How We Think | Articles
Changing Consumer Behavior:
A Blueprint for New Product Success
Companies commonly behave as though the key to new product success is more creative ideas. According to a survey by A.T. Kearney for the GMA, more CEOs identified increasing focus on innovation and creativity as the top means of improving growth rates than any other factor. Unfortunately, despite all this creative focus, the failure rate of new packaged goods products is about 95%. So the reasons for which the CEOs are looking for creativity and innovation – better growth rates and better bottom lines – usually do not materialize.
Products don’t fail because the ideas were not creative enough; they fail because the marketing strategy was unclear or imprecise about existing consumer behavior, what benefits consumers seek through this behavior, what attributes support the behavior, and what consumers are willing to change as well as what they will not change. Bringing new goods to market successfully calls for a new strategy to clearly identify how and why the new product will replace consumers’ current behavior with a new behavior.
New products are routinely backed up by a clear Business Proposition that defines the financial expectations of the company, the degree of reward, and the amount of investment. But most Business Propositions are built on at least some subset of unvalidated assumptions and incomplete information and these are often the same points that determine the success or failure of the Business Proposition. The only way to get these assumptions right is through an exact understanding of consumer behavior.
The answer is not to be more creative than the next guy. The true path to success is being more focused than the next guy about how consumers will benefit from changing their current behavior to your new product, and what it will take to get them to change.
Here are three different examples of new products that understand their consumers’ behavior. When Swiffer tells consumers to “drop the mop,” it is clearly defining the old behavior and source of business.When Kashi GoLean identifies its cereal benefits as a unique combination of protein, fiber and whole grains, both the source of business and Kashi’s point of difference are obvious.The Toyota Prius, “so advanced it makes the future seem obsolete,” describes its fuel economy and emissions reduction with “the performance of a conventional car.”
The odds of developing a successful new product stream can be greatly increased through a process that begins with broad consumer understanding and then applies that learning in increasingly specific ways to products and concepts. Each step requires validation that the product and concept are clear, consistent, and aligned with consumer behavior. The company commits to increased resources only with such validation. Ideas that don’t meet these criteria need to be weeded out early, saving time and resources for those that do. And the initial, broad consumer understanding becomes a continuing source of inspiration for new ideas.
In the ideal system, there are four main stages coordinated with the increasing need for resource commitment: Strategic Development, Early Development, Advanced Development, and Launch and Monitoring. Each stage provides critical input to the Business Proposition requirements of volume, revenue and profit. Key Decision Points should be in place to represent specific times for assessment of the new product at each stage as the Business Proposition is finalized.
During the first stage, the Strategic Positioning is developed and validated by quantitative analysis of specific consumer behaviors in both usage and purchase, what benefits they are seeking, and what attributes are critical to achieving those benefits. Research and development can then be approached with the aim of achieving the desired benefit in a new way or by matching or surpassing the driving product attributes. Preliminary simulations use the behavioral framework to quantify the impact of the new benefit on existing consumer behavior. The first Decision Point then uses these simulations to ensure that the product at least theoretically can meet the company’s volume and profit expectations. R&D, Sales and Operations all must agree that the product benefit and attributes, the pricing, and the distribution specifications can be met.
During Early Development, ideas are developed into actual product and actual concept positioning testing. The results are used to determine if the product is effective against its competitive set, if the positioning resonates with consumers the way it was expected, and if the product’s overall development is on track. At Decision Point Two, concept and product test results are evaluated against the results generated by the simulations. Simulations can be refined, if necessary, based on these concept and product tests to ensure that the Business Proposition revenue and profit numbers are still attainable.
In Advanced Development, the product is finalized with packaging and advertising ready for launch. It is then examined one last time before going into the marketplace. BASES or similar testing confirms that all the elements work together. These results, along with the finalized marketing plan and Business Plan, are required for Decision Point Three.
Management then has a final opportunity to examine the Business Proposition in its entirety and as it is expressed in the product, advertising, and marketing plan. The Business Proposition should be highly detailed in terms of what to expect regarding consumer response and precise in the assumptions for distribution and pricing.This way, companies can measure performance against expectations with those data acting as an early warning system against issues. This process should run seamlessly because management has been apprised of the results of each preceding stage.
The new product is launched in Stage Four. Consumer awareness, trial and repeat are monitored against assumptions in the Business Proposition along with critical measures of pricing and distribution. Fast-reaction plans to correct any deficiencies should be in place.
Is creativity important? Of course it is, if it is used properly. The probability of success will increase when creativity is focused against a precise strategic understanding of consumer behavior, so that new product ideas execute against critical strategic levers. Planning is enhanced because goals are fact-based, allocating internal resources appropriately and anticipating competitive response. The management of product development is streamlined because effort is placed only against concepts that have been assessed against strict consumer criteria. Cumulative company expertise should be built across project lines.
Companies should focus on developing a precise and quantified consumer understanding to support the Business Proposition’s short- and long-term revenue and profit assumptions: Why will consumers switch to this product? What will it cost to get them to switch? The answers to these questions will improve the success rate for new products and get them to the market faster.
Jayne Eastman is a partner in the Dallas office of Henry Rak Consulting Partners, a Chicago-based consultancy. We invite you to learn more about the HRCP partner team.
To learn more about HRCP and its services, visit www.hrcpinsights.com.
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