Some industries view innovation and product development as their very lifeblood. But while telecom, media, pharmaceutical, biotech, and social-computing providers have the launch process nearly down to a science, others in industries including financial services and the fast-moving consumer goods are still working to attain the same level of success.
Furthermore, even the most successful new CPG products leave as much as 20 percent of potential sales on the table during their first year in-market, according to our recent analysis. We’ve found that product launches fail when companies fall prey to several common missteps:
• Unrealized potential: Fundamentally setting financial goals based only on company needs vs. the true demand potential with consumers, and thus, leaving valuable dollars on the table.
• “Soft launches”: Making new products available but not committing sufficient resources toward actively promoting them.
• Weak project management: Resulting in actions in different functions that are not in sync, often resulting in delays, rework, and subpar outcomes.
• Quantity over quality: Launching too many, often marginally incremental products, flooding the distribution system with small, low impact initiatives.
• The desire to hold on: Neglecting to phase out legacy and underperforming products in a coordinated way, often necessary to make the room for the new products and innovations.
Certain actions, or non-actions as the case may be, also fail to take customer lifetime value into account. This includes assuming that profitability will come in later years, once sales volumes are in place; fearing self-cannibalization rather than seeking to refresh products within customer relationships; and missing the effect of addressing a broader range of customer needs to improve overall retention rates.
Yet among all of the challenges outlined above, perhaps the most common–and most avoidable–is the failure to appreciate the impact of superb launch planning and execution on the overall success of sales. In some instances, the metrics are one of the culprits; measuring the number of new or improved products brought to market can lead to lots of new products, without driving true incremental growth or large increases in sales.
In other instances, the interconnectedness of and need for time to transition between product planning and launch is forgotten, leaving little time for market preparation. This can lead to disappointing early sales and a reduced amount of attention and resources in subsequent months and quarters, as well as making it more difficult to convince the organization to fully support subsequent new product launches.
To get the maximum benefit from new product development and innovation efforts, we suggest an approach based on the notion of “precision activation,” which involves a series of thoughtful choices based on up-front analysis and continuous learning. This approach includes six parts:
1. Sequence customer priorities based on the fit with the needs of customers who have high lifetime value: Place the initial focus on early-adopter customers who have the greatest level of unmet demand for your particular new product and service. Further, cross-selling new products to current customers can have much lower acquisition costs, generate better margins, and improve retention for all the products in a deep relationship. Equally important, make a concerted effort to communicate to and prepare the market for an increase in the number of potential engaged consumers, thus growing your potential pool of new customers.
2. Build a plan and choose a pattern: Great launches often seek to achieve peak sales within 18 months, and then avoid erosion. Another successful approach is to plan for a stair step, adding another geographic market or distribution channel at planned intervals or each time goals are achieved. But a plan based on the dreaded hockey stick–in which sales suddenly take off in year three–needs to be avoided at all costs.
3. Prepare the market through up-front work with distributors, media placements timed to coincide with launch, and a program to generate earned media and social buzz. (Viral is good!)
4. Take a “test-and-learn” approach, measuring the success of different positioning statements, sales paths, and merchandising plans. Roll out the top performers across all distribution points, and continuously monitor and refine. This approach is particularly relevant in situations with a wide number of individuals and outlets involved in the selling process. Take, for example, the personal property and casualty industry, with innumerable networks of part-time agents with widely diverse skill sets and engagement levels.
5. Develop advertising messaging and creative pieces well in advance, and coordinate placement and timing tightly with other parts of the plan.
6. Invest in distribution support, and seek to create early wins for distribution opinion leaders. Consider a road show approach (and geographic staircase) for products that are sold, vs. a broadcast launch focusing on highest-yielding distribution points across a national system for products that are bought.
Beyond that, companies need to become much more rigorous about managing both a pipeline of product launches and a portfolio of innovation projects. As success builds, there will be choices regarding whether to invest in rolling out distribution of “Product A” to the next customer group in sequence, or to move resources to the early launch efforts for “Product B” because the marginal return will be greater–a nice problem to have!
Growth through innovation is hard to come by in today’s world. But if your company has the ability to launch new products and services successfully so that they reach their full peak consumer demand and sales potential, then it may be more attainable and more profitable than ever before.