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.