504: Market Research for Product Innovation – with Chip Chomyn

Product Mastery Now for Product Managers, Leaders, and Innovators

Why market research is product managers’ secret ingredient for successful products

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TLDR

Market research is a key part of product development and management. In this episode, Chip Chonym explains why market research matters throughout the innovation process, discussing both qualitative and quantitative methods. He covers the “double diamond” approach, how to talk about value, pricing strategies, and how market research helps make smart decisions. Chip emphasizes that product managers should see market research as an ongoing process and provides practical tips for doing effective research.

Introduction

In the world of product management and innovation, market research is like a compass. It guides product managers through the complex landscape of what customers need, want, and how they behave. Chip digs into the world of market research, exploring why it’s important, how to do it, and how to use it when developing products.

Why Market Research Matters in Product Development

Market research is one of the seven key areas of knowledge that make up Product Mastery, according to the Product Development and Management Association (PDMA). It’s important because it helps uncover what customers need and want, even if they don’t know it themselves. This information is gold for creating successful new products.

Understanding how different areas of knowledge work together is crucial for product managers. Market research doesn’t exist in a bubble; it connects with and informs other parts of product development, like creating strategies, how teams work together, and understanding the bigger business picture. This holistic approach ensures that decisions about products are based on a full understanding of both the market and the broader business context.

Market Research: An Ongoing Journey

One big misconception about market research is that it’s a one-time thing. In reality, effective market research is an ongoing process that continues throughout a product’s life. From the first idea to checking how well it’s doing after launch, market research plays a vital role at every stage.

The Double Diamond Approach in Market Research

The “double diamond” approach is a helpful way to understand how market research works in product development:

Diamond Phase	What It Means	Research Activities
First Diamond – Discover	Exploring widely to understand the problem	Watching customers, open-ended interviews
First Diamond – Define	Narrowing down to specific problems	Defining the problem, identifying customer groups
Second Diamond – Develop	Coming up with lots of potential solutions	Testing concepts, evaluating prototypes
Second Diamond – Deliver	Refining and implementing the chosen solution	Testing with users, validating in the market

This approach emphasizes the importance of alternating between thinking broadly (exploring) and focusing in (refining) throughout the research process.

Qualitative Research: Getting to Know Your Customers

Qualitative research methods provide rich, detailed insights into how customers behave, what motivates them, and what problems they face. These methods are especially valuable in the early stages of product development when you’re still trying to understand the problem.

Key Qualitative Research Methods

• Ethnography: Observing customers in their natural environment to gain real insights into their behaviors and needs.
• One-on-One Interviews: In-depth conversations with individual customers to explore their experiences and perspectives.
• Small Group Sessions: Discussions with 3-4 participants, encouraging dynamic interactions and idea generation.

Small group sessions are often more valuable than traditional focus groups. In smaller groups, people feel more comfortable challenging each other’s ideas, leading to more honest and insightful discussions.

For example, a product manager developing a new project management tool might conduct small group sessions with team leaders from different industries. These sessions could reveal unexpected pain points in current tools and spark ideas for innovative features.

Quantitative Research: Measuring What Matters

While qualitative methods provide depth, quantitative techniques offer breadth and statistical reliability. These methods are particularly useful in later stages of product development when you need to test specific concepts or refine your ideas.

Essential Quantitative Research Tools

• Conjoint Analysis: A statistical technique that determines how people value different features that make up a product or service.
• MaxDiff (Maximum Difference Scaling): A method for understanding customer preferences by making them choose between different options.
• Surveys: Structured questionnaires that can reach many respondents, providing statistically significant data.

These quantitative methods allow product managers to make data-driven decisions about product features, pricing, and market positioning.

For instance, a company developing a new smartphone might use conjoint analysis to understand how much customers value different features like battery life, camera quality, or screen size. This information could help prioritize which features to focus on in the final product.

Talking About Value: The Art of Communication in Market Research

One of the challenges in market research is translating product features into benefits and value for customers. Engineers and product developers often focus on the technical aspects of a product, but customers are mainly interested in what they get out of it.

Effective market research requires crafting questions and descriptions that resonate with customers. This involves:

• Focusing on benefits rather than features
• Using language that customers understand and relate to
• Presenting concepts in terms of the problems they solve or the value they provide

For example, instead of asking customers about a “5000mAh battery,” you might ask about their frustrations with battery life and how a phone that lasts two full days without charging might change their daily routine.

Pricing Strategies for New Products: Beyond Cost-Based Approaches

Pricing is a critical part of product strategy, and market research plays a vital role in determining the right price. Many product managers and engineers default to cost-based pricing, but this approach often leaves money on the table and fails to capture the true value of innovative products.

Key Considerations in Value-Based Pricing

• Differential Value: Understanding what makes your product different from alternatives in the market.
• Customer Segmentation: Identifying the specific groups of customers who value your product’s unique benefits.
• Willingness to Pay: Determining how much customers are willing to pay for the value your product provides.
• Portfolio Pricing: Considering how your product fits into your overall product lineup and pricing strategy.

Value-based pricing requires a deep understanding of customer needs, market dynamics, and competitive positioning. Market research provides the insights necessary to implement this more sophisticated pricing approach.

Case Study: The Mechanical Pencil Example

To illustrate the principles of value-based pricing and market research, let’s consider the example of a mechanical pencil. At first glance, it might seem challenging to differentiate or price such a common product. However, by applying market research techniques, we can uncover opportunities for innovation and value creation.

Steps in Researching and Pricing a Mechanical Pencil

1. Identify Differentiation Factors: Comfort during extended use, reliability of lead advancement mechanism, eraser quality and longevity.
2. Understand Target Customer Segment: Professional artists, architects, or students who use pencils extensively and value precision and comfort.
3. Determine Willingness to Pay: Through techniques like conjoint analysis, assess how much target customers would pay for specific improvements in comfort, reliability, or functionality.

By focusing on the specific needs of a target segment and the value provided by unique features, it’s possible to justify a premium price for what might otherwise be considered a basic product. For instance, a mechanical pencil designed for architects might command a much higher price than a standard pencil due to its precision, comfort during long drafting sessions, and specialized features like integrated scale rulers.

The Power of “Why” in Market Research

Throughout the market research process, the most powerful question a product manager can ask is “why?” Understanding the underlying motivations, frustrations, and desires of customers is key to developing truly innovative products.

The “why” question applies at multiple levels:

• Why do customers choose one product over another?
• Why do they perform certain tasks in a particular way?
• Why do they value certain features or benefits?

By consistently probing deeper with “why” questions, product managers can uncover insights that lead to breakthrough innovations and products that truly resonate with customers.

For example, when researching a new coffee maker, asking “Why do you prefer your current brand?” might reveal that it’s not just about the taste of the coffee, but also about the ritual of preparation or the aesthetic appeal of the machine in their kitchen.

Balancing Qualitative and Quantitative Research Methods

Effective market research requires a balance between qualitative and quantitative methods. Each approach has its strengths and limitations, and the most robust insights often come from combining both types of research.

Complementary Roles of Qualitative and Quantitative Research

Research Type	Strengths	Limitations
Qualitative	Rich, detailed insights; Discovery of unexpected issues	Limited sample size; Potential for researcher bias
Quantitative	Statistical reliability; Large sample sizes	May miss context or underlying motivations

Product managers should strive to leverage the strengths of both approaches, using qualitative methods to explore and generate hypotheses, and quantitative methods to validate and quantify findings.

Adapting Research Techniques to Specific Situations

There’s no one-size-fits-all approach to market research. The specific techniques and methodologies used should be tailored to the product, market, and stage of development. Factors to consider include:

• The maturity of the market and product category
• The complexity of the product or service
• The target customer segment (e.g., consumers vs. businesses)
• Available resources and timelines

Product managers must be flexible and creative in their research approaches, adapting methodologies to fit the unique needs of each project. For instance, researching a new B2B software product might involve in-depth interviews with IT decision-makers, while a consumer snack food might rely more heavily on taste tests and quantitative surveys.

The Role of Market Research in Making Smart Decisions

Ultimately, the goal of market research is to enable better business decisions. By providing data-driven insights into customer needs, market trends, and competitive dynamics, market research empowers product managers to:

• Prioritize features and development efforts
• Identify new market opportunities
• Optimize pricing and positioning strategies
• Reduce risks associated with product launches

When integrated into the product development process, market research becomes a powerful tool for reducing uncertainty and increasing the likelihood of market success.

For example, a company developing a new line of athletic wear might use market research to identify which features (moisture-wicking, odor control, eco-friendly materials) are most important to their target customers. This information could guide product development, marketing messages, and pricing strategies.

Conclusion

Market research is not just a set of tools and techniques; it’s a mindset that puts the customer at the center of product development. By embracing market research throughout the innovation process, product managers can:

• Develop products that truly meet customer needs
• Make more informed decisions about product strategy
• Reduce the risk of product failure
• Create sustainable competitive advantages

As the business world continues to change, the importance of market research in product management will only grow. Product managers who master these techniques and integrate them into their development processes will be well-positioned to create successful, customer-centric products.

Remember, effective market research is an ongoing process, not a one-time event. By continuously seeking to understand your customers and market, you can stay ahead of trends, anticipate needs, and create products that truly resonate with your target audience.

Useful links:

• Check out AMG Research

Innovation Quote

“What is your why?” – Simon Sinek

Application Questions

1. How does your organization currently use market research in product development? Are there opportunities to make it more of an ongoing, iterative process
2. Think about a recent product launch or feature development. How might the outcome have been different if you had applied some of the market research techniques discussed in this article?
3. Consider your current pricing strategy. How could you use market research to move towards a more value-based approach? What information would you need to gather?
4. Reflect on a time when you were surprised by customer feedback or market reception to a product. How could better market research have helped anticipate or prevent this surprise?
5. How can you better balance qualitative and quantitative research methods in your product development process? Are there areas where you’re relying too much on one type of research?

Bio

Chip Chomyn is the President and Managing Principal at AMG Research, a research-based consulting and insights company based in Pittsburgh, PA. Chip brings more than 20 years experience in marketing and sales and, over that time, has been involved in more than 1,000 market research studies. He has degrees in Bioengineering and Mechanical Engineering, which explains in part his special interest in helping medical and industrial businesses in new product development, pricing, segmentation, and market analysis.

Thanks!

Thank you for taking the journey to product mastery and learning with me from the successes and failures of product innovators, managers, and developers. If you enjoyed the discussion, help out a fellow product manager by sharing it using the social media buttons you see below.