Achieving Market-centricity
Business and consumer markets are littered with examples of innovative new products and services that either failed to live up to their share, revenue and profitability expectations or fell way short of those upfront goals. And there are a host of reasons why those new propositions underperformed or never really took off. For example, companies often fail to invest at a level and manner necessary to develop market demand or, by the time they bring a new proposition to market, competitors may have already outflanked them.
However, the biggest reason for product failure tends to be lack of customer and market-centricity. Said differently, companies often excel at building technically competent products and services but fail to do so in the context of what the market actually values. We see this time-and-again, including in instances where we are called on to diagnose and course-correct failed new product and service introductions. While such course-correction is often possible, it is a far more complex and challenging solution than integrating rigorous product and market testing into the development cycle. By being customer and market-centric in the decision process for a new product or service launch, decision makers within your organization can substantially de-risk their development processes and improve their chances of success. That is why we are a strong proponent of rigorous testing before any product or service launch.
So, what exactly is market testing?
It is the process of conducting the research and analysis necessary to effectively identify, assess and structure new product or service innovation opportunities, one of our firm’s areas of specialization. Prior to wholesale commercialization efforts, best-in-class market testing programs tend to be well-structured, multi-stage and progressive in nature. With each stage of the process adding precision and specificity to not only the features and functionality of a new product, but also to other aspects of your product or service launch strategy. For example, the segments to target, the channels to use when accessing them, and the price to set to balance both your margin requirements and customer willingness to pay. The net impact of such market testing includes an ability to not only commercialize products and services with a higher chance of success but to also set corporate and internal expectations that are realistic and achievable.
By being customer and market-centric in the decision process for a new product or service launch, decision makers can substantially de-risk their development processes and improve their chances of success. Successful product and service innovation relies on multi-stage market testing and product or service refinement.
When can you conduct marketing testing and through what means?
Concept Design: Starting with a high-level concept (e.g., a few pages of potential feature and functionality sets) and with varied segment, channel and pricing perspectives in mind, test the opportunity across a wide range of potential end markets to finalize feature-price combinations and down-select into the target customers you’ll focus on, the channels you’ll use to reach them and how you’ll engage them (e.g., value proposition you’ll set to entice them). This work is most often done via primary and secondary research and survey techniques. Qualitative, exploratory research is used to better frame and constrain what feels like a limitless set of opportunities and quantitative techniques (e.g., large scale surveys) to create precision.
Prototype Stage: Based on the concept design work from the previous stage, one or multiple permutations of the desired product or service are created and then, in real-world settings, these are tested. This could be conducted in a “laboratory” setting such as focus group or as part of a beta project at customer sites in the B2B space. The focus here is to test and refine real world, working products or services rather than theoretical concepts. There are few substitutes for allowing prospective customers to touch, feel and use a new innovation.
Post-launch Incubation: This goes beyond prototyping and, instead, uses one of multiple potential customer segments as a platform to accomplish a host of objectives. With the three most common being to 1) refine the MarComms strategy around said product or service, 2) test real world interest and adoption before scaling production resources for broader market entry and/or 3) generating buzz about the product by creating a level of actual, not just perceived, exclusivity.
What risks does your company run if you don’t have an effective market testing process?
At a basic level, you risk potential product failure and whatever money you invest in the new product or service, including substantial expenditures in scaling your operations to produce, market and commercialize such products and services. It’s easy to get excited at the prospect of releasing a new product or service, but the stress of running a P&L and resulting myopia created by short-term profit motive can prove to be detrimental to the process, resulting in executives putting market testing on the backburner to save time (i.e., to hit a perceived market window) or money. In such instances, though, those short cuts catch up with you with real financial cost to your division or corporation.
Ineffective market testing and resulting new product or service failure can have a far more substantial and long-lasting impact. A major failure can kill the culture of innovation within your organization, leading to reluctance in future new product or service development efforts. That is truly the biggest risk organizations face with improper testing. Why? Because a suffocated culture of innovation fundamentally undermines your long-term competitiveness. Even the most stable industries continue to see disruption and standing still, in most instances, is equivalent to sliding backward.
In conclusion: Resist getting ahead of yourself in the new product and service development process. A healthy amount of anticipation is great, of course. But successful product and service innovation relies on multi-stage market testing and product or service refinement to make certain the planned offering has a tight fit with the market – your customers’ needs, competitor moves and, of course, your unique skills and capabilities.
If you would like to learn more about our extensive experience with market testing or how we would approach assisting you with testing,
Contact us to learn more.
