EDT - 01 - Customer Development-Model PDF

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Entrepreneurship and Digital Transformation lecture notes Customer Development-Model...

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New Product Development vs

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a Customer Development Model M g o al

i Prof. Dr. Kay Peters rD a ir

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© 2021 SVI-Endowed Chair for Dialog Marketing Confidential

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SVI endowed Chair of Dialog Marketing

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Prof. Dr. Kay Peters

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log a i D Doris Bombeck

Freja C. Lindemann M.Sc. BWL © 2021 SVI-Endowed Chair for Dialog Marketing Confidential

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Welcome – Introducing Myself (1)

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Since 2012 Professor of Marketing University of Hamburg, Germany

Ma g o Since 2010 Visiting Ass. Professor of Marketing, UC ial Davis D f or r i 2005-2009 Managing Director ha C Center for interactive Marketing ed& Media Management, w University of Muenster, n Germany do E MBA and PhD, University VI- of Kiel, Germany S (Marketing, 0 Econometrics, Innovation) 21 2 ©

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Co-Founder and -Owner of software & consulting companies Expat Assignment >1yr in Latin America © 2021 SVI-Endowed Chair for Dialog Marketing Confidential

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Welcome – Introducing Myself (2)

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Extensive International Executive Training, among others for 3M, Metro, J&J, Brady Corp., Haniel Group, Several Banks across Europe

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Areas of Expertise: or f r - (Interactive) Communication ai h C - CRM – Customer Centricity ed - International Product Diffusion ow & Marketing

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S Co-edited Books 1 on 2 0 - eCommerce © 2 (German) - Marketing for Interactive Media (German) - International Direct Marketing (German, English, French)

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Media and Customer Management: Precondition for a Sustained Dialog Media Integrated Media Management g is the precondition for an effective tin and e efficient cross media application. rk

M g o l Dia

Dialog

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Co mp e Me titio dia n o f

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f or r i a Ch Sustained Customer Dialog

is the result of tailored and integrated communication policies. à Customer- and media management

Analytical Customer Management is the precondition for understanding individual customer needs. Customer

ing y as neit e r e Inc rog te e H

© 2021 SVI-Endowed Chair for Dialog Marketing Confidential

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Interdisciplinary Research & Implementation Expertise

Create and Implement ingKnowledge

Integrated Expertise

Marketing

Econometrics

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Projects & Implementation

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Science & Research

Teaching

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Our International Team of Co-Authors

ar k Prof. Dr. V. Kumar

Prof. Dr. Prof. Dr. A. Aravindakshan Prasad A. Naik

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Prof. Dr. Olivier Rubel

Prof. Dr. Prof. Dr. Prof. Dr. Norris I. Bruce Peter C. Verhoef Kalyan Raman

2 Prof. Dr. Kay Peters

© 2021 SVI-Endowed Chair for Dialog Marketing Confidential

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SVI-Endowed Chair for Dialogue Marketing

Customer- and Donor Management

Media Management

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1 Value2driven 0 2 communication within © the customer lifecycle.

Cross-media budget allocation integrating quality and synergies.

International Marketing © 2021 SVI-Endowed Chair for Dialog Marketing Confidential

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New Product Development vs

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a Customer Development Model M g o al

i Prof. Dr. Kay Peters rD a ir

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© 2021 SVI-Endowed Chair for Dialog Marketing Confidential

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We know why they DO IT….

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© 2021 SVI-Endowed Chair for Dialog Marketing Confidential

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…and why they DO IT…

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© 2021 SVI-Endowed Chair for Dialog Marketing Confidential

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© 2021 SVI-Endowed Chair for Dialog Marketing Confidential

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…and why they DO IT…

Starting a Venture – What is Important? (I)

M g o l Dia

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VI to THINK about WHAT S 21

© 2021 SVI-Endowed Chair for Dialog Marketing Confidential

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Starting a Venture – What is Important? (II)

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or f r i haimportant C …and most d we o HOW to turn thinking nd in DIRECT and IMMEDIATE action E VI S 1 02 2 ©

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Here is What You Get…

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…and this is WHAT IT DOES…

Mitigates your highest risks a M log

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© 2021 SVI-Endowed Chair for Dialog Marketing Confidential

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…but you got to DO IT YOURSELF!

© 2021 SVI-Endowed Chair for Dialog Marketing Confidential

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Agenda

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Product Development Model Customer Development Model

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or f r ai h C 3. Introduction to the Business Model Canvas ed w do n E V IS 1 02 2 ©

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What do they have in common?

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© 2021 SVI-Endowed Chair for Dialog Marketing Confidential

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What do they have in common?

$150m

$500m

$200m

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$200m

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$500m

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$100m $5bn

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$450m

© 2021 SVI-Endowed Chair for Dialog Marketing Confidential

$800m 20

What do they have in common?

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© 2021 SVI-Endowed Chair for Dialog Marketing Confidential

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What do they have in common?

ng i t e

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SUCCESS © 2021 SVI-Endowed Chair for Dialog Marketing Confidential

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But WHAT makes THE DIFFERENCE?

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Why do New Products Fail? (I)

Flaw 1: The company cannot support fast growth

Lesson Have plan to ramp up quickly if the product takes off ark gM Tools • Diffusion Models o l ia • Marketing Mix Models rD

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Why do New Products Fail? (II)

g Flaw 2: The product falls short of claims and gets bashed tin e Lesson Delay your launch until product is really ready ar k M log a i rD o f a ir h C d marketing $500m budget e w 50% users would run o premium version within 2 yrs

Lots of issues, even loyal customers revolt

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© 2021 SVI-Endowed Chair for Dialog Marketing Confidential

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Why do New Products Fail? (III)

Flaw 3: The new item exists in “product limbo”

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rk buyers Lesson Test the product to make sure its differences will reallyasway M Tools • CPD log a i • Observational Learning rD o f Conjoint • ir ha

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Why do New Products Fail? (IV)

g Flaw 4: The product defines a new category and requires tin e substantial consumer education ar k M g Lesson If consumers can’t quickly grasp how to use your it’s toast loproduct, a i D Tools • Observational Learning f or r i • Product Testing ha C d we d En I V 1S 2 0 ©2

© 2021 SVI-Endowed Chair for Dialog Marketing Confidential

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Why do New Products Fail? (V)

Flaw 5: Product is revolutionary, but there is no marketting ke“At what price?” r& Lesson Do NOT gloss over the basic questions “Who will buy it?” a gM Tools • Observational Learning o l Dia • Product Testing r fo r i ha C ed ow ©2

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New Product Development

Tens of thousands of new products are launched every year g Depending on the product category on average 40-60% tin of them e fail ar k M g No special formula to guarantee successialo rD o f But we will try to increase the probability of success – process a ir h orientation dC e ow how to do this and apply your Course enables you to dlearn n I- E knowledge V S 21 0 ©2

• • • • •

How?

Source: Moore (2014), p.49ff.

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Problems, where early market does not get a proper start (I) 1.

Lack of product-to-market expertise ng i t e

ar k Selling the vision before having the final product M log a i rD o f 3. Marketing falls pray to the crackabetween technology enthusiast ir h and visionary dC e w do n E V IS 1 02 2 © 2.

Source: Moore (2014), p.49ff.

© 2021 SVI-Endowed Chair for Dialog Marketing Confidential

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Problems, where early market does not get a proper start (II) Lack of product-to-market expertise: g tin e rk

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Raising insufficient amount of capital

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Hiring inexperienced sales and marketing people Ma g Selling products through an inappropriate channello of distribution ia D Advertising in the wrong place and ways r

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d Solution: En I SV Winning at1marketing means finding a target market segment 2 0 that fits2 a companies size in the short term and allows for © expansion in the long run! Source: Moore (2014), p.49ff.

© 2021 SVI-Endowed Chair for Dialog Marketing Confidential

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Problems, where early market does not get a proper start (III) Selling the vision before having the final product: • • • •

Pre-announcing and pre-marketing of a product that needs to overcome ng i t significant development hurdles rke a Visionary‘s position in the organization weakens og M ial Support for the project is withdrawn D or f r No usable customer reference is gained ai

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ow d n Solution: I- E Vearly S Shutting down marketing efforts, admitting mistakes, and 1 2 0 focusing © 2 on turning the pilot project into something useful (focus on customer needs)

Source: Moore (2014), p.49ff.

© 2021 SVI-Endowed Chair for Dialog Marketing Confidential

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Problems, where early market does not get a proper start (IV) Marketing falls prey to technology enthusiast and visionary: g Failing to discover & articulate compelling application providing • tinorder-ofe magnitude leap in customer benefits. ar k M • Many trials but no implementation/habit formation. log a i rD • Lack of continuing revenue as a result o f a ir h dC e w do n E Solution: SVI1 02 First, re-evaluate the product. Not sufficient additional benefit 2 © over existing solutions, re-design or pivot based on customer needs. Source: Moore (2014), p.49ff.

© 2021 SVI-Endowed Chair for Dialog Marketing Confidential

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Product Development Model (I)

Concept/ Seed

Product Development

Alpha/Beta Test

tinLaunch/1st e Ship rk

a M log a i Turn vision into key ideas, into business plan rD o f ir build? ato • What’s the product? Is it possible h dC e • Use market research toodetermine customers. What channel, what w d n price? E V IS 1 • Develop business plan further 02 2 © • Create spreadsheet and financial model. Determine how much money you need

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Product Development Model (II)

Concept/ Seed

Product Development

Alpha/Beta Test

tinLaunch/1st e Ship rk

Ma g o ial Engineering: Marketing: D f or r i • develops the product ha • refines market size based C on engineering ed • specifies first release date w o nd • starts targeting E I • hires staff to create it V S 21 0 ©2

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Product Development Model (III)

Concept/ Seed

• • •

Product Development

Alpha/Beta Test

tinLaunch/1st e Ship rk

a M log a i Work with outside users & test different r Dversions of the products o f a ir Complete marketing: sales and communications plan is developed h C d More people hired. Ready wefor the big unveil o nd E VI S 1 02 2 ©

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Product Development Model (IV)

Product Development

Concept/ Seed

Alpha/Beta Test

M g o l Dia

The big launch! • •

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tinLaunch/1st e Ship rk

f or r i a possible. Introduce across all Get product to as wide a markethas C channels ed w do n Try and grab as many customers as soon as possible! Marketing and E IV S on all gears – waiting for the customer Sales are working 21 0 ©2

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Product Development Model (V)

Product Development

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Anything missing? ©2

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Product Development Model – is NOT…

a marketing model g tn e ar k • a sales hiring model M log a i D r o f • a customer acquisition model a ir h dC e • even a financing ow model nd •

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10 Major Flaws of the NPD Model (I)

1. 2.

Where are the customers? Focus on first customer ship date

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ar k M 3. Emphasis on execution – not learning log& discovery a i rD o f 4. No meaningful milestones for air sales, marketing & bus h dC development e w do n E 5. Use of NPD to measure sales V IS 1 02 2 ©

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10 Major Flaws of the NPD Model (II)

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Use of NPD to measure marketing

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Premature scaling

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Ma g o 8. Death spiral – getting product launch ial wrong D r 9. Not all startups are alike air fo Ch d 10. Unrealistic expectations we o d En I V 1S 2 0 ©2

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Product Development Model (VI) This is a top down approach: • • •

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Not wrong, but incomplete and probably backwardsing t ke r a Often results in a death spiral for the productMdue to premature log scaling, especially in a startup. a i rD o f Large Fortune 500 companies can absorb 40% of their new a ir h products failing (sometimes, d Ce.g., Dell? Blackberry? ). This e w model was developed dofor large firms. n E VI- and startups have few to no other options Smaller companies S 21 0 2 Need © to combine it with a bottom up approach!

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Agenda

1.

2.

Product Development Model M g o l Dia

Customer Development Model

a

g tin e rk

f or r i ha Model Canvas C 3. Introduction to the Business ed w do n E V IS 1 02 2 ©

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We move from NPD to CDP & Design Thinking

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log a i D

Augment

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o nd

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Customer Development Model

g

The Pivot

V I-

nd

1S 2 0 Arrows indicate that each of these steps is iterative ©2 Stop sign indicates that these are milestones for check

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Customer Discovery (1/2)

1)

Your understanding of the customers’ needs

ng i t rke that mean? 2) Don’t just look for data – Look for insights! Whatadoes gM o • Visit customers – get out of the building l Dia r • Talk to them. Who are they? fo r i • What’s their problem? ha C d • How would they use your solution? we o nd E I hypothesis – Ideation 3) Develop and Test V your S 1 • What’s your 02value proposition? 2 ©you solve their problem? • How do • •

Go back and talk to the customers Are there customers for your vision? © 2021 SVI-Endowed Chair for Dialog Marketing Confidential

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Customer Discovery (2/2)

4)

Do the results match?

g tin e rk

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Yes (à next step) No (à Pivot, hypothesis don’t meet reality)

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You are trying to learn about them, as much as they want to learn about you.

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Ma g o ial D 5) Determine the ‘Minimum Viable Product’ for (MVP) r i • Ask ‘how much will you be willing to hapay?’ C d also understand the benefits in terms of • Don’t look for actual price, tryeand w do time savings etc. n E V IS 6) Disclosures 21 20be bad – need to...