According to a Harvad Business School study, approximately 80% of new products launched fail to meet their objectives. And, a key reason for this is a lack of understanding of target customers. The risks are especially high for manufacturers of durables such as boats, engines and electronics because of the sizeable investment in R&D and tooling, in addition to advertising and promotion, corresponding with a new product launch.
In this article, I explain the three levels of New Product Innovativeness based on nearly four decades of experience in Marketing Research. And for each level, I will describe the types of inputs needed and key pitfalls to avoid to improve your chances for success.
Level 1: Improve – Address Current Product Deficiencies
This is, by far, the most common type of new product innovation and is something that all businesses should do to ensure they are delivering a satisfactory product or service.
Focus
Improve the customer experience by addressing known issues with the product or service. The ultimate goal is to boost customer satisfaction and increase customer retention by doing a better job of meeting customer expectations.
Inputs
The two most common sources of inputs for Level 1 product innovations are:
- Warranty data
- Customer satisfaction surveys
The process often starts by looking for the most frequent or expensive warranty claims or items with the lowest satisfaction ratings and then brainstorming ideas for how to make the product better. Side note: if you are a marine manufacturer and don’t have an existing customer satisfaction survey, you can get one for free from my website that you can even customize for a minor additional charge.
Risk
Low. Since this is building upon your existing products and customer base, the risk of failure is minimal. However, the chances for a big sales impact are small too as small/incremental changes are not likely to stand out in a crowded marketplace.
Pitfalls
Two of the biggest mistakes I see with companies doing Level 1 product innovations are:
- Focusing on the wrong things to fix
- Not knowing the root cause of the problem
Just because an item is rated relatively low in your customer satisfaction survey does not necessarily mean it is the most important thing to address
In terms of focusing on the wrong things, oftentimes the items that are prioritized are issues based on anecdotal information (e.g., a conversation with a friend or business associate) rather than “hard evidence”. When this occurs, you could wind up spending valuable resources chasing “one-off” or low-incidence issues that are unlikely to have much, if any, impact with most customers. Similarly, just because an item is rated relatively low in your customer satisfaction survey does not necessarily mean it is the most important thing to address. For example, if your survey includes a question on the Purchase Price, that is almost always going to be rated relatively low because people always want to spend the least amount as possible. But does that mean you should lower your prices? Probably not in most cases.
Not knowing the root cause is an issue too and is a common occurrence with many customer satisfaction programs. For example, if your product receives a relatively low rating for “Quality” or “Reliability”, you will have to do a lot more digging to find out what is driving this. Sometime pouring over open-ended responses can provide valuable clues. Otherwise, doing Qualitative research with a handful of existing customers is the best approach.
Level 2: Imitate – Learning from the Competition
The second most common source of new product ideas stems from watching and learning from the competition. Whether it is adding a new feature or introducing a whole new model, the goal is to copy what others are doing based on the assumption that it will increase consumer appeal. While it is important to always keep an eye on your competitors, the key is to know when to follow them and when not to.
Focus
The goal of imitating is to maintain, or increase, your share position by neutralizing a potential advantage by a competitor or by adding a benefit before other brands catch on.
Inputs
The source of product imitation ideas often comes from “R&D” (Rip-off and Deploy). That is, information gathered from a competitor Ad or press release, feedback from channel partners, or simply eye-balling other products at a trade show. It is often precipitated by underperforming sales or share and then trying to figure out what growing brands are doing right that could be costing you sales.
Risk
Moderate. If the new product or feature is patented, you will obviously need to be careful to avoid infringement. And, it is often the case that imitating a competitor is less about growing sales but rather has more to do with avoiding losing sales by addressing a potential competitive deficiency.
Pitfalls
While it is important to always keep an eye on your competitors, the key is to know when to follow them and when not to.
If the product change is fairly substantial, there are some actions you could take to help mitigate the risk. One approach is to do Qualitative research with competitor-brand purchasers and ask a series of indirect and direct questions. This would include such things as: Which other brands did you consider?, Why did you decide to purchase a ___ instead of the others you were considering? What are some key things you like about your ____? Then, to be a bit more direct, follow by having them rate the appeal of various product features, indicate how often they use each, and then ask what they think of them.
Another technique I have often used is a type of “product clinic” where you bring in multiple target customers to a specific location to evaluate your brand and one or more competitors on display. Product ratings and preferences are collected and then discussed afterwards to help pinpoint what others are doing well that you might want to adopt. This technique is especially helpful if there are a multitude of factors, or you are uncertain what it is, that could be driving competitor brand preference.
Level 3: Innovate – Breaking New Ground
When I think of products that are truly innovative, I am referring to new solutions to existing problems/needs. This is sometimes called “disruptive” or “radical” innovation. In rare cases, a solution is created for a previously unknown need (e.g., Microwave ovens and cell phones).
True product innovations offer the greatest upside potential for an organization but naturally carry the greatest risk. However, they are important to pursue for leading companies that hope to maintain their competitive position as well as for smaller organizations or start-ups hoping to break-through by changing the game.
Focus
The goal of innovation is often to change the market or create an entirely new market by providing value to customers in a unique or substantially better way. Recent examples in the boating and fishing industry include the Volvo IPS/Pod Drives, Joystick steering, Spot-lock (trolling motors), Forward Facing Sonar (Fish Finders), the Sharrow Prop, and perhaps even the Sea Doo Switch.
These game-changing innovations often produce a long-term competitive advantage and potential financial windfall for the originating company.
However, not all product innovation activities are intended to produce short-term financial success. Sometimes they are pursued simply to stay on top of technological or regulatory changes that could eventually alter or disrupt the marketplace. I believe much of the work on electric propulsion systems in the US boating industry fall into this category at present. While current battery technology makes electric boats impractical for most applications, it may be advantageous for companies to “experiment” in this area and get down the “learning curve” so that they are ready when the technological ingredients are ready.
Inputs
The key is not asking customers what they want but rather by understanding their needs, desires and behaviors.
Some product innovations are the result of scientific or engineering advancements. Others, however, are borne from a keen understanding of target customer needs and wants. Apple Inc. is famous for this with their innovative products such as the iPod, iPad, Airpods and even the Apple Watch.
But how do you get such deep customer insights? The key is not asking customers what they want (most people don’t have that kind of “vision”) but rather by understanding their needs, desires and behaviors. And my favorite way of getting these types of insights is through a research technique called “Jobs to be Done” (JTBD).
What is unique about JTBD research (also called Outcome Driven Innovation) is that it focuses on the job or task (e.g., catching fish from a boat), not the solution (specific boats). The first step involves Qualitative research to elicit a comprehensive set of needs (called Desired Outcomes) when performing the designated job. This is followed with Quantitative research to prioritize the needs identified and determine which ones are relatively unsatisfied. The final step is to conduct a multi-disciplinary brainstorming session with representatives from Sales or Marketing, Engineering and other “out of the box” thinkers to identify potential creative solutions to address needs that were deemed important and relatively unmet (low satisfaction).
The details of JTBD research are beyond the scope of this (already lengthy) article. However, I intend to cover that in greater detail in a future post.
Risk
High. Not only are the costs to develop and launch a whole new product substantial, but it is often hard to accurately gauge consumer interest through conventional research methods (e.g., Concept Tests). This is because there is often a “bias for the familiar” where it might take a while for people to warm up to radically new ideas.
However, the potential rewards are very high too given the possibility of “owning” or dominating a new or evolved product category. This is why large organizations, in particular, would be wise to continually invest in exploring new product innovation ideas.
Pitfalls
In my nearly four decades of research experience, the biggest pitfall I have witnessed with product innovation efforts comes from pursuing engineering or technological advancement that are not grounded in firm understanding of customer needs and behaviors. The ultimate question is whether the technology makes life better or easier for target customers in some meaningful way.
Concluding Thoughts
No matter how big or small, all companies need to evolve or innovate in some fashion in order to survive over the long term. And while there is always risk involved, there is likely even greater risk of doing nothing.
And the key to increasing your chances for success is to be sure to do your due diligence by incorporating many of the “inputs” noted above and by taking heed of some of the common pitfalls noted.
Since launching Left Brain Marketing, Inc., in 2000, I have had the privilege of helping numerous organizations develop or improve their products which is a personal passion of mine. If you have questions or concerns regarding your new product development efforts, leave me a comment or shoot me an email as I would be happy to help. I can be reached at info@leftbraininc.com.
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