Making Sure New Products Don't Fail
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This document outlines best practices for developing new products that are successful in the marketplace. It discusses the importance of having the right product and brand. The stages of the new product development process are identified as opportunity identification, design/development, and commercialization/launch. Each stage involves key activities like developing business propositions, prototypes, marketing plans, and implementing launch plans. Following a structured staged gate process can help ensure new products are developed efficiently and launched as planned to achieve commercial success.
Making Sure New Products Don't Fail
- 1. How To Make Sure New Products Don’t Fail Rick Steinbrenner Chief Marketing Officer
- 2. Basics - The 4 P’s of Marketing Product Place or Distribution Promotions or Marketing Communications Pricing or Profitability Arguably, product & promotions/marketing communications are the most important elements in the marketing mix. Question is: How do we ensure commercial success/speed to market? 2
- 3. Step #1 – Having The Right Product 3
- 4. 4 Most New Products Fail ~22,000 new products are launched each year 75% of new products fail to make $7.5MM in sales in year one of launch Less than 3% of new products fail to make $50MM in sales in year one of launch – long considered to be benchmark for success. Most consumers tend to buy the same 150 items – 85% of household needs Source: Schneider Associates, Jack Trout and other leading marketing professionals
- 5. 5 Why? – Some Companies Overstate Their Brand Strengths
- 6. Examples of New Product Failures Consumers didn‟t want Coke to “mess” with their old Coke. Premier smokeless cigarettes from R.J. Reynolds: tasted awful. Is Underwear Really Disposable? Like Pens & Lighters? Somehow consumers couldn‟t believe Colgate frozen entrees wouldn‟t taste like toothpaste – ugh! 6
- 7. Why Do Most New Products Fail? No competitive point of differentiation – “me too” Unanticipated competitive response Poor positioning and/or overextended brand equity Product fails to deliver promised claims/benefits Too little/no marketing support – advertising/promo $‟s Bad estimates of market potential/market share penetration Marketing research mistakes Launched into wrong channels and/or channel conflicts Unanticipated market changes after launch Source: Allen Weiss 7
- 8. How Does One Increase Their Chances Of Success? Make sure your new product idea is truly innovative and differentiated Make sure your new product performs as promised Don‟t overextend your brand into adjacent categories that don‟t make sense Properly resource the new product activity Have straight talk about the issues/opportunities as you go through development Follow a structured process to facilitate cross-functional communication Staged Tollgate New Product Development Process 8
- 9. What Is A New Product Development Process? It‟s a structured framework that helps keep the initiative “on-track” and helps minimize “scope creep” and launches as promised. Facilitates cross-functional communication & Sr. Mgmt. buy-in (e.g. Tollgates) Insures good work flow, productivity, good quality designs and product performance as specified. Goals: Speed to Market - don’t keep designing forever Commercial Success – both distribution and sales velocities meet expectations 9
- 10. New Product Types Not all new products are the same. Some are simpler to develop/launch than others. Type 1: New product technologies and/or new categories – “disruptive” innovation Type 2: Existing technology/new designs – product restages or re-launches Type 3: Existing products with simple performance and/or appearance changes – line extensions Generally, the type of new product will determine the number of steps and program rigor required to bring an idea to market. 10
- 11. Phase I: Opportunity Identification/Discovery Consumer Trends Competitive Trends Consumer & Technology/Trends Product Category Identification Process Brand Equity Filter Product Concept Identification Process Branded Product Concept Checks Alternative Basis of Interest/Business Proposition (s) Final New Product Design Guide(s) New Category Core Category 11
- 12. Defining the “Fuzzy Front End” The Role of Marketing Research in Product Development “Who I Am” “What I Say” “How I Act” “What I Feel” “How I Think” High HighLow PotentialMarketShare/Volume Consumer Behavior Understanding Demographics and other traditional segmentation methods Product usage via informal surveys and other qualitative methods Observing actual usage behaviors Quantitative in-depth discussions on emotions/attitudes Identifying consumer values via quantitative cluster analysis There is a huge difference between what consumers say what they are going to do and how they think throughout the buying process. 12
- 13. Example: Iron Product Positioning by Attitudinal Segments Source: 1995 ISS I Want To Iron I Have To Iron Appearance Driven Ironers Professional Pressing Results ProFinish Committed Ironers Powerful Wrinkle Removal SurgeXpress Ironing enhances my appearance Uninvolved Ironers Performance Made Simple Quick „N Easy Ironing is just a task Only 5 attitudinal attributes (out of 80) helped to define iron consumer purchase behaviors 13
- 14. Uninvolved Ironers Working couples on the go Time pressed Hate ironing Appearance Driven Ironers Family’s appearance is key “One Pass” ironing Like to iron ATTITUDINAL FACTORS NEED GAPS FEATURES Performance Made Simple Professional Pressing Results Lightweight Sure steam system Auto-clean valve Maximum steam performance Superior glidability In-use comfort The study was able to consistently link attitudinal behaviors/thoughts to purchase drivers Source: 1995 B&D A&U Study14 Committed Ironers Mostly single Personal appearance Ironing is just a task Powerful Wrinkle Removal Sleek, lightweight design Maximum steam performance Adjustable steam control Iron Attitude & Usage Consumer Segmentation
- 15. Consumer Segment % of Total Iron Population % of Ironing “Tonnage”* Usage Index Appearance Driven Ironers 19% 40% 211 Committed Ironers 20% 13% 65 Uninvolved Ironers 61% 47% 78 * Ironing tonnage is mean frequency of ironing times # of garments ironed/occasion Source: 1995 ISS Iron Consumer Segment Usage Analysis Appearance driven and committed ironers combined account for 39% of the users, but iron 53% of the tonnage - an usage index of 136!!! These are the heavy users of the category. 15
- 16. Basis of Interest Example – ProFinish Premium Irons Opportunity: Re-invent Black & Decker household premium irons Competitive Frame of Reference: Total 1996 Iron Category – 10.5MM units/$240MM in Retail $‟s. One of the largest appliance categories. >$30 price point segment – 2.2MM units/$86.4MM in Retails $‟s. Higher than average retail prices. Iron alternative: Dry Cleaners - $10B industry. Basis of Interest: >$30 segment was fastest growing segment. B&D was #1 brand with almost 50% market share. Black & Decker premium irons had 2X the share of nearest competitor – but losing momentum & distribution. Correctly identified heavy user premium iron consumer segment – “appearance drive ironers”. ProFinish Concept: Top two box purchase intent score of 62% among target consumers - upper 1/3 ranking. Barriers to Entry: Black & Decker premium irons had been losing distribution to Rowenta, Sunbeam, Norelco – especially in higher price points in department stores with better performing products. Black & Decker failed on 4 previous occasions to develop a successful premium iron. CAPEX for developing new tooling was $2MM+ - high risk. This is an example of what senior management needs to move to phase II16
- 17. Phase II: Design/Development Develop capital authorization request: Make vs. Sourcing decisions Launch timelines Profitability/capital/payout projections Pre-Production Builds/Intellectual Property Protection: Industrial designs/Engineering builds - Prototypes Off-tool prototype confirmation of design Manufacturing equipment/production design Patent protection – Utility/Design Consumer in-home use test concept verification: Does the product deliver on product promises with consumers/users? Develop Marketing Plans: Pricing strategy Distribution strategy/channel management Communications strategy: Advertising/Promotion/Digital Public Relations strategy 17
- 18. 14% 12% 12% 40% 22% B&D "ProFinish" Sunbeam Proctor Rowenta Norelco ProFinish Premium Irons had stronger purchase interest vs. competition (40%). Source: 1996 BASES Product Designer Study 18 Premium Iron Brands Most Likely To Purchase
- 19. Q4 Q3Q2Q1Q4Q3Q2Q1 1995 1996 1997 Qual. Home Use Test: Eng. Build Models $10M Quant. Home Use Test: Pilot Run Samples $20M Pro’s Con’s Retain shelf space 7 month advantage over sequential Address sales oppty. - $22M/day Launch before Rowenta/Norelco We can react to poor results Product not optimized, but would beat competition - parity or better Research costs still exceeds budget by $50M Recommended New Product Launch Critical Path ID Research U.S./Europe Part II Conjoint Study $11M $55M Positioning Competitive Screener Benchmark $42M Study - $60M Branding Study - $25M Start 1/96 Ship 7/97 Announce at Housewares show in 1/97 19
- 20. Phase III: Commercialization/Launch Develop packaging: Packaging structure Graphics Develop/pitch customer presentations/samples: Production start-up/warehouse builds: Sales/Customer Service Product feature/benefit briefings Pricing implementation Warehouse availability Implement Communications Plans: Develop advertising creative – TV/print/videos Communications planning – offline and/or online Public relations – press releases/media events Trade collateral materials – including merchandising/displays 20
- 21. Maximum Steam Performance: No other premium iron steams more Professional Pressing Results at Home - just like a dry cleaner!! Superior Non-Stick Glide: New space age soleplate coatings Comfortably Designed: Comfort grips & unique control design (new feature for the category) ProFinish had 21 utility and design patents, the first iron to launch “comfort grips” into the market Voted a Consumer Digest “best buy”, achieved 100% distribution; $30MM business from zero Final Premium Iron Product Concept - ProFinish 21
- 22. “Best Practice” Stage Tollgate New Product Development Process Summary Phase 1 BusinessTeamScreen/Resourcing Phase 2 BusinessTeamReview/Go-NoGo Phase 3 ????? ????? ????? Major Activities: Identify new product concepts (sources): Consumer/customer ideas New functional technologies Consumer research Competitive product reviews Brainstorm/develop new concepts Refine & screen new concepts: Informal customer reviews Qualitative research (focus groups) Quantitative concept screen ranking Business Proposition Development: New product design guide Technical/engineering feasibility Develop rough prototypes Pricing/volume/profitability analysis Intellectual property reviews Launch timeline - first pass Major Activities: Develop capital authorization request: Production make vs. sourcing plan Production tooling plan Finalize launch timeline Profitability/capital financial plan Pre-production/pilot builds/protection: Off-tool prototype confirmation Manufacturing equipment/prod. design Intellectual property legal filings Consumer/In -home use testing Changes to product/positioning as needed Develop marketing plan/budgets: Communications plans (TV/Print/Online) Distribution strategy Pricing/profitability plans & budgets Final launch timeline – start ship Major Activities: Final sales/customer presentations: Customer planogram approvals Confirm year one volumes Production start/warehouse builds: First piece inspections Year one production requirements Implement pricing – customer service Implement communication plans: Media placement Press releases/events Packaging structure/graphics Trade marketing collateral 22 Name the staged tollgate new product development process phase steps
- 23. “Best Practice” Stage Tollgate New Product Development Process Summary Phase 1 BusinessTeamScreen/Resourcing Phase 2 BusinessTeamReview/Go-NoGo Phase 3 Opportunity Identification Design/Development Commercialization/Launch Major Activities: Identify new product concepts (sources): Consumer/customer ideas New functional technologies Consumer research Competitive product reviews Brainstorm/develop new concepts Refine & screen new concepts: Informal customer reviews Qualitative research (focus groups) Quantitative concept screen ranking Business Proposition Development: New product design guide Technical/engineering feasibility Develop rough prototypes Pricing/volume/profitability analysis Intellectual property reviews Launch timeline - first pass Major Activities: Develop capital authorization request: Production make vs. sourcing plan Production tooling plan Finalize launch timeline Profitability/capital financial plan Pre-production/pilot builds/protection: Off-tool prototype confirmation Manufacturing equipment/prod. design Intellectual property legal filings Consumer/In -home use testing Changes to product/positioning as needed Develop marketing plan/budgets: Communications plans (TV/Print/Online) Distribution strategy Pricing/profitability plans & budgets Final launch timeline – start ship Major Activities: Final sales/customer presentations: Customer planogram approvals Confirm year one volumes Production start/warehouse builds: First piece inspections Year one production requirements Implement pricing – customer service Implement communication plans: Media placement Press releases/events Packaging structure/graphics Trade marketing collateral Tollgates While these steps might look “discrete”; there can be some activity overlaps Moreover, every company will have their own custom process that fits their business 23
- 24. Step #2 – Having The “Right” Brand On The Product 24
- 25. Product Branding Process Analytical Framework Define Core Brand Positioning Identify Brand Extension Potential Develop Brand Equity Bridges Marketplace Analysis Hunting Grounds/New Categories Who are we? What can we be? Where can we go? How do we get there? 25
- 26. Key Branding Considerations All products should have a “sustainable competitive advantage” An “SCA” is something: You exclusively have Your competition doesn‟t (or don‟t realize they have it) Your consumers/customers want it However, this is not enough. One needs to make the new product memorable in consumer minds. Therefore, all products should have a clear marketplace positioning which helps to create an emotional bond with consumers/customers. A positioning statement is based on analysis of the competition, consumer problems, product features solving those problems - tying all of this either into a new or existing brand. Source: Trout & Ries 26
- 27. How Do World Class Brands Really Work? It all starts with their positioning….. What the consumers REALLY Buy The Benefit of What They Sell What They Sell The Company What Defines the Business - DNA What the Products Provide The Products/Services The Brand/Sub-Brand Name 27 It defines the business(es) the company is in…..it’s what the customer really buys
- 28. What is A Positioning Statement? To target market, X is the brand of frame of reference that benefit/point of difference. Support/Reasons Why: #1 #2 #3 etc. 28
- 29. Positioning Elements Definition 1. Target Market: Consumers/customer group(s) having the highest pre-deposition to buy your product. Can be demographic, behavioral, psychographic and attitudinal in nature. 2. Frame of Reference: either the product category or consumer/customer based solution to “THEIR” problems, not yours. (can be direct competitors or non-category substitutes). 3. Benefit/Point of Difference: Single-minded, ownable category benefit relevant to the target market. It‟s your product claim or promise to the marketplace – either attribute based or emotional. 4. Support/Reason’s Why: The product based reason to believe and/or claim substantiation. Remember, the clearer and simpler the positioning, the easier it will be to break through the clutter and become memorable. 29
- 30. Actual Positioning Statement To women and men with busy lives, the Black & Decker line of small household products offers a better way of doing things because it provides smart, innovative solutions for your home. 30
- 31. A new brand will be harder to establish awareness since there is no prior marketplace equity (and expensive too). Using an existing brand on a new product is more cost effective, but one must be careful of not over-extending the brand. Good news: developing a solid positioning can be VERY easy assuming you did your brand filtering homework correctly during the NPD process. Positioning Things To Remember 31
- 32. Successful Examples of Branding Applications 32
- 33. What the consumers REALLY Buy The Benefit of What They Sell What They Sell The Company Happiness Refreshment Soft Drinks 33
- 35. Eliminates Speed Bumps of Daily Living Better Way of Doing Things (Innovation Solutions) Power Tools & Home Products Solutions What the consumers REALLY Buy The Benefit of What They Sell What They Sell The Company 35
- 36. Scumbuster Cordless Wet Scrubber – “Splish Splash”
- 37. What the consumers REALLY Buy The Benefit of What They Sell What They Sell The Company Miracles of Science Better Way Of Doing Things (Innovation Solutions) Residential, Agricultural & Automotive Products 4-Time NASCAR Champion Jeff Gordon 37
- 38. “Trunk Crew” – Featuring 4-Time NASCAR Champion – Jeff Gordon
- 39. Summary New product development helps to define fundamental consumer “need gaps” and then marry those needs with innovative functional technologies resulting in new innovations and marketplace uniqueness. The “staged tollgate” new product development process aids cross-functional communication due to it‟s discipline and structure. Branding helps distinguish your new product vs. competition and allows you potentially to create a psychological bond with the consumer. Branding is the cornerstone of ALL marketing strategies and needs to proceed all other strategies. However, there are limits to brand equity. Not all brands can readily move to new & different categories. Understanding where your brand equity can go is fundamental. Branding/positioning dovetails new product development and vice-versa. 39