Two functions within the firm, research and development and marketing, should be natural allies in facilitating the growth of the firm. Indeed, Peter Drucker stated that: “Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs.” It is the role of Research and Development (R&D) to create long-term sources of cash flow by developing innovative, high margin, first to market products and services. Marketing contributes to long-term cash flow by assuring that R&D’s good ideas make it to market with adequate support to assure success. Unfortunately, in many organizations R&D and marketing are at best casual acquaintances and at worst adversaries.
The stereotypes of the two organizations do not help. R&D is often viewed as collection of ivory tower scientists focused on technology and with little understanding of customers. Marketing, on the other hand, is often viewed as a collection sales focused artists who do not understand science and do jobs that anyone can do (after all, how hard is it to write ad copy compared to inventing the next great technological breakthrough?).
The gap between marketing and R&D is well illustrated by the complaints that each function directs at the other. Marketing frequently accuses R&D of working on products for which there is no market demand. Why would anyone want this new, complex, unproven technology? R&D accuses marketers of providing information that while correct, is useless: customers want a high quality, reliable, user-friendly product. What exactly does product design do with such vague information?
Such stereotypes are all too often well founded but R&D and marketing share common goals. Each discipline focuses on investing now, whether in a new product or in customer relationships, for pay-offs in the future. Each seeks competitive advantage for the firm through innovation. These shared foci on the future and on innovation are well placed. Numerous studies demonstrate that new products bring in a substantial share of organizations’ revenues, ranging from a third to virtually all. These same studies indicate that half of successful new products achieve a 33% ROI or better, have a payback period of two years or less, and achieve a market share of 35% or better. Surveys also indicate that the single strongest predictor of the value of a public company is its innovativeness.
Marketing can help R&D and itself by doing two things. First, marketing can help R&D determine the “right” products to which it should devote its efforts. Marketing can help determine the types of problems and benefits that customer seek and thereby define the parameters of a potential market for the technologies and products on which R&D spends its time. As part of this effort, marketing can identify customers at the bleeding edge of applications and problems who can serve as a resource for R&D. Second, marketing can help R&D do the right projects in the right way. Product development is filled with trade-offs involving alternative features, costs, product complexity, and ease of use, among others. Marketing can contribute to the success of R&D by providing information about the trade-offs that customers, or potential customers, would prefer. Such information is very useful to R&D and increases the probability of success of the new product in the market.
Customers tend to view new product and service offerings as valuable when they have unique, useful features, when they fulfill needs better than alternative offerings, when they are of high quality/reliability (defined from the customers’ perspective), when they reduce consumers’ costs, and when they help customers accomplish a task more easily, quickly, cheaply, or conveniently. Marketing can help R&D evaluate these characteristics of new initiatives through marketing research and by taking R&D professionals into the world of the customer through customer visits and other forms of direct experience with customers.
Marketing can facilitate the work of R&D and make is more successful when it is perceived as a strategic partner. Such partnerships not only benefit the individual marketing and R&D functions, and they benefit the firm as a whole because, as Drucker observed, business success is about creating customers.
Contributed to Branding Strategy Insider by: Dr. David Stewart, Emeritus Professor of Marketing and Business Law, Loyola Marymount University, Author, Financial Dimensions Of Marketing Decisions.
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