Market research by technologists ... can be key to success of product development programs.

As the coatings industry faces rising cost pressures and ever more burdensome regulatory requirements, manufacturers of products throughout the value chain have begun to rely increasingly on innovation and new product development to remain competitive. Innovation and product development, however, cannot occur in a vacuum. Market research serves the critical function of providing information about the market that can guide R & D efforts within a company. Information such as desired properties and functionality, potential market size, potential market lifetime, barriers to market entry, and potential competition can be generated through market research.

"Too many companies don't do market research when they should," says Michael D. Brown, vice president with The ChemQuest Group, a management consulting firm located in Cincinnati, OH. "We see a number of projects where clients are struggling to understand why a new product introduction has not been successful. Typically the poor results can be directly related to the fact that investigation of the market was not done prior to initiating the product development effort."

Traditionally, market research efforts have been conducted by marketing groups, while technologists have focused on gathering and analyzing technical data. At the 2004 International Waterborne, High-Solids & Powder Coatings Symposium, however, Dr. Charles Hegedus, a research associate with Air Products and Chemicals, suggested that technologists themselves should play an active role in the market research process. A technologist's participation in the market research process, Dr. Hegedus argued, helps build a bridge for communication between business and technology--something required for successful innovation. Furthermore, it helps technologists ensure that their limited technical resources are invested in projects that will have a high probability of success.

Many technologists tend to believe that technical information is most valuable to product development, and therefore they have not played a more active role in the market research process. However, according to Roger Shamel, president of Consulting Resources Corporation, a market and management consulting firm in Lexington, MA, market data is of primary importance. "Without knowledge of the marketplace, technology doesn't have much value. If there is no need for a new product, the technology, even if it is highly advanced, will be inconsequential," he explains. Dr. Hegedus agrees. "At Air Products, we view product development as being like shooting an arrow at a target," he says. "The arrow is the development of new products or refinement of existing products, and the target is what our customers really want or need. In order to aim properly, we need to know where and what the target is." As an example, consider the development of an architectural coating for interior home use. It is important to know what colors homeowners want and what properties are important to them, whether it be ease of application, gloss, durability, low odor, special effects, or something else entirely. If a company develops a product without gathering this information, it would have little chance of actually providing a paint that consumers would purchase.

Another reason why technologists frequently shy away from market research is that they view the process of performing market research "foreign." However, "there is definitely a parallel nature in the job functions of market researchers and technologists," says Dr. Hegedus. A technologist is trained to gather data, analyze it, and make conclusions. Similarly, market researchers gather and analyze information from which they make business-related conclusions. The only real difference between the two work processes is the type of information gathered and the sources used to access it.

The benefits of conducting market research are numerous and relate to both the business and technology aspects of new product development. For example, gaining an awareness of competitor activities and the protection of R & D efforts from the competition are both key functions of market research. "Competitive intelligence cannot be emphasized enough," says Mr. Shamel. "Companies need to know what competitors are doing and what they may do to enhance their own position in the market." Mr. Brown further notes that too few companies understand their competitors. "Producers don't need to be obsessed about the competition, but they do need to be aware of what competitors are doing or they could be at a distinct disadvantage when they try to introduce their new products."

On the business side, information generated from market research efforts can be utilized to develop an effective business strategy and assure that the strategy and new projects are aligned well with one another. Decision-making can also be assisted. "Market research information on the window of opportunity for a new product can help a company determine whether or not it should pursue the development effort in-house, partner with another company, or acquire the necessary technology," says Dr. Hegedus. In general, market research can help a company assess the value of existing products on the market and identify potential new product opportunities, plus provide information on how to position the new product, how to determine an appropriate selling price, and how to advertise, etc.

On the technology side, market research can help a company understand how new technology can support the business. "It is important to define the technology needs of the marketplace," notes Dr. Hegedus. "Companies need to understand what customers desire in terms of product performance so they can determine the specific properties that will provide that performance," he continues. Understanding the technical capabilities of competitors is also important.

Many factors contribute to a successful market research effort. If a company is initiating a new market research project, the first step is to become familiar with the current state of the market and the technology in use. Companies should collect as much information as possible through impersonal approaches such as Internet searches, literature evaluation, etc. This initial education effort will help determine what questions to ask. "It is very important to regularly confirm that you really know what information you need so that you always stay focused on asking the right questions and the critical questions," says Mr. Shamel. "With all of the information sources available today, and the limited resources allocated to market research efforts, there is very little opportunity to make mistakes and waste time."

Realizing that market research takes time, money, and resources is also key. The availability of so many different sources allows an investigator to use multiple approaches to corroborate information. "Be sure to follow information trails because one source can lead to many others," says Dr. Hegedus. "Of course," he adds, "you also must be aware of the law of diminishing returns." Mr. Shamel further notes that with so much information it is easy to stray down the wrong path, so it is important to regularly check your activities against your goals.

Contacting industry experts is another crucial factor for successful market research. When gathering information from these contacts, it is most important to listen. Most people want to share their knowledge if given the opportunity. In addition, it helps to pay attention to the "Golden Rule," according to Mr. Shamel. "Give something back to the people you are interviewing. You will be much more likely to get valuable information if you share some of your knowledge as well." Along the same lines, Mr. Brown notes that it is also important to get out and interact with customers at least several times each year. "Technologists need to take the time to get out of the lab and go to conferences or trade shows where their customers will be attending. When they get exposure to the marketplace, technologists obtain a better grasp of customer needs. Often, as a result, there is much better teamwork between the sales, marketing, and R & D groups within a company," he explains.

Perspective is also important in market research efforts. Diversity of thought can increase the effectiveness of information gathering. Involving people with various backgrounds can bring different perspectives and approaches. On the flip side, it is important to keep in mind where the information came from and to consider the frame of reference and perspective of the source when evaluating the data.

Finally, companies must relate the data to the workings of the business. "Data is great, but it is useless until it is put to work," says Mr. Brown. It must be analyzed, and the results of the analysis must be applied to the decision-making process. "Not enough companies analyze market research data with respect to how it will impact the business--whether it will grow or shrink profits, margins, or bottom line costs, for example" he says. "Too few companies think about the whole financial model of business and how it changes in response to the market. Risk assessment should be included as a component of the market research effort."

While this description may sound simple, conducting market research can be very challenging for both technologists and traditional marketing personnel. "Market research is not a one-time event, but a continuous process," says Mr. Brown. "Companies should be gathering information every day from a wide variety of sources, including the sales team, marketing group, customers, government sources, consultants, the trade press, and many others." It is critical to ensure that adequate resources (time, money, people, information sources) are committed to the project. The process is ongoing and takes time. Trying to take shortcuts will only limit success. "Unfortunately, time and resources for conducting market research are often quite limited for technologists," Mr. Brown adds.

With the vast amount of resources available today, it is easy to be overwhelmed. Information overload remains an issue, and identifying useful information has become a major part of the market research effort. The only way to become comfortable with the task of conducting market research is to become familiar with the resources and begin using them. Some information relating to certain industries, products, and geographic regions can still be hard to obtain due to security and proprietary issues. Successful investigations rely on a group effort so that different approaches and perspectives can be brought to the table. Technologists that do get involved in market research can also find it hard to avoid becoming too focused on the properties of products. "Numbers are important because they tell how a product will behave, but most important is how that property can be relayed into a product that will meet customer needs," notes Dr. Hegedus.

When these challenges are overcome, the market research effort can provide business and technical information that can have both a positive and significant impact on a company's bottom line. "Successful new product development is the result of finding out the ultimate needs of the marketplace and providing products that meet those needs," says Dr. Hegedus. Market research is the means for finding that information. The key is to gather the data, analyze it, and use the conclusions drawn to guide R & D efforts in the right direction in terms of what new products to develop, when to develop them, and how to introduce them to the market.

RELATED ARTICLE: INFORMATION TO COLLECT

Many types of both business and technical information can be valuable resources. Business information can help a company to learn about the structure of the industry, market characteristics, and the potential economics of a new product. Technical information related to performance, development lifecycle, trends, and patent status can help a company guide its development efforts to-wards producing a product designed to fill the unmet needs of the marketplace.

Business Information

* Industry Structure

--Members of the value chain including raw material suppliers, commercial product manufacturers, distributors, applicators (DIY, contractors), end users

--Industry mindset 

--Target market segments

--Size and growth rate

--Target market associations

--University alliances

--Knowledge centers

* Market Characteristics

--Sales potential

--Cost and time to enter and penetrate market

--Market share availability and vulnerability

--Potential margins and return on investment

--Level of risk (acceptance of product, competition, rates of technological change, regulatory issues)

--Market drivers and profitability

* Economics of Product

--Raw material and manufacturing costs

--Storage and distribution costs 

--Advertising costs

--Value throughout the value chain

Technical Information

* Technical Performance

--Model formulations

--Performance attributes and importance

--Standard test methods

* Development Cycle

--Use of technical resources in target market

--Qualification requirements (FDA, government contracts, long-term environmental testing, etc.)

--Lab, pilot, and production scale-up process

--Quantities

--Timing

* Needs, Drivers, Trends

* Technology/Patent State of the Market

RELATED ARTICLE: INFORMATION RESOURCES 

All sources of information are potentially valuable, but in the end some will add more value than others. Never over-look or ignore a reliable source, because many sources will provide several other leads which will prove valuable. However, it very important to keep the search in perspective and be aware of the available resources for the market research effort in order to know when to stop looking. Gathering of information should be an iterative process. As new sources provide data, it is necessary to check the information against earlier sources and relate all of the material to the questions that are being posed. In addition, it is important to confirm information from independent sources wherever possible.

People

Most market research experts agree that the most valuable source of information is gained through personal contacts. People like to share their knowledge, and often a significant amount of information can be collected in a relatively short period of time through personal interviews. Both internal and external contacts can be useful.

* Individuals

--Internal colleagues

--Library information specialists

--External colleagues

--Industry experts

--Customers

--University contacts

--Press staff

--Government officials

--Technicians/support staff

* Groups

--Conferences, meetings, workshops, courses

--Expert panels or focus groups

--Task forces

--Work teams

--Industry/research consortia

Internet Resources

A number of different resources can be found on the Internet including industry and government websites. Trade associations often include some market information. Industry magazines have websites that often include buyer's guides that can provide information on existing products. There are also sites that provide searches of patent databases for a fee. Government websites provide information on regulatory issues, productivity, import and export activity, and more. Search engines can be valuable for finding specific information, although it is important to carefully design your searches in order to obtain pertinent results.

* Search Engines

--Google

--Yahoo

--Web Ferret

* Industry-Portals

--Companies

--Universities

--Industry and trade associations:

* FSCT (www.coatingstech.org)

* NACE International--The Corrosion Society (www.nace.org)

* National Paint and Coatings Association (www.paint.org)

* The Society for Protective Coatings (SSPC) (www.sspc.org)

* The Paint Dealer (www.paintdealer.com)

* Paintsquare.com--The online home of JPCL, PCE, and the protective coatings industry

* http://Infotrac.galegroup.com/itweb/alle86036

* Government Sites (EPA, FDA, DoT, DoD, NSF, PIERs, U.S. Census Bureau, etc.)

* www.fedstats.gov

Consultants

A number of organizations publish multi-client market research studies on various sectors of the paint and coatings market. Some of these firms make sections of their reports available for purchase, while others only offer entire reports for sale. A great resource can also be found in smaller specialized consulting firms that are highly knowledgeable in specific aspects of the marketplace. These consultants can provide customized research tailored to the specific needs of a market research project, offering specialized information not available in a broad market study. Some major large market research firms are shown below. Specialized consultancies are too numerous to list.

* Large Market Research Firms

--Business Communications Company 

--The ChemQuest Group

--Freedonia

--Frost and Sullivan

--Kline & Company

--Rauch Guide

--Skeist

--SRI

--www.marketresearch.com

Literature

Numerous types of literature can be accessed online, on CD, or in print. Many are free, but some do require payment of a fee for access. Some examples are listed below.

* Patents--U.S. Patent Office, Micropatent, Aureka

* Scientific journals--Scifinder, Chem Abstracts, Web of Science

* Conference, symposia publications

* Trade and industry publications (InSite2)

* Specialty encyclopedias--Kirk Othmer, Ullmann's

Financial

Financial records provide critical information about existing and potential competitors. Most public companies post their financial results online. Privately held companies are tracked by different companies as well. Some major sources of financial information include:

* Public companies--Edgar, 10-K, 20-F, Mergent Online (U.S. and International)

* Investment reports, market studies

* Privately held companies--Dun & Bradstreet, market studies, press releases, and newspaper articles (Factiva/Internet)

by Courtney T. Thurau

Air Products and Chemicals, Inc.*

and

Cynthia A. Challener

C & M Consulting ([dagger])

*7201 Hamilton Blvd., Allentown, PA 18195.

([dagger]) 345 E. Church St., East Hardwick, VT 05836.