Understanding customer needs which drive significant product innovation is particularly challenging for new product development (NPD) organizations. Research has addressed how organizations benefit from interacting with customers, but more conceptualization is needed into the dimensions of the customer interaction process. In a business-to-business (B2B) setting, customer interactivity is conceptualized as a multi-dimensional construct consisting of bidirectional communications, participation, and joint problem solving during NPD projects. Drawing upon organizational information processing theory, customer interactivity is hypothesized to be positively related to customer information quality when developing highly innovative products, but not when developing modifications or extensions of existing products. Another condition affecting this relationship studied is the embeddedness of the new product in the customer's business environment. Customer interactivity is hypothesized to be positively related to information quality for highly embedded product, but not for low embedded product. Results from a sample of NPD organizations in several B2B industries support these hypotheses. The study contributes to the marketing literature and practice by identifying important dimensions of the customer interaction process which lead to more proactive organizations, and identifying two moderating conditions of the customer interactivity and NPD performance relationship.
A strong market orientation and customer knowledge competence are vital to the success of new products (Kohli and Jaworski, 1990 and Li and Calantone, 1998). However, some researchers have argued that being market-oriented leads to less innovative, and more incremental, me-too products (Christensen and Bower, 1996, March and Berthon et al., 1999). The main argument is that organizations cannot generate innovative products by only responding to current customers who are myopic and unable to articulate more advanced needs. Since that criticism has been levied, Narver, Slater, and MacLachlan (2004) introduced the proactive market orientation concept which deals with attempts to understand the latent needs of customers—needs of which ordinary customers are unaware, or have difficulty articulating. Positive outcomes have been found for organizations who understand these needs (Olson et al., 2005, July and Atuahene-Gima et al., 2005). However, proactive market orientation offers a very general description of the customer interaction process, and is blended with other attributes of the organization. What is missing from the literature is a more refined conceptualization of the dimensions of the customer interaction process, and an examination of how these dimensions influence new product development (NPD) performance. Understanding how customer interactivity differentially impacts performance when developing incremental and innovative products provides insight into how organizations should acquire incremental and difficult-to-articulate needs.
Another condition affecting the customers' ability to easily articulate their needs is the degree to which the product being developed is embedded into the customers' business environment. In Business-to-Business (B2B) markets, customers often use products which significantly influence their work processes, job responsibilities, job titles, and competitive strategies, among other aspects. Large mainframe computers have traditionally been highly embedded into information-intensive industries such as banking, insurance, and financial services. Other examples include medical equipment in hospitals, telecommunications equipment in telecom service companies, scientific equipment in laboratories and manufacturing equipment in manufacturing companies. The problem of articulating customer needs for such products is rooted in the depth, and breadth of needs including a range of technical, economic, user, service and management needs. If customer interactivity is more important for new product success under conditions of high embeddedness than for low embeddedness, it would suggest another condition in which hard-to-articulate needs are evident and customer interactivity is critical.
Therefore, this study conceptualizes a customer interactivity construct. Its focus is on the intensity and richness of the interaction between the NPD project team and customers or potential customers during the NPD process. It suggests a learning perspective as opposed to viewing customers as being endowed with knowledge about the future such as lead users (von Hippel, 1986). While the NPD literature has shown strong support for a positive relationship between interacting with customers and new product performance (Moorman, 1995, Aug, Atuahene-Gima, 1996 and Li and Calantone, 1998), this study raises the notion that a high degree of customer interactivity is not always warranted. Instead, it depends on the newness of the product being developed and the embeddedness of the product in the customers' environment.
The theoretical foundation and hypotheses are developed in the next section. This section is then followed by the study methodology section which is in turn followed by the findings and discussion sections.
