TESTING PRODUCT CONCEPTS
Don't Do It Like the Big Boys
Before you commit your company to making a product or providing a service you've dreamed up, you'll want to conduct a reality check with consumers. A big company, says Luther, would run consumer focus groups for a qualitative test of the concept -- a "feel." Then it would develop marketing hypotheses and conduct quantitative research to test them and get a statistically accurate fix on each one. The cost? Two hundred thousand dollars or more. But, Luther suggests, you needn't spend that. "Just do the focus groups. If you do four to eight focus groups in at least two geographic areas, for half the cost of the full-blown study you can get 80% of the answers."
By doing your focus groups in two waves in two markets, Luther adds, you can learn from one to the next. "Maybe R&D could cook up prototypes for the second wave."
Can't afford eight focus groups? Then do just two, says McManus, which will at least rule out disasters.
And if you can't afford that, have a party and let your neighbors try it out. Think of other groups: schools, offices, clubs. Friends and family aren't reliable here. Get anyone else to try it, but try to be sure they won't hesitate to say if they don't like it.
TEST MARKETING
The Old Thinking . . .
The old idea of selecting a small city -- Peoria, say -- and test marketing your product there before introducing it more widely doesn't work anymore, insist Luther and McManus. "It's yesterday's newspaper," McManus says. How come?
* Test marketing presupposes that a national market exists for the product or service, which isn't necessarily true.
* It further presupposes that the national market is homogeneous -- certainly not true.
* Companies have learned how to screw up competitors' tests. For instance, they can flood the test market with their own product just before you test yours.
. . . and the New
Once the product is ready to go, the best way to test it is just to go into business. Start regionally, McManus suggests. It's how most smaller companies introduce a product anyway. Tom's of Maine Inc., a small manufacturer of personal-care products, follows a city-by-city marketing strategy on its way to becoming a national brand. That keeps its mistakes, if any, on a manageable scale. Ben & Jerry's Homemade Inc. started selling ice cream in Vermont. A regional introduction costs no more than running a full-scale test, and the risk is no greater -- provided you've left yourself a way out.
TRADEMARKS II
Will It Travel?
Companies are finding that trademarks can be extended not only within product categories -- Tide powder and liquid -- but across categories, too. "For instance," says McManus, "Neutrogena was a tiny company with a narrow market niche, but it had built a widely known trademark despite its small size. The equity in that trademark is a benefit equity: safe and gentle. Neutrogena is growing because it has found that what works in skin care will work in shampoo and conditioner, too."
But, he warns, you have to be careful not to generalize here. Cadillac couldn't step down to a small car, the Cimarron. Chevrolet can't upgrade its nameplate to an expensive one.
In general, the MCA experts say, trademarks can travel two ways. You can apply an established trademark to A, a new product that delivers the same benefits to a new market. That's what Neutrogena did. Or, a trademark can travel to C, a new product that delivers new benefits to the same market. That's Tom's of Maine expanding its toothpaste line by adding a baking powder product. But don't try to move the trademark to B, a product trying to deliver new benefits to a new market, in a single step. -- Tom Richman
"You test market by getting into the business. There's nothing theoretical about it." -- John Luther
Two Don'ts and a Do. Don't introduce a new product unless it has proprietary competitive advantages. If it doesn't, says McManus, it won't succeed. Lipton had nothing on Celestial Seasonings Inc. when it came to marketing herbal teas.
Do be simple and candid in your packaging and in your description to the trade. If you can't be, the product probably isn't very good.
Don't bet the ranch. Coleco Industries Inc. did with the Cabbage Patch Kids. Always hold some assets in reserve.
"People work to develop new products without thinking about the business they're building. If you don't know what's next, you'll have to keep on asking yourself, 'What business am I in?' " -- John Luther
Before Thinking New Product, Check This List Your company is doing OK, your first product is a hit, and now it's time to start thinking about what's next. Don't even think about what your next product or service should be, says McManus, until you've satisfied the following checklist:
* Do you know what business you're in now?
* Do you know what business you want to be in five years down the road?
* Have you got the right people to develop a new product? Fast-track trainees and boneyard veterans can't do it for you. They've got the process down but lack the imagination and energy.
* Can you put together a multidisciplinary team -- that is, a group of people with all the skills required to manage this project?
* Have you done your trademark benefit equity analysis -- figured out what it's worth to whom?
* Have you granted your product-development team permission to fail in order to learn?
"Young, inexperienced M.B.A.s are dangerous as hell, because they're only process driven. They don't know or appreciate the feel of the cloth." -- John Luther, M.B.A., Harvard Business School, 1963
Why Not to Worry About Confidentiality Before you can decide whether to bring out a new product or offer a new service, you'll want to talk to the potential users and consumers and to the distributors or retailers as well.
"Sure," says Luther, "there's a chance that one of them is going to tip off your competition. But if your product is that vulnerable, maybe you shouldn't be doing it."
A Way Out Of course you think the idea will work . . . but what if it doesn't? "Always, always," McManus urges, "have at least one way out." If the competition nails you or you don't get the distribution, or the consumer doesn't buy, you need to know how you're going to extricate yourself from your new-product blunder. It could be as simple as cutting all spending on the product and dumping the whole inventory.
How to Avoid Good Ideas That Fail If you don't add enough proprietary value to your new product, you'll have a big problem -- what McManus and Luther call a marketing success and a business failure. If there's no proprietary barrier to a competitor entering the market with a product that's just as good or better than yours, you'll quickly be competing on price. You could have a marketing success -- people will buy it -- but you'll have a business failure if you can't sell it at a profit.
That's why, McManus and Luther say, you must do both the internal and the external analyses. "It isn't just what the market wants, but what you can do better than anyone else that will decide whether you make money from a product."
