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(originally published by Booz & Company)


Boosting Marketing’s Role in New Product Development

Another question measured the percentage of new products or services introduced in the last five years that were initiated by R&D, marketing, sales, or some other department. Once again, the influence of R&D loomed large: 37 percent of new products emanated from that wing, compared with only 28 percent from marketing.

In the next phases of analysis, the authors combined information from the executive surveys with objective financial and customer data. They constructed several statistical models that assessed how marketing departments could influence new product development and affect firm performance. The authors considered standard aspects of finance such as cost outlays, profitability, and sales, as well as nonfinancial elements such as customer satisfaction and loyalty. The models also controlled for the differing characteristics of marketing departments and firms, the type of industries they operated in, and whether top managers had a marketing background. A number of other variables, including firm strategy, size, and general innovativeness, were also taken into account.

The results showed that the quality of the marketing team’s research and technical skills had an especially significant impact on its level of influence on innovation. These capabilities also enabled marketing divisions to initiate more cycles of product development themselves. General knowledge about marketing and management, on the other hand, had no effect on the department’s influence.

Previous studies had found that marketing’s ability to link its actions and strategies to financial performance largely determined its influence. However, this paper found no support for that hypothesis, and the authors speculate that the ties between marketing and financial performance are more relevant for existing products, which have plenty of past data available, than for new ones. Another surprising finding: The degree of collaboration between marketing and R&D had no significant impact on marketing’s influence, a result that underscored the two functions’ distinct roles.

But there is definite value in making sure marketers get the resources and support they need: Innovation success significantly boosted the overall performance of a firm, the authors found, and companies that could execute the most important marketing capabilities (turning high-quality research into new products that connect with customers) posted the strongest financial performance.

In contrast to the prevailing opinion, the authors say, their results show that not everyone in a firm can do marketing, and the department should have higher status in the product development area.

“Top management officials should strengthen the marketing department’s position within the firm and especially within” new product development, the authors write. “It is necessary for a firm not only to develop these capabilities but also to ensure that the marketing department has the power to translate this knowledge into performance-driving activities and decisions.”

Bottom Line:
Although the marketing department plays a minor role in the development of new products at most companies, this study shows that firms with an influential marketing wing have better innovation outcomes and overall performance. In particular, the quality of research and the ability of employees to translate customer needs into specific product characteristics boost the influence of the marketing division, and in turn benefit the firm’s innovation efforts.

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