My former company was not, in my opinion, adequately engaged in R&D, nor was it completely wedded to the concept of market tests. That relegated us, for the most part, to the class of companies launching me-too and second generation products with incremental improvements.

This strategy is not wholly without merit. Nor is the Poison Apple (let-someone-else-take-the-first-bite) strategy. Let others do the development work in the lab and the pioneering work in the field; once the product has proven itself but before it becomes established, swoop in with a clone and nifty marketing that ostensibly shows differentiation and you’re set. You have to be quick, however. An aggressive pricing strategy would also help but, generally, that was not our way. We were always about value-added, if not value-creation.

The Drivers

In the evaluation of new product potential, success was measured against a set of criteria. We would ask the tough questions: Does the new product play off existing strengths and to existing customers? Is it easily explainable (and, therefore, marketable)? Does the potential return justify the investment required? Clearly, incremental improvements, line extensions and value-added me-too products, which leverage existing brands and customer loyalty, would more likely give yes answers to these questions.

One study of 11,000 new product launches conducted by Kuczmarski & Associates (a Chicago-based management consulting firm specializing in accelerating growth through innovation) listed the primary motivations for launching new products. In order of importance:
-    Attract a new customer or market;
-    Gain or maintain a competitive advantage;
-    Retain customers;
-    Fill a growth or profit gap;
-    Arrest margin erosion;
-    Utilize new technology.
All but the last could be accomplished without adopting ‘risky’ innovation strategies.

In a business with small margins, a success rate of 10-15% for new products is unacceptable. And that’s after the cost of trials and errors getting past the development stage and finally to market test in the first place. Or is that second place. At any rate, market testing is far from foolproof and not universally accepted as the perfect way to go.

This includes market testing new merchandising concepts.

The Best Buy Example

In the September 15, 2008, issue of Marketing magazine, Lesley Young reports on Best Buy’s recent penchant to skip a step (ref. Launching Pad) when initiating new retailing options. Its new Best Buy Mobile mall store concept, for example, went straight to market launch.

Test marketing and launch marketing use basically the same techniques. But tests can eat up time (3-6 months) and save little on costs compared to, say, a true, though geographically-restricted launch. As well, with increasing ethnicity and socio-economic diversity blurring demographics, and with the spillover of regional media diffusing erstwhile targeted messages, there are few perfect test markets available anyway.

Best Buy also created Geek Squad departments inside their stores without testing. They found, probably to no one’s surprise, that the techies were as valuable on-site as they were on the road.

Again, back to my own experience, we found that segment-specific marketing was almost fail-safe as direct-to-launch programs. Of course, in-house specialists worked with customers during the entire design process so that we always knew we were on-target.

At the end of the day, despite all the budget and time restrictions, you’ve got to get results. If you are not introducing a whole new technology, market tests do not circumvent the restrictions, nor do they guarantee the results. The merits of the product or service, the simplicity of the message, and excellence in the execution of the launch will be the determining factors of success.

Last point: I referred several times to the issue of explainability. Will people ‘get’ the new product or program? Can the marketing message be simply defined and easily delivered? It is extraordinarily difficult to change people’s perceptions or habits. I would never consider launching a true innovation or a new technology (which tend to do both) without market testing first. There is a right time and place for everything.

There are a number of excellent books on corporate strategy that merit your attention and that will provide value for your time and for a twenty. There are, of course, others not so excellent, books that at my most generous I would consider hollow in content, penned by pop authors contemptuous of their readers. Unfortunately, in business books as in so much else, popularity is not necessarily reflective of value.

There are times, however, when strategy junkies need a quicker fix than can be provided by books, good or bad. These cravings can be satisfied by reading various business magazines and blogs. Not all are of these are of equal value either and some blogs, especially, are thinly-disguised platforms for selling services and are unabashedly self-serving.

All this is to introduce a business magazine I discovered quite by accident in a store that offers for sale obscure magazines, toy soldiers and Marvel comic memorabilia. The discovery was the Spring ’08 issue of Strategy + Business. Published by Booz Allen Hamilton, the huge strategic management and technology consulting firm, Strategy + Business is - to their credit and my relief – neatly disguised and only mildly self-serving.

Interestingly, it wasn’t the feature articles that most captured my attention but the front section columns. A number of these should get you thinking :

Upturn Thinking in Downturn Years

In market downturns, the companies that emerge strongest are those that, while retrenching, push ahead with long-term strategic planning. One example of a company that did just that is Lucent; even while the telecom hardware business was in decline, CEO Patricia Russo pushed ahead with an initiative to identify new growth areas that would make use of Lucent’s core capabilities and provide stable revenue and income streams going forward.

New Metrics for Media Campaigns

The reach and frequency metrics used in assessing traditional media campaigns are losing relevance in this age of the web, social networking platforms, cell phones, PDAs, podcasts and video games. Marketers are looking to deliver “contextually relevant messages” to specific, i.e., targeted concentrations of potential customers. They are seeking more precise information on how this digital activity correlates to actual sales. As this information becomes available, they will increasingly embrace the pay-for-performance advertising model.

Undiscovered Riches in IP

In an age of commoditization and globalization, you might imagine companies would dig deep to find and exploit assets that yield sustainable differentiation. Among those assets, Intellectual Property may well be the next frontier. Companies are getting wise to the significant revenues that can be gained through patent and technology licensing. IP is moving out of the legal counsel’s office and into the corporate development arena. In fact, in the past 15 years, licensing revenues have burgeoned from $15 billion to $110 billion. To take it to the next level, companies will have to make their intellectual property both serve the business and be a business in its own right.

New Life for Tired Brands

Ford is attempting to revive the Taurus brand out of the ashes of the Five Hundred, and Proctor & Gamble is using Red Zone antiperspirants and deodorants to reposition Old Spice among teen males. Should and can old brands be revitalized? Have the attributes which once made the brands successful been eroded or been made irrelevant by competing brands? Are the products suffering from the poor opinion of its original customer base or poor awareness from new, potential customers? A proposed four-step Brand Vitality Assessment (which, no doubt, Uno Who could conduct) would provide the answers.

All in all, I rate this magazine a lucky find, one for which you might keep an eye out. You might also want to scour the back issues. Go to www.strategy-business.com. Of course, with Booz Allen Hamilton being a mega consultant, you should not expect a free lunch. Not while they’re trying to build the brand at any rate.