|
|
|
|
Will your new product be a winner?
The earlier in a product’s development that you can make reliable forecasts of product success, the more resources you’ll save. Companies can save millions of dollars by not launching a product that would have failed, or by changing a product’s offering so that it succeeds. Yet most companies do a poor job of accurately predicting product success. The Doblin Group reports that more than 90 percent of all products launched lose money. When I work on innovation in consumer products companies, “it’s too soon to tell” is the most common answer to questions regarding the success of a recently launched new product. This is usually a polite way of saying “the product is failing.” Until the product is discontinued, however, management can keep hoping that some new approach or promotion will lift the sales of products like Arizona Iced Tea Freez-A-Pops or Gillette’s “For Oily Hair Only” shampoo, so for these companies it really is too soon to tell.
In examining the trajectory of disruptive innovations, Clay Christensen at Harvard developed the “jobs framework” for predicting the source of initial new product success. Christensen notes: “When a consumer buys a product, they are really ‘hiring’ it to get a job done. Companies are successful when they make it easier for their customers to get done what they were already trying to do.” If this is correct, then all a product or service needs to do to generate revenue is fulfill four requirements:
Customers for whom all four conditions apply will purchase the product or service because there are benefits and no barriers. The closer new products come to meeting all four requirements, the higher the chance of that product being purchased. The innovation will be a financial success if these conditions can be met at a profit. It’s a very rare new product that meets all four requirements. Typically, a new product will provide new benefits at a higher price, forcing customers to choose between price and benefits. Many new product launches ignore switching costs, yet customer inertia is a powerful drag on new product purchase, even for products that provide more benefits at lower prices. Market research can provide detailed answers to these four questions, but a general understanding of the market and the product concept will enable companies to generate approximate answers. This allows managers to quickly assess the probability of new product success, and the kinds of customers that might buy, before making extensive investments in the innovation. Let’s look at the two new products mentioned at the beginning of this update and apply the “four question test.”
1. Cingular call-forwarding. As a standalone product, the Cingular call-forwarder excels on two of the four criteria for product success – better benefits and ease of use. Its price is higher than current offerings, and availability is limited to Cingular subscribers with particular types of phones. Historically, these two benefits have not been enough to make a winner. The product could improve its position on price and value if it were given away as part of a Cingular subscription bundle. For a monthly price, subscribers would get a ‘free’ call forwarding stand along with their phone service. This is such an obvious application for this industry that I’m sure this is the direction in which Cingular plans to take this innovation.
2. The Prius meets three of the four criteria for product success; it provides more benefits for the same price in a product that is easy to buy through your local Toyota dealer. The only question on this product relates to ease of use, which can be resolved via a test drive. This one looks like a winner.
One last note about Toyota -- Toyota Motor outsold Chrysler in August, the first time one of Detroit's Big Three has fallen to fourth place. August 2003 was also the best month in Toyota’s history, and that’s before launching the 2nd generation Prius. They’ve also launched a new brand, Scion, in California, which sells very small stylish cars for under $15,000. Scion will be rolling out nationally in 2004.
For more information:
|
|
All content on this site licensed under a Creative Commons License.
|
