The PDMA Handbook of New Product Development

13.2. Need for Market Analysis and Segmentation

Understanding customers and markets and their needs and requirements has long been recognized as critical to the success of a new product development effort. In Chapter 1 of this book, Cooper summarizes the results of his research, which clearly points out a strong correlation between sound market understanding and new product development effort success. He states, "A thorough understanding of customers' needs and wants, the competitive situation, and the nature of the market is an essential component of new product success. This finding is supported in virtually every study of new product success factors."

Mercer Management Consulting, in a study performed with R&D Magazine (Deck, 1994), examined the differences between high- and low-performing product development organizations. Across a range of measures, the research revealed that high-performing companies differentiated themselves through their collection and use of customer understanding information. Figure 13.1 summarizes the practices that have been shown to be statistically significant in explaining what makes a company become a high performer.

In summary, the linkage between sound market analysis and understanding and new product success is well demonstrated. Successful companies have recognized this and have added steps such as "Strategy Development" and "Concept Screening" to their product development processes (Griffin, 1997).

Figure 13-1. SUMMARY OF KEY MARKET ANALYSIS ...