Title: Improving Marketing’s Contribution to New Product Development (Fee or subscription required)
Authors: Wenzel Drechsler (Goethe University Frankfurt), Martin Natter (Goethe University Frankfurt), and Peter S.H. Leeflang (University of Groningen)
Publisher: Journal of Product Innovation Management, vol. 30, no. 2
Date Published: March 2013
For marketing departments, the pendulum seems to be swinging again, and this time in their favor.
According to several recent studies, marketing’s role has been in steep decline at many companies. But the authors of this new study conclude that firms that play to marketing’s special strengths in understanding consumer preferences often outperform their peers in developing new products and in innovation efforts overall. To get a seat at the table, though, marketers will have to do a better job of marketing themselves internally.
The prevailing view, according to this paper, is that marketing departments have lost much of their distinctiveness, leading to a belief that “everyone can do marketing.” The function’s stock is particularly low in the product development cycle, where the R&D division typically dominates the agenda. Yet, when new products fail—and they frequently do—marketing is likely to take the fall for not eliciting accurate, relevant, and timely information about consumers and target markets.
However, a few lines of research counter this view, suggesting that some of the most innovative companies heavily integrate the marketing department into the development process. What has remained unclear, though, is which capabilities can improve the marketing unit’s contribution, and lift the performance of both new products and the firm’s innovation initiatives as a whole.
This study aims to fill in some of the gaps by empirically exploring the link between marketing capabilities and a firm’s relative success at innovation, with a particular focus on the business-to-business sector. The results show that firms with strong marketing groups are indeed better at launching new products. The success of these marketers hinges on pairing high-quality customer research with the right technical skills: They have the capabilities to translate customer needs into winning product specifications. Companies need to support these capabilities, the authors argue, but the responsibility is on the marketers to hone them and make the case for their usage. “Firms need not only key marketing capabilities and skills but also a marketing department that itself functions as an expert,” the authors write.
As a key part of this effort, marketing needs to take a more sophisticated approach to evaluating, filtering, and sourcing new products, an approach that includes the use of so-called idea or prediction markets. These sites are used by a growing number of companies to solicit information from the public about whether an event (such as a product launch) is likely to succeed. Using these tools can help shift the innovation process away from internal debates and toward the integration of external data.
To arrive at their findings, the authors first surveyed 239 executives working in finance, marketing, or R&D at large German firms (the average company had more than 3,500 full-time employees). To ensure that their results could be generalizable, the authors studied firms in a variety of industries, although most of the companies operated in business-to-business markets and focused primarily on products rather than services. Almost three-quarters of the firms pursued a differentiation strategy, tailoring their new product development to specific types of customers or markets, and nearly one-fourth of the companies had a CEO with a background in marketing.
The surveys touched on a variety of issues related to marketing and product development. For example, one question asked respondents to divvy up 100 points to rate the degree of influence the marketing, sales, finance, and R&D sectors had on decision making in the development process. On average, the R&D department received 43 points, whereas marketing’s score was just 24.