"Nothing
seems to take more time, cost more money,
involve more pitfalls or break more careers than do
new product programs."
Theodore Leavitt, Harvard Business Review, Nov.-Dec. 1964
Nothing
much has changed since 1964, when the above quote was taken from
an article published on the subject. Food manufacturers have become
more sophisticated, spent more on R&D and have gone to great
lengths to keep the food supply safe. However, the elusive "Great
New Product" remains a mystery to develop.
In the past, inventors who had ideas and were
willing to take risks developed most new products. As huge consumer
product companies grew, the willingness to take risks and spend
millions on development has lead to a shift from inventor to marketer.
The inventors used the classic theory of product
segmentation as their guide. New products were developed that
created a new set of attributes for consumers to try. Later the
marketers developed market segmentation as a method of blocking
competitors on the grocery store shelves.
Both methods created a high degree of failure
because each method lacked the focus of the customer. What customers
want has nothing to do with competing bells and whistles or strategic
moves on market share. Consumers want benefits and value.
Traditional market research developed as a way
to understand the consumer. Field-testing and focus groups became
the mantra of the marketers. The failure with these methods was
that marketers were testing products that were nearly completed.
The research occurred too late in the game when most of the assumptions
are already laid into the product.
A great example of this was the launch of peanut
butter and jelly in a single jar. This should have been a smashing
success. The consumer could eliminate jars, simplify and speed
the process and make clean-up easier. But the product failed.
Consumers were asked if they like the idea. Of course they did.
So the assumptions were built into the product. The problem was
that consumers like their own ratio of PB to J, so the product
was convenient but ultimately didn’t match consumer flavor assumptions.
So what are dairy companies to do? Consumer studies
work if they are used properly. Hold the study early in the process
and challenge people with questions.
The best results come from focus groups when
you get the subjects mad. Great ideas come from passion not harmony.
Many focus groups are put together to reinforce
the proposition put before it. The hope is to tinker on the edges.
But the political reality is that, like the opening
quote, too many careers have been broken for marketers to risk
their tail. That is how assumptions get programmed into product
introductions.
So how can companies create successful new products?
The first step is to understand your company strategy. Who are
you? What do you do? Where do you want to go? How will a new product
support that? What is the purpose of the new product?
Proactive products are designed to create expansion
and diversification. Reactive developments occur because consumer
behavior changes or new technologies develop. Defensive products
are released simply because the competition did it first and the
firm is playing catch up. Industrial product intros and consumer
products have very little in common yet offer an important new
product market.
The second step is to decide in advance what
is success. One key measure is the payback of the R&D and
marketing costs. Company 1 expects a payback and positive cash
flow in one year. Company 2 measures the same parameters but over
a three year period.
By definition and perspective, number 2 has a
much higher rate of successful new product launches. This is an
executive and cost accounting decision.
Your company must set those parameters clearly
in order to define success.
Another decision in the process is to determine
what is new. The recent introduction of Milk Chugs created a new
opportunity to sell an old product. Exciting graphics and packaging
created a new alternative to consumers for soft drinks. Suddenly
soda has to compete with milk, a complete paradigm shift.
The reality is that customers respond to the
word new. Additionally, sales people need reasons to call on customers;
new products offer those opportunities. There is great pressure
on manufacturers to create and maintain this environment of newness.
But new for no reason, creates line extensions
with no strategic significance. Witness the french fry industry.
Each company offers literally hundreds of items with microscopic
differences between them.
I believe that successful new products can and
should be introduced. Product segmentation, as the old inventors
knew, is the key to this success.
At the end of the day, customers buy benefits.
Build better benefits into new products and use technology to
create consistency and value and the world will beat a path to
your door.
But the marketers had it right also. Market segmentation
based on research and strategy creates pain for your competition.
When I managed a wholesale bakery, I had a motto
for our production team; "you sell it, we’ll make it". This put
enormous pressure on us. The sales department would challenge
us with a new peanut butter chocolate pie that required a $7.95
retail selling price. We would back engineer prototypes until
the right combination of ingredients, line time and packaging
were discovered. We were successful 90 percent of the time.
As stated above, "the best results come from
focus groups when you get the subjects mad".
I got the best results from my R&D team when
I made them mad. Not abused, not mistreated, but challenged to
find the impossible and do it anyway. When they succeeded, I rewarded
them with generous perks and time off. As a company we responded
to customers’ deepest desires, fulfilled our professional challenges
and had a lot of fun in the process.
Find a way to bring this enthusiasm to your new
product process and successful new products and happy customers
will be your reward.
Ed
Zimmerman