite their market research, did Kimberley Clark (and Procter & Gamble) really understand their customers’ needs in this situation? The Fresh Rollwipes product was designed to be conveniently dispensed via a refillable plastic container that cliped to the standard toilet paper holder. Careful attention was paid to developing a dispenser that blended in with the consumer’s bathroom. Both companies, however, underestimated the role of consumer embarrassment associated with toileting (e.g., Associated Press 2003). While many consumers already used some sort of makeshift wet cleaning method in the bathroom, they didn’t like others knowing about it. The extra dispenser attached to the holder is right out in the open, possibly causing guests to wonder if there is something wrong with household members since they were using these “alternative” wipes. Although numerous mistakes were made in this case (e.g., Nelson 2002), it seems clear that Kimberly Clark and Procter & Gamble did not completely understand their customers’ needs.
Unfortunately, this example is not unique. New product failure rates of up to 90 percent commonly cited in the popular and academic press suggest that successful innovation is the exception rather than the rule (e.g., Power 1992; 1993; Stevens and Burley 1997; Brand Strategy 2003). The road to riches is littered with many stories of new product failure (e.g., Schnaars 1989; Gershman 1990; Kirchner 1995; McMath and Forbes 1998; Franklin 2003). Not surprisingly, many pundits take these failures to mean that it is impossible to truly understand customer needs. Headlines like “Ignore Your Customer” (Martin 1995), “Shoot First, Do Market Research Later” (Elliot 1998) and statements like “The public does not know what is possible, we do” (Morita 1986) fuel this viewpoint. At the same time however, a consistent finding from benchmarking studies on the factors related to successful innovation is that understanding customer needs is a fundamental, although challenging, activity (e.g., Montoya-Weiss and Calantone 1994; Cooper 1999; Henard and Szymanski 2001). There are just as many, if not more, examples in which firms used various traditional (e.g., customer surveys, focus groups) and nontraditional (e.g., ethnography, contextual inquiry, empathic design) research approaches to gain insight into their customers’ needs, and to develop highly successful new products (e.g., Urban and Hauser 1993; Leonard-Barton 1995; Burchill, et al. 1997; Otto and Wood 2001; Shillito 2001; Sanders 2002; Squires and Byrne (2002); Crawford and Di Benedetto 2003; Ulrich and Eppinger 2004). Thus, there is persuasive evidence that it is indeed possible to understand customer needs and that this insight can be used in the innovation process. Rather than ignoring customers, it is more prudent to only ignore customers’ specific ideas on how to fulfill their needs—it is the company’s job to develop new products!
[insert Exhibit 1 about here]
Conceptually, understanding customer needs leads to products that are desirable, feasible, and salable (to the mass market). Note that “product categories” are often defined by firms and not by customers (e.g., the SLR camera category, the digital camera category, the disposable camera category); thus product categories typically relate to feasible combinations of attributes that are salable (and hopefully desirable). As suggested by Exhibit 1, ideas, concepts and new products can be classified based on their location in the desirable-feasible-salable space. Thus, highly successful innovations are desirable, feasible and salable. Casual observations indicate that many existing products fall primarily in the feasible and salable region (e.g., Fresh Rollwipes), and that fresh looks at already established categories can lead to more desirable new products (e.g., consider the efforts of Oxo in the kitchen tools market and its greatly acclaimed Good Grips peeler, salad spinner and angled measuring cup). Gizmos and gadgets like the Segway Human Transporter are mainly in the feasible and desirable overlap (e.g., Waters and Field 2003), but are not really salable to the mass market. Many innovations that are mainly technology-driven reside only in the feasible region for a number of years (e.g., directional sound systems for use in automobiles, advertising, and special office-based applications; Schwartz 2004; brain-computer interfaces that allow the direct bi-directional interfaces between the brain, nervous system and computer; Cyberkinetics 2004; Michelin’s Tweel, a single piece airless tire with “spokes” that never go flat; Mayersohn 2005). Astute business analysts note that most firms are still product-driven rather than customer-driven (i.e., firms first determine what is feasible for them to develop; they then fashion marketing strategies to sell the products and services that can deliver; only later finding out that their offerings may not really be desirable).
The primary purpose of this chapter is to review the theory and practice related to understanding customer needs. By necessity, this review will be relatively brief as this topic covers a wide spectrum of literature across the marketing, design, and engineering disciplines. This review will provide insights into the challenges associated with identifying and interpreting customer needs, which will lead to a discussion of promising directions for future research.