Building the product – innovation and NPD series Part Three

NPD SERIES ROADMAP
Part One: Necessity is the mother of innovation
Part Two: The big idea
Part Three: Building the product (this article)
Part Four: Launch

In the third instalment of Marketing‘s series on innovation and new product development we get stuck into the middle – where things really start to take shape.

Kimberly-Clark knew where its opportunity lay: a bathroom cleaning product that transformed a frustrating chore into a quick and easy task. The idea may seem like an obvious one, but it was a promise none of its competitors had been able to deliver on. It required a breakthrough product that brought together two polar needs: strong cleaning capabilities and a simple process, free from the rigmarole of sprays, brushes, gloves and masks.

Research by the paper product manufacturer affirmed that the idea was worth pursuing from the consumer’s point of view; it delivered high believability and excitement scores. Branching away from the company’s core competency into a new method of cleaning would be the main stumbling block – a challenge of understanding and implementing new supply chain formats. Armed with some prior experience in wet-wipe manufacturing, Kimberly- Clark identified a dual-textured scrubbing fabric and biodegradable cleaning solution that could fulfil the idea. Concepts were developed and placed in research to test, optimise and forecast. Various sensory elements of the product were tested – the dual-textured fabric, ease and speed of use, cleaning efficacy, the smell of the solution, the packaging and so on.

Findings indicated that consumers believed the VIVA paper towel brand had a right to play in the broader cleaning category. The product – VIVA Shower Fast Wipes, a bathroom cleaning system so simple even a teenager could clean the bathroom properly with it – launched in January and by halfway through the year had captured 6.5 percent of the bathroom cleaning market, generating more than $1 million in revenue.

Kimberly-Clark managed to execute what many call the most difficult part of the innovation process – matching consumer needs with a relevantly designed product or service. It is this second stage of the new product development (NPD) process – building the product – on which we will focus for the third instalment in Marketing‘s innovation and NPD series.

Stage-GateThe ‘X factor’

Dr Scott J Edgett, co-founder of Stage-Gate, an innovation framework used by many of the world’s biggest brands, says the key challenge is developing a product that is actually what the customer wanted in the first place. Edgett advises constantly validating what’s being developed back to the product definition established during the idea phase. “At the end of the day, what we’re actually developing needs to be something somebody wants and validated back to the research, back to what we thought we were developing.”

With that in mind, there are two key things that a new product must achieve over and above staying true to the consumer need it seeks to address. These are excitement and differentiation – two ‘x factors’ that create the buzz new products need to fly. Excitement motivates trial and creates the impression that the product is unlike any other, according to Ray Crook, regional director of innovation and product development, Asia Pacific, at research firm TNS. It’s the factor that gets people lining up around the block, turns consumers into fans, leads to word of mouth and ultimately leads to trial. “It’s all very well to say ‘be exciting’,” Crook says, “but harder to actually achieve.” To be exciting, the gap between the benefit (or benefits) of the product and the barriers to its purchase needs to be unexpectedly large. “An anti- ageing cream that actually works, for instance,” Crook offers as an example.

In categories that don’t traditionally lend themselves to excitement, the rule still applies. To generate excitement, the product only has to offer a unique and meaningful benefit over its competitors. The product itself doesn’t have to be inherently exciting in order to generate excitement within its category. For example, if you’re making washing powder, it just has to be more exciting than the other washing powders on the market. It doesn’t have to be more exciting than the iPhone.

The path between excitement and differentiation is a two-way street. In order to be exciting and perceived as unique, the product must have a recognisable point of difference. With a lot of ‘me too’ innovation, or incremental rather than breakthrough innovation, many products make it to market with little or no discernible difference from the competition.

Furthermore, the fact that a product has a new ingredient or feature does not count as differentiation if the consumer is not aware of this feature in the first place. Most consumers are not aware of the inner workings of the products they use and cannot be expected to appreciate what to them may be meaningless differences.

A recipe for success

Andrew McQuillan, vice president of innovation for Nielsen, Pacific, agrees that the biggest challenge for new products is creating something that truly wows consumers. “It’s not good enough to simply meet expectations. You have to exceed expectations. Consumers have a repertoire of brands… If they’re currently buying a brand in that category, they go back to their existing habits.”

Breaking the habit is only half the challenge, however. Often loyalty to existing products, which Nielsen defines as a combination of value and uniqueness, needs to be neutralised also. “If it’s not unique, you’re going to go back to your existing product, because there is no difference or significant difference between the new product and the old product,” McQuillan points out.

McQuillan says he sees many products that aren’t ready for launch pushed out into market. He names 12 critical success factors for new products. Nielsen’s theory goes that outstanding performance on just a few of these factors is not enough; a new product is only as strong as its weakest link. Failure to deliver on any of the 12 success factors can overwhelm the combined positive effects of the other 11 attributes.

Nielsen BASES

The 12 factors fall under five macro areas: salience, communication, attraction, point of purchase and endurance.

  1. Salience, the first macro area, is all about standing out. Successful new products do that in two key ways: by bringing true innovation to the market and by breaking through the clutter with attention-catching marketing, something we will investigate further in the final instalment of our innovation series.
  2. Communication represents the second phase of the consumer adoption process. Successful product launches accomplish two key innovation tasks: imprinting a message with consumers through strong comprehension and delivering resonant messaging.
  3. Attraction, the third phase of innovation, serves as the first consumer evaluation point for the product proposition. It begins with a classic marketing ‘problem/solution’ set-up: is there a consumer problem (need or desire) for this type of product, and does the test product solve that problem in an original way? The combination of problem and solution, of need/desire and advantage, is critical. If both exist, consumers will be interested. Successful innovation also needs to be credible and free of downsides such as the side effects often associated with over-the-counter products.
  4. Point of purchase, is where consumers convert attraction into action. Purchase encompasses the ‘find-ability’ factor and the value equation (whether product advantages offset price and other costs).
  5. Endurance, Nielsen’s fifth phase of consumer adoption, incorporates aspects of product delivery (providing the consumer benefits and experience as promised) and product loyalty (remaining differentiated from competition over time).

 

The crystal ball of volume forecasting

Critical at the product development stage is volume forecasting to size the potential yield of the product.

TNS has a system called eValuate, which forecasts volume potential and prescribes how to optimise the product at the concept testing, product and launch stages. The approach is a micro modelling method that looks at consumers at an individual level – an important distinction to make, according to Crook. “One of the issues with the aggregate approach is that you’re taking an average and then multiplying it by another average. So what can happen is if you’ve got consumers with different behaviours within it, which is often the case, you’re losing a lot of the nuances in how the volume or how the intention to buy builds up.” When averaged against each other, heavy and light consumers give a medium or average reading. The danger is if the heavy consumers don’t end up liking the product, and the light consumers love the product, it tells a completely different story of potential yield than vice versa.

Micro modelling also allows a brand to understand what may need to be done to entice heavy consumers that may be loyal to another product. It can help to understand how much potential revenue will come at the expense of competitors, how much will come from cannibalisation of existing products and how much will be incremental. “It means a lot if you can say the incremental volume that you’re going to get is going to be worth two and a half million dollars to the business. But if you’re out by a little bit, that projection could be that you’re only getting one and a half million dollars to the business,” Crook adds.

Josh Gaudry, marketing manager in Lion’s innovation division, says that, despite the research techniques available, forecasting is crystal ball work. At Lion, Gaudry refers to two forecasting methods – ‘bottom up’ forecasting, which compares the new product to a similar product already in market and infers volume from there, and specific research, such as choice modelling. “There is usually a combination of both those things; it’s never really just one lever that we want to pull,” Gaudry says. “And there are also more practical things around what are minimum customer requirements… you might say we need brands to perform at this level per store for it to be successful, and if they don’t meet those benchmarks, then it generally gets killed within the Stage-Gate process.”

Marketing is from Mars, operations is from Venus

Edgett says one of the most common mistakes made during the product development phase is the right hand not talking to the left. “When we work in a cross-functional team environment, we often make assumptions on another part of the organisation doing something, and they’re not… it’s cultural alignment to work as a real team, not as functional representatives.”

Gaudry agrees that the disconnection between marketing and operations, and other parts of the business, is a constant challenge to keep on top of. “We want to create new things and they want to make the breweries really efficient and make their production really efficient. So, in a lot of ways, they’re kind of counterintuitive to each other.” The solution, Gaudry suggests, is to imbue a cultural appetite for innovation across the business. “I’m lucky to work for a company that’s happy to invest in capability, in operational capability, if we believe in an idea.”

The company did so recently when it launched its cider product 5 Seeds. From a production point of view, making cider is very different to making beer. Lion invested in its breweries to add on the cider capability.

The technical side of things is important also – development testing to ensure that the product works, has the necessary shelf life, is safe and so on. Edgett warns, however, that there is an inherent tendency among operations to over-engineer products.

“Sometimes the engineers and the technical people, they start developing it, development will start coming on and it drives product cost up and that’s not what the customer wanted, for example.”

The delicate balance of matching well- understood consumer needs with a relevantly designed product or service is one that is hard to strike. It requires a disciplined and structured approach – an approach that ensures all facets of the new product are designed around the consumer, address the opportunity and have an ‘x factor’. With an integrated and staged approach, companies can arrive at a product that generates the excitement required to break into the market and capture the imagination of consumers.

 

In Part Four of this series on innovation and new product development we get stuck into the launch phase, where the journey has only just begun.