According to a leading market research firm, less than 1 in 4 new products make it to market and generate enough revenue to be commercially viable. Product launch failures are most often attributed to a lack of research and preparation during the product development stage. Want to ensure your product is poised for success and doesn’t end up a part of this statistic? Follow these 4 rules to ensure you don’t end up with a garage full of product no one wants.
- Test Your Product Assumptions and Scale Slowly
Too often, we see inventors and entrepreneurs fall into a painfully similar story. They have an idea, put all their resources into designing, developing, and mass-producing their product vision, only to find out at their first trade show that they have made product assumptions that their target audience rejects. With all their resources spent and containers of product about to be delivered, they are unable to implement the feedback they have received from real, paying customers.
While the entrepreneur may have discovered a market gap, the original idea should be treated as the product’s initial strategic direction. It’s important to test every assumption about the product and validate it; by producing small batches and using customer feedback to guide design, the idea can be transformed into a product with broader appeal.
When Proctor & Gamble launched Align nationally in 2009, they had already spent two years testing variations in packaging, reviewing customer feedback, and refining the product with small amounts of seed capital. They tested the product’s assumptions in real market conditions, selling to select cities and quantitatively measuring the reaction. When the team finally launched nationwide, Align went on to make over $50 million in its first two years and won the “Edison Best New Product Award”.
Take it from the largest producer of consumer goods on the planet; test your product and validate your assumptions before investing huge amounts of capital on a product that may not work.
- Evaluate Your Market and Design Around Your Price Point
Price point is the most important factor in determining whether a product makes money, yet entrepreneurs often put off pricing decisions until the very end of product development.
Instead, learn about your market and position your product around a price point that buyers will accept. Have in depth conversations with your early customers about pricing. If you’re selling to larger buyers or licensees, all it takes is a patent and a few phone calls to get some honest feedback.
Once you find a price point that works for your market segment, adjust product features, material and quality to ensure your business can become profitable in a timeline that revolves around your capital limitations.
Continue to evaluate and adjust your price point as you build momentum and transition from early adopters to mainstream consumers. In the end, your goal is to make money, so find out how to do so before you’re out of it.
- Prioritize Growing a Customer Base Over Profit
While your entry pricing strategy should be based around your short – and long-term business goals and limitations, your early sales data and customer base creates the backbone for your company’s growth.
Many entrepreneurs price their product using a price skimming method. This means targeting a profit margin and price accordingly, then skimming the price as the cost of goods go down. On paper, early profit enables reinvestment into marketing, fueling further sales. But, this strategy risks pushing away mainstream customers and larger buyers.
Although first production lots are always expensive – generally low volume with amortized tooling costs and a higher than average defective allowance – suppliers can provide pricing indicators for subsequent and higher volume orders.
Pricing for penetration allows you to prioritize growing a customer base, attracting mainstream consumers as opposed to early adopters. Generating sales from later stage adopters means learning about how they interact with your product, advertisements, and website. Perhaps above all, these sales provide ammunition when meeting with bigger buyers. And of course, as you continue growing your customer base, production costs will lower, and profits will come.
- Ensure Your Packaging Jumps Off the Shelf
As Shark Tank star Lori Greiner explains, product packaging must grab your attention immediately. In retail, you are up against the clock. Poor sales can quickly knock you out for good, so your product better sell itself.
Visualize your product on a major department store shelf. What products and colors surround it? Your product needs to pop out from the crowd. Does your packaging convey the difference in value between your product from your competitors? Remember, a startup does not have brand recognition. Minimalist designs like Apple’s aren’t going to work, no matter how elegant.
Test different designs with customers, use Lori’s retail store test, and ensure your packaging explains what the product does without making the consumer work. Do not make the same mistake Colgate-Palmolive made with Fabuloso, it might just kill someone.
A successful product development process challenges your inner product vision, scrutinizes every assumption, and often stretches your patience thin. If you’re still feeling unsure about where to start or what to do, reach out to us with your product idea and we can help take it from your mind to the market.