(BUS 13) Notes to Accompany Lecture, May 14, 1998
by Kenneth L. Hess

Definition of a Market

Geof Moore defines a high tech market as:

A set of actual or potential customers,
for a given set of products or services,
who have a common set of needs or wants, and
who reference each other when making a buying decision.

Matching the Process of Product Development to Its Context

Note: This section, "Matching the Process of Product Development to Its Context," is based on class notes for EE353/CS394 taught by Fred Gibbons. See also HBS Case Note 9-952-009.

Key marketing and development issues are highlighted by positioning a product in the context of a "newness" map and a "development risk versus opportunity cost" map.

Newness is plotted as a function of newness to the company and newness to the market.

Newness Map
High newness to firmNew product lines

Microsoft's Internet Explorer Version 1.0

IBM PC when first introduced in 1981
New to the world

Apple's Newton personal digital assistant

.Improve existing products Netscape's Navigator Version 1.0 .
Low newness to firmCost reduction

HP's Deskjet LC printer


ETAK's digitized map images used as a geo-locating service on the World Wide Web

Low newness to market
High newness to market

New products in the lower left portion of the map may come at the expense of existing products (cannibalization). But, if a company does not cannibalize its own products, a competitor will.

Products in the upper left corner raise the issue of company/product fit. How well can the company deal with the development, manufacturing, and marketing issues as compared to the established competitors?

Products in the upper right corner offer the allure of "breakthrough" opportunities (Brave New World), but the risk of market acceptance and fit with corporate skills is high thus the risk of failure is high. Generally, these are "technology push" products, being introduced because new technology makes them possible.

A product's position identifies its risks and required strategies and resources.

A 1982 Booz, Allen and Hamilton survey classified 700 firms' product introductions on the map, with the following findings:

High newness to firm20% new product lines


.10% new to the world
.26% improve existing products 26% additions to product line.
Low newness to firm11% cost reductions .7% repositions of existing line
.Low newness to market .High newness to market

There are actually two reasons why the upper right corner is thinly populated: obviously the risk of failure is higher, but when you do have a success, then you enhance, upgrade, and spin-off new products -- one success in the upper right corner generates a family of products in the left column.

Engineering scheduling and product feature issues are illuminated by positioning a product on the "opportunity risk" map. Opportunity is defined as the cost (primarily in lost sales, but also in reputation which will lead to lost future sales) of delaying introduction. Development risk assess the need to have the right product upon introduction.

Opportunity Risk Map
High opportunity costCrash program (copying someone else)

Microsoft's Internet Explorer version 1.0

.100% correct

Netscape's Navigator Version 1.0

(The cost of being late to market) ...
Low opportunity costNew products

IBM PC when first introduced in 1981

.New version of established products
.Low development risk (The risk of producing the wrong product for the market) High development risk

In situations of low development risk and high opportunity cost, getting to market is everything, and a crash program is required. Low opportunity cost coupled with high development risk makes time to market less important, and places the emphasis on making sure the product is right.

Products in the lower left corner typically are new markets where customer expectations are low. The early adopters often want the product now because it offers breakthrough benefits, and they will "live with" problems.

Products in the upper left corner have the same "forgiving" customer attributes, but expected competition forces a crash program.

Overall, the entire left column can be thought of as "faster, better, cheaper" products, also known as "market pull" products. A study of 567 successful innovations published in 1969 by Myers and Marquis showed that 79% were market pull and only 21% were technology push. Although this study is dated, I have seen no reason to doubt its continued validity. Many smaller studies find the same results.

Products on the far right are problematic. The worst case is the upper right quadrant. The product must be perfect the first time, e.g., start-ups going against existing competitors. The position on the lower far right is often the introduction of a follow on product which is relatively protected from competition (possibly by patent or by technological leadership).

Used in conjunction with each other, a product's position on the newness map identifies key marketing issues. Then the opportunity risk map helps determine the required trade-off between speed and accuracy.

The Product Life Cycle and Technology Adoption Life Cycle

The product life cycle and technology adoption life cycle relate to each other closely. People often confuse one with the other. The typical product life cycle is shaped like an s-curve, plotting sales for a product category against time. The technology adoption life cycle is shaped like a bell curve. Each standard deviation represents the different categories of buyers, arranged left to right as they would be most likely to try a new product. Often, a product life cycle curve is drawn with these categories of buyers mapped on to it.

Thus, the location of a product on the product life cycle curve has a lot to say about the characteristics of the customer most likely to purchase. Geof Moore, in Crossing the Chasm, describes the different categories along these lines:


Early Adopters

Early Majority

Late Majority


Moore also identifies a chasm, between the early adopter and the early majority. Early adopters alienate the early majority -- the early majority feels that visionaries:

Because of this chasm, marketing strategies must change even more at this point in the product life cycle than elsewhere.

Companies must choose where along the curve to enter a market:

Entry StrategyEntry Point on Product Life Cycle Required Characteristics of Successful Company
Pioneers: Launch entirely new products and product categories Very early growth stage
  • Requires strong R&D
  • Close coordination of marketing, engineering, and production
  • Willing to accept failure
Follow-the-Leader: Wait until a competitor is successful, then quickly copy. Early growth stage
  • Requires strong market intelligence
  • Need ability to turn on a dime
  • Skill at market development
Segmenters: Enter with a modified product to meet the needs of a particular segment Early to late growth
  • Excellent product design skills
  • Strong market research
  • Cost conscious
  • Efficient manufacturing
Me-Too: Enter very late with a commodity product Maturity
  • Thin staffing, minimum overhead
  • Dominated by manufacturing cost considerations

Porter's Caution: When examining the structure of an industry, don't rely on the product life cycle. Instead go back to the fundamental forces.

Product Marketing Objectives

Conference Board studies in 1964, '71, and '80 all identified poor marketing as the major cause of new product failures. The studies cited inadequate market analysis as the number one reason for failure by a wide margin over other causes. A 1975 study by Cooper of 114 actual industrial product failures found the following reasons for failure:

1) underestimated competitive strength and/or competitive position in the market (36.4%)

2) overestimated number of potential users (20.5%)

3) product's price set too high (18.2%)

4) technical difficulties/deficiencies with product (20.5%)

The most common failure scenario from this study was the "better mousetrap no one wanted" (28% of cases) followed by the "me-too product meeting a competitive brick wall" (24% of cases).

Clearly, good product marketing is important.

There exist five categories of market research:

Category of Market Research DescriptionRepresentative Examples Strengths and Weaknesses
Unstructured User Feedback.
  • Tech support calls
  • Beta test
There's sometimes a difference between what a user says he wants and what he really wants.
ObservationSimply observe the relevant actors and settings.
  • Observe people in a store
  • Observe people while using a product (actual product or mock-up)
  • Try competitor's service or product
An exploratory technique. Good to identify hypotheses to test further.

Also very good for product design questions.

Focus GroupA gathering of about ten people who talk about a product or service with a skilled moderator. The moderator focuses the discussion to learn how people feel about the topic of discussion. The session is often viewed through a one-way mirror and/or recorded. .Useful as an exploratory step to provide input into further testing.

The sample size is too small to generalize in a meaningful way.

Value is highly dependent on the moderator.

SurveyMeasure the magnitude of people's knowledge, beliefs, preferences, satisfaction, desires, ...
  • Personal interviewing, canvassing
  • Phone interview
  • Mail questionnaire
When properly constructed, more accurate than observation and focus groups.
ExperimentalSubject matched groups of people to different treatments while controlling extraneous variables and checking whether the observed responses are statistically significant.
  • Split-run, direct response advertising
  • Split-run catalogs
  • Test markets
The most scientifically valid method.

Good research follows the scientific method:

Key Marketing Issues
High newness to firmObjective: Capture competitors' customers and the uncommitted -- product improvement needs to comfortably exceed switching costs.

Talk to:

  • Competitors' customers
  • People yet to purchase


  • Competitive analysis
  • Surveys
  • Focus groups
Objective: Change people's way of doing things -- need 10X product improvement over the present.

Talk to:

  • Prospective customers


  • Very difficult to find and select "real world," prospective customers.
  • Very difficult for customers to extrapolate more than a tiny distance from their present way of doing things.


  • Personal experience
Low newness to firmObjective: Retain and grow installed base, obsolete self -- need marginal improvement over existing products.

Talk to:

  • Installed base
  • People yet to purchase


  • Track tech support calls
  • User testing
  • Surveys
  • Focus groups
Objective: Change people's way of doing things -- need 10X product improvement over the present.

Talk to:

  • Prospective customers


  • Very difficult to find and select "real world," prospective customers.
  • Very difficult for customers to extrapolate more than a tiny distance from their present way of doing things.


  • Personal experience
  • Mock-ups
  • Beta tests
Low newness to market

High newness to market