New Product Development – It’s all about the RISK

For many businesses developing new products is their lifeline for new growth. Look at all the line extensions that the major brands keep introducing. As an example, have you noticed how many different flavors there are for Special K cereal, not to mention the Special K snack bars?

But when you cut to the chase, NPD isn’t hard, it’s risky. The NPD process is all about minimizing risk. After all, you spend all that money to develop the new product, build inventory, and get it on the shelf, and it may not sell. Now you are faced with returns, over stocks, and it just goes downhill from there.

So, consider this; New Product Development is like cooking pasta. If you don’t add enough salt while it is boiling it seems that no amount of salt can catch up later and the pasta ends up tasting bland. With NPD if you don’t build in the solution to the customers’ needs up front, no amount of advertising or promotion will save you later.

This is the part where the risk comes in. How do you know if your new product will solve the needs of your target customers? The landscape is fraught with product failures, even from large companies with a lot of resources (and supposedly smart people).

You can never eliminate the risk in NPD. There are no sure bets on any product. But, all hope is not lost. Here is a short list of steps that should be taken to minimize risk. The more of these you do, the greater the chance of success.

1. Make sure you have a development process in place. I favor a phase and gate process, but whatever you use make sure it includes best practices.

2. My second point is critical. Whoever is in charge of the project must know how to use the process. DO NOT let the process dictate the work you do, rather, use the process to reach the goals. There is not a process that is 100% right for any company or product. Tailor it to eliminate items or steps that will not add any value.

3. Do your research. The more the better. If your budget is challenged this is not the place to sacrifice. You must obtain VOC (voice of the customer). If you don’t have internal resources to get it, then hire a professional agency. The better the research, the less risk involved.

4. Understand the target segments. There probably is more than one segment that needs/wants your product, but they are likely to have some differences in the way they use the product. Also, the positioning will be different to reach different segments.

5. Know your competition. Is your product faster, better, smaller, or cheaper? If not there better be something about it to set it apart from all the others on the market that are already out there solving needs.

6. Use market back pricing. This is where you work backwards to determine the price the end user will pay. Many companies simply figure out what the product costs to make, sell, ship, and advertise, and then add the amount of margin they need to make to reach the final price. This will sink you faster than the Titanic. In market back pricing you start with the final price to the end user – the amount the market will bear. Then subtract the middleman’s margin, your overhead costs, your desired profit margin, and any other cost that will be involved. This results in the amount you must be at, or under, to produce the product. If you cannot produce it at this cost, then you do not have viable product.

7. Write superior requirement documents. Someone has to translate all the information obtained in the steps above into a document that the R&D team, engineers, manufacturing team and marketing can understand. Start with an MSA (marketing situation analysis) which lays out the market need for the product. Follow that with an MRD or PRD (market/product requirement document). I have seen NPD programs go astray because these documents were not clear or not even written.

8. Lastly, be realistic. Do not get so close to the forest that you cannot see the trees. Too many people get caught up believing that their new “baby” will take the market by storm. Stay objective, keep emotion out of it. You will not find an emotional step in any good NPD process.

So there you have it. Reduced risk. How can I be so sure? I brought a billion dollar product line to market using these steps. I have often been asked, “How do you reach a billion dollars in sales?” It’s simple, follow the steps, and put enough salt in the water while it is cooking.

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You don’t have to be a marketing guru to be successful, but your brand does

OK, so you know just enough about marketing to be dangerous, but you don’t have the time to develop more advanced marketing skills. But all hope is not lost. If you have limited resources (who doesn’t) and only have time to concentrate on one facet of marketing, then make it your brand development.

By now you’re probably asking, what is a brand anyway and why is it so important. While there are a lot of definitions for what a brand is, to keep it simple, a Brand is a Promise. It is a promise that conveys multiple meanings to the end-user. While there are volumes of definitions as to what a brand is, at a high level (and for the sake of brevity) the main attributes of a brand include:

• Consistent quality
• Trust
• It solves a need
• It connects with the end-user

A few examples:

Consistent Quality
McDonalds, Coca Cola – A Big Mac or a Coke is the same no matter what continent you are on.

Disney – You know that they always provide good and wholesome entertainment.
Apple – The interface to the technology will always be easy and intuitive to use.

Solves a Need
Mercedes Benz, BMW – If you’re thinking the need is transportation, think again. The need they solve is status. Transportation can be bought less expensively.

Nike, Under Armour – If you are an athlete is there any doubt that these brands have developed a connection. It is so strong that they use only their logos and no words to communicate their brand. Is there anyone on the planet that does not know the Nike swoosh?

Alright you say, I get this. But what are the benefits of developing a brand? There are many so I will just hit a few highlights.

• Facilitates a higher price, as there is a perceived higher value.
• Generates repeat business. Ever heard the term “brand loyal?”
• Makes new products accepted at a faster rate, thus stimulating growth.
• Makes it more difficult for competitors to steal your market share.

Now that you know why you should develop your brand, you’re probably asking how to do it. Well, if you have to ask that question (and most people do), the answer lies in a keen understanding of the marketing basics. And those basics cannot be taught in a blog or article so the best way to do it is to seek the help of an expert.

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Is your marketing message ready for prime time?

In this day and age it seems that everyone is enamored with social media marketing, internet marketing, websites, search engine optimization (SEO), pay per click (PPC), networking, and mobile text marketing, just to name a few.

While these tactics can be good ways to market your business, and in some cases are very cost effective, there is still the need to consider the basics.  Why?  Because the basics are the foundation of not only your marketing plan, whatever way you do it, but because they also communicate the essence of your brand.

Can you even name the marketing basics?  I call these “Marketing 101” and they include:

  • Customer Need – if you can’t define their need(s) then how can you satisfy them?  If your product does not solve a need, then it will fail.
  • Value Proposition – this is the value the customer will get from your product/service.  Put it in their words.  Do you solve their need?
  • Target Market – defined as the group of customers that have a need for your product.
  • Segmentation – within a target market there are different segments that must be identified because while they may have similar needs, the value proposition and the message about your product will likely need to be different to catch their attention.
  • Unique Selling Proposition – aka product differentiation.  What is different about your product than your competition?  Why should someone buy yours instead of theirs?  What is your hook?
  • Positioning – this refers to the way you communicate the value proposition to your target market segments.  Use the wrong words and you miss the boat.
  • Benefits/Features – Too many people talk about features and not enough about benefits.  A customer really does not care about a feature.  They care about what that feature will do for them, known as the benefit.  In other words, this product will do xxxxx (the benefit), because it has yyyyy (the feature).  Some features are self-explanatory and people know what the benefit is automatically, but with many you have to tell them.  Don’t assume they will make the connection between what the benefit is of a feature.
  • Competitive Advantage – what makes your business better able to deliver the value proposition than the next guy?  Is it sustainable or will you be copied quickly?  Is your product Better, Faster, Cheaper, Smaller?  If you can’t answer these questions then don’t expect your customers to either.
  • Buying Behaviors – what are the common behaviors of each segment?  Where/how do they buy their products?  Are you able to sell to them the way they usually buy?
  • The Whole Product – this refers to the buying experience from start to finish, as opposed to what many businesses do; just the sell the product itself and assume they are done.  If you have a great product but have made the transaction difficult, you may lose the customer for future business. You must assure that every “touch point” the customer has with you is satisfactory or better.

Once you have paid attention to these items you will be able to communicate the right message to the right group of people using the right words.  If you are not satisfied with your marketing, maybe its time to consider that its not your tactics that are the problem.

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How do you sell more to existing customers?

If your business is like 99% of the known world’s businesses you are living with the 80/20 rule.  That is, 80% of your revenue (and profit) comes from the sales of 20% of your products (goods and services).  And chances are a lot of those other 80% of your products have high margins.  Like it or not, that’s just the way it is.  You will never have an even distribution where each product “carries its own weight”.

But, that doesn’t mean you don’t try to change the 80/20 mix.  After all, IT COSTS LESS TO SELL MORE TO AN EXISTING CUSTOMER, THAN IT DOES TO FIND A NEW ONE.  So, how do you sell more to your current customers?  They are already your customers, you probably know a lot of them, and they know your business.  Right?   This is a dangerous assumption, and if you are making it not only are you missing a huge growth opportunity, but you’re mix is probably more like 90/10 (90% of your revenue is coming from 10% of your products).

So, how do you sell more to an existing customer?  Conceptually it is quite simple.  There are three easy steps.

  1. Let them know what your other products are, those in the 80% category.
  2. Make a compelling offer.  This can take many forms such as a simple sale price, or a bundled offer.  But it should be compelling.  After all, if your customer is already there making a purchase, you want to get to the next step.
  3. Increase the value of the transaction.  It does not cost you any more to charge a higher amount for an additional sale.  You’re employees are already spending time helping them and handling the transaction so your only additional cost is the cost of the product itself.

Let’s talk about number 1, the beginning of the process – Let them know what your other products are.  How do you do this?  You may have tried lots of ways to do this, and there are many choices.  But I have found the best method – DIGITAL MENU BOARDS.

A Digital Menu Board is an HD flat screen TV that is run by a computer.  It has so many advantages over any other POS (point of sale) method that they have become the best POS systems on the planet.  Consider all that they have to offer.

  • HD motion content includes videos and image rich graphics.
  • TV screens with motion draw your eye to them.  Think about the last time you went to a restaurant or bar.  You didn’t go to watch TV, but you find yourself constantly looking up at the screens.
  • Content can be changed easily and frequently.
  • Content can be controlled by your business thus putting control in your hands.
  • Your business will be seen as more high-tech, more relevant, and up to date.  This can be important, especially if your clientele is under 30.
  • A loop on the TV offers high repetition which is very important.  In the advertising world a message has to be seen as many as 15-20 times before it begins to generate awareness by the viewer.
  • And best of all – LOW COST.  A Digital Menu Board will likely cost you less for an entire year than one week of TV or radio advertising.

In summary, as you consider your marketing expenditures you should allocate resources to both external marketing (finding new customers), and internal marketing (selling more to existing customers).  Which works best for you is dependent on many factors, but one factor is for sure – that is that the internal marketing will cost you less, and has a greater chance of a short term ROI.  With the additional money you generate from internal marketing, you will be able to afford more external marketing.

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