The Proof
Success is Found in the Details
You may not like math, but the objective and logical nature of it is a great way to demonstrate how EVERY DETAIL MATTERS when launching new products.
In our experience, new products fail for two primary reasons:
1. Low or inaccurate awareness: It is a simple fact that people don’t seek out products they don’t know exist. People don’t get excited about buying products they don’t understand.
2. The compounding impact of small compromises or big mistakes: Companies tend to recognize the risk of one catastrophic error (and therefore are careful to knowingly avoid them), but most overlook the greater compounded risk created by a sequence of smaller errors.
Awareness is critical because it sets the upper limit for volume forecasting. The value of conversion rates, spending per transaction, and repeat purchase are primarily determined by the number of customers doing each. These people must have already become aware of your offer and have decided to try it for the first time before they factor into these calculations. Put another way, if only a quarter of the guests you want to attend a party actually receive the invitation, you’ll have a lot more food to serve than people to eat it.
The cost of little compromises isn’t so obvious, so let’s perform a basic calculate to demonstrate.
Assume there are twenty elements necessary to launch a successful new product, and each element has a range of theoretic potential, varying from perfect performance (valued at “1”) and total failure (valued at “0”). Most often, companies deliver something between these two values…essentially a percentage of optimization or a threshold for what is considered “good enough.” (kind of like saying 93%and 99% both earn an “A” grade, so the difference between the two must not matter).
Perform perfectly on all 20 elements and a product essentially has a 100% chance of being successful. In mathematical terms, the compound impact of delivering a “1” on all 20 elements looks like this:
1^20 = 100% odds of success
But, reality never allows for perfection…limited resources, like time and money, force necessary compromises and tradeoffs. Human flaws like over-confidence prompt further avoidable compromises. In reality, companies end up sub-optimizing most, if not all, of these elements.
By just dropping performance on each element to 95% of possible perfection, the odds of success have been cut to a third:
0.95^20 = 36% odds of success
Drop to 85% for each element (still above Pareto’s widely applied 80/20 principle…being efficient by focusing on the 20% of effort that produces 80% of the results), and the odds of success crater to under 4%.
0.85^20 = 3.9% odds of success
By the way, if you had hoped that Pareto’s 80/20 could be applied to a new product launch, we’d calculate your odds of success to be just above 1%.
As you can see, this rudimentary math predicts a report card full of solid “B” effort across every element leads to 4% odds of success…which aligns nicely with the common conclusion that 95% of new products fail within the first two years.
What may seem like a sequence of insignificant individual compromises related to the many decisions that go into launching a new product actually compound dramatically. Even a report card that appears to be full of A-minuses or B-pluses should raise concerns. On the other hand, being one of the few companies willing to put in the discipline to capture an additional 10% improvement for each decision can make a greater than 10x impact on overall results.
Every Detail REALLY DOES Matter
While predicting the success of a new product launch can’t possibly be captured in such a rudimentary formula, it hopefully provides a simple and tangible tool to quantify the compounding impact a ‘good enough’ mentality can have ultimate results.
As you return to making decisions related to the new product that will determine the future of your company (or your career), consider the following:
- Review each component of our EDM Protocol and assign a value from 1 (perfect confidence) to 0 (no confidence) for each. Multiple these together to get a benchmark for the overall odds of success.
- Recognize areas that have been overlooked or neglected and take action to address them. Remember that in this equation, a value of “0” for any one component puts the overall odds of success at 0%.
- Read more about how we help clients in listen mode, learn mode or launch mode.
- Contact us if you recognize the need for some expert help and guidance. We’ve helped clients improve their odds of success across almost 200 categories.
WHAT IS YOUR BUSINESS CHALLENGE?
Our core competency comes from the unification of three key capabilities that we believe produce unique and elegant solutions of exceptional value:
- Classical market research training: We know how to design and analyze research.
- A collaborative business perspective: We understand the demands of working on a customer team and what it takes to deliver successful new products – from line review presentations to guiding executives through strategy development.
- Over 15 years of retailer interactions: We regularly present to or engage retail partners which has taught us what it takes to effectively influence their decision process.
This background allows us to be fast and productive – from immediately speaking the same language as clients to being able to recognize their unarticulated needs.