As product development professionals, we often think of our customer. What do customers feel? What do they need? What are their expectations? Our responses, generally, focus on features and functionality of the product.
Of course, we have many types of customers and the best new product development (NPD) processes address customer needs throughout the value chain. Let’s take a look at the various types of customers and their role in NPD.
Types of Customers
One of the fundamental decisions you make in product innovation is who is the customer. We must consider several types of customers.
First, we have internal customers. These are departments or units that are downstream within a single company. It is folly to ignore logistics or sales during product design and development. No new product makes its way into the hands of a customer without first being manufactured (supply chain logistics), being delivered (distribution), and being purchased (sales).
Supply chain is an internal provider and customer to the NPD effort. Working with the purchasing department early in concept development can reduce costs of raw materials. Perhaps your purchasing department can work a deal that gives a component discount as production ramps up after new product introduction. Your purchasing department should be a partner not an adversary.
You also need your internal customers to provide timely actions to get a new product to market. Legal teams must work with the NPD team throughout design and development for functional patent protection and trademarking of new logos, etc. Many other functional departments serve to assist the development effort as well.
External customers are who we typically think of when we hear the term “customer”. These are folks outside the firm that buy the product and consume it (thus, the oft-used, interchangeable term of “consumer”). Our communication with external customers is frequently one-way by telling them about a product’s features.
However, the most successful innovators use two-way communication with external customers. We must know the thoughts and feelings of our customers to design and develop new products. External customers provide infinitely valuable feedback on our ideas and concepts. They test prototypes and lead us to the designs that will best satisfy their needs.
External customer feedback is at the heart of the WAGILE process. WAGILE takes the best of the traditional waterfall development processes and the best of Agile design to create a disciplined yet flexible customer-focused NPD process. Register here for our interactive WAGILE product development course (online 18 and 19 February 2021).
Not all customers are end-users. Most of the time, a consumer purchases a product and uses it herself. There are many situations, though, in which other people use the product after it is purchased by someone else.
The easiest example of a non-purchasing end-user is a child. Mom and Dad buy toys, books, games, and snacks for Little Johnny often without his input. Of course, Little Johnny does not have money (and sometimes doesn’t know how to talk yet), so he is incapable of buying a product. However, Little Johnny does play, read, and eat so he “consumes” the product.
In product innovation and in the WAGILE process, we test not only the market response of the decision-maker (see below) but also the end-user. If :ittle Johnny prefers to play with the box instead of the toy inside, should we proceed with development of that particular product? We also might find that parts and components need different assembly for children than in a product built by adults. The end-user is an important customer in NPD.
Little Johnny’s mom and dad are the decision-makers in this scenario. Naturally, other products and services have customers that are decision-makers different from the end-user. Medicine has tons of examples.
For example, your insurance provider (private or government) determines which physicians you can afford to visit. Insurance companies often pay for pharmaceutical drugs but not naturopathic therapies. They may tell you which hospital is okay for you to go to for a knee surgery, regardless of the distance from your home.
Decision-makers are likely to look primarily at cost for a new product. Effectiveness and satisfaction by the end-user (unless it’s Little Johnny) may not be the defining characteristic of a purchase. For corporate decision-makers, “average performance” might be more important than delivering a quality experience to the ultimate consumer.
Who is Your Customer?
As you design a new product innovation, you must consider the customer. It is extremely unwise to ignore your internal customers. Use the various departments in your firm as partners to find the best solutions (especially for supply chain and distribution).
One our external customers, likewise, often are ignored. Why wouldn’t you want to test concepts and ideas with the person whom you ultimately want to sell? Customer feedback is essential to successful product innovation.
Finally, don’t confuse the decision-maker with the end-user. Satisfying the needs of both of these customers might mean a trade-off in cost versus quality. Make sure your NPD process involves testing for all external customers, including decision-makers and end-users.
I’m excited to share my podcast interview with Kevin Brennan. You can listen to a summary of WAGILE here. Then, register for the interactive online WAGILE Product Development course on 18 and 19 February 2021 (register here). You will have homework because you must understand customer needs to be successful in product innovation! Contact me at [email protected] for more information.
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