Driving Growth with New Products

Many companies rely on new products to drive significant percentage of revenue. They believe Marketing will play a major role but have expressed concerns about whether Marketing can successfully launch the product.

measuring new product success

Figure 1: Asnoff’s Matrix provides an important framework for new product success

Keep in mind at least these five attributes which affect how fast your new products are adopted.

  1. Complexity: This is the degree of difficulty in understanding and using a new product. We encourage you to make your product be less complex and sound less complex. Many companies make their products sound more complex because they think that will justify the price they’ve set or for some other reason. Simpler is better.
  2. Compatibility: This is the degree to which a product is consistent with existing technologies, products, and processes. These days, folks want to leverage their existing investments. Make sure your product is compatible and emphasize this compatibility in your messaging.
  3. Relative advantage: This is the degree to which a product is perceived as superior to existing substitutes. With budgets tight all over, only products that are going to show a significant improvement over what folks are currently doing stand a chance.
  4. Observability: This is the degree to which the benefit or results of using the product can be observed and communicated. Demos, case studies and any other vehicle you can create to make the product’s benefits observable are very important.
  5. Triability: This is the degree to which a product can be tried, even on a limited basis. Do whatever you can to make it possible for prospect to try your product.

Answer Three Key Questions for A Successful Product Launch

If this is your strategy too, here are three key questions to ask yourself:

1. What business outcome are you trying to achieve? The answer to this question is critical because it defines the strategy. In one instance, the customer expects a certain percentage of existing customers using their flagship product to adopt the new product. This is an example of a product development strategy. In other instances, the customer expects the new product to give them access to new customers, a diversification strategy. (See Figure 1 below.)

2. How do you expect Marketing to contribute to this outcome? Often, the answer to this question tends to be all over the board. Sometimes the answer is some number of “qualified opportunities.” Other times it is to create category leadership. And in other instances it has been to grow share of preference or share of wallet. To measure Marketing and product launch success, it needs to be clear what needle Marketing is expected to move and how they are expected to move it.

3. What constitutes a successful product launch? Again, the answers range from measures such as the “amount of media coverage” to “market penetration” to some “number of inquiries”.

Whether existing customers or new customers will buy the new product, or whether the ultimate measures are share of preference or share of wallet, product adoption within some time frame of launch needs to be one of the primary success measures of any new product launch. What that adoption rate should be may depend on whether the product is new to the market or just new to you, your launch expertise, your current category position, and what type of adopters you are targeting. (See Figure 2 below.)

adoption curve

Figure 2: Product Adoption Curve

A variety of factors affect adoption rate, including:
– Perceived benefits of the product over alternatives
– Communicability of the product value proposition
– Ease of use
– Perceived risk
– Accessibility to the product (sampling, trial, etc.)

Quantify New Product Launch Success

New products have a poor success rate. Only about 1 in 5 survive longer than a year and new product launches are 6 times more expensive than line extension launches. As many as 95% of new products introduced each year fail, resulting in massive losses.

The gap between the laggards and product innovators is a result in their ability to reach product profitability. According to AMR research, product innovators reach profitability for new products 90 percent faster than laggards. They believe the key difference is cross-functional integration to shrink the time it takes to source, build and introduce new products. Lack of coordination between functional silos, customers and trading partners is the number one cause behind sub-optimal new product introductions.

So while some experts suggest using “time to market” – a measurement of the time it takes to produce the product or service – we advise using “time to profitable revenue” as the metric for success. This is the measurement of the time it takes to sell enough of the product or service to overcome the investment in the product and start generating a profit.

Plan the timing of your new product's launch into the market.

Planning and timing are everything when it comes to launching a new product.

Bringing new products to market is no easy task. A successful product launch requires companies to measure critical success factors and hold team members accountable. 

If your company’s future depends on revenues and growth from new products, it is essential that your launch strategy includes:

  1. at least one specific quantifiable outcome
  2. that Marketing understands how it will contribute to this outcome
  3. that it is clear how the success of the new product launch will be measured and
  4. that the launch plan is designed with a specific performance targets in mind

How do you know whether your launch is a success? A key metric we’ve recommended for measuring success is the rate of adoption. However, there are some interim metrics that can help you with predicting whether the new product will successfully be adopted. One of the earliest indicators is rate of trial. Trial generation is often an essential part of the product adoption process.

Trial metrics are a good leading indicator. There are two parts for measuring trial. The first is obvious, actually track the number of trials – whether paid or free. The second step is often missed, and that is to follow up with those who trialed the product to assess their intent to purchase within a specific period from trial. The intent to purchase provides insight into the likelihood the trial will result in purchase.

 

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