Innovation Reactor

Free: The Future of a Radical Price - UK Book Launch

Free is the new book by The Long Tail author and editor of Wired magazine, Chris Anderson. Having been an enthusiastic proponent of Long Tail theory I was fortunate to attend the UK book launch last week. Here’s a quick run down of the book.

Free is well researched and reviews some companies over the years that have used Free as a business model or a component of their marketing strategy, Jell-O, Village Voice, Google, Gillette, Yahoo, Facebook, Craigslist and US saloons back in the 1800’s that provided a free lunch if you bought a beer.

The book looks at the economics of free by comparing physical markets (Atoms) to the online digital market (Bits). With physical products, marginal costs rarely fall to zero so free is a marketing strategy used to drive sales that are cross-subsidized from another customer segment. You are probably paying sooner or later. Whereas in competitive markets, like the internet, price falls to marginal cost, therefore Moore’s Law (50% increase in performance and subsequent price declines approx every 18 months) can now be applied to technologies like storage, bandwidth and processing to allow business models based on free to thrive.

A central idea of the book is Google's “max strategy” where Free maximizes distribution and customer reach.

“It’s the best way to reach the biggest possible market and achieve mass adoption” says Anderson.

The obvious problem with a Free business model is monetization, i.e. we’ve got a popular product, a good reputation and all these new customers, now how do we make money from our business? However, most businesses would rather have this issue than having a great product with high margins but no customers and or brand recognition.

The book argues that in the digital world the first to Free gets attention and significant market share. Using the Microsoft struggle with piracy and open source software as an example, sooner or later you’ll compete with a company with a "freemium" business model so you need match the price, adapt your product offering to new segments or offer significant differentiation.

Anderson writes “Those who understand the new Free will command tomorrow’s markets and disrupt today’s”.

He offers several ideas for making money from Free such as offering products or services that allow customers to save time, lower risk, increase status and more premium or complimentary products and services to enhance their experience. But this is really nothing new and something we marketers struggle with each day.

There are some real problems with Free. For instance, the behavioural psychology of when products are provided free, customers tend to be less engaged and have lower commitment levels. Also, if free is not managed it can create abundance and waste that has long term effects on the environment. Devon Dudgeon writes another great review of Free in her Below the Line blog.

Chris gave a short introduction and I received a free copy of course. While I enjoyed reading the book and meeting Chris I didn’t enjoy the read as much as The Long Tail, probably because I paid $24.95 for that one!

Affiliate Links:

Free: The Future of a Radical Price

Using customers passions to develop highly differentiated products

   

When developing new products or making improvements to existing ones many marketers struggle to determine the amount of customer value. To help you develop highly differentiated products or services I have created a new product development benefits model.

Stage 1: Add everyday benefits that put you on parity with the competition

You identify a target segment of the market, size up the competition and create product benefits based on your customer needs. However many companies offer the same value proposition and just change the packaging, design or branding. Product development limited to stage 1 creates commoditization and price-led competition. Since everyday benefits are easy to visualize and valuate but customers are often reluctant to pay extra for them. To differentiate your products you need to move further along the customer value curve to stage 2.

Stage 2: Develop special benefits centered on your customers' passion areas

Products in stage 2 engage with peoples passions by establishing an emotional connection and deeper relationship. By adding special benefits to your product - focused on a unique passion area that your customers value - you maximize differentiation of your product. Product benefits created around passion areas have powerful effects on the customer buying process because they offer significantly more value. Customers are also more emotional and less price-sensitive when it comes to their passions, so they will to pay more to access to quality benefits that enhance their experiences.

Research is critical to uncover unmet customer needs, deep emotional insights and the idiosyncrasies surrounding the passions in their lives. Any special benefits you develop and add to your products should offer real value and empower your customers to live their passions.

Example passion areas: Theater, Sports, Dining, Home, Garden, Travel, Entertainment, Motoring, Technology.

Stage 3: Create highly differentiated buzz-benefits

Great products end up as dinner party conversations because they have extraordinary benefits that create buzz and excitement. Stage 3 benefits are easy for your customers to visualize while also being difficult to quantify the value. These product benefits must be available to all customers, however are only attainable by a select few so they remain exclusive. Unique buzz-benefits create excitement, emotional appeal and generate viral PR, reducing marketing costs and making it hard for competitors to replicate your product. It’s really important for you to determine if your brand has permission to play in your customers’ passion areas before you start.

Example buzz-benefits: A day on the set with an Academy Award winning film director, automatic first class flight upgrades, cooking classes with a celebrity chef, a free test drive and lesson from a top race driver.

Summary

You need a mix of rational and emotional benefits to achieve true differentiation, so design product benefits that appeal to both sides of your customer psyche. When you move along the customer value curve and develop special benefits - focused on your customers passion areas - you create products that provide customers more value. Adding extraordinary benefits to your product creates buzz and excitement that will send your product viral.

Revolutionary Road – Online business lessons from LOVEFiLM

LOVEFiLM is the largest online movie rental company in the UK. With over 1.2m active subscribers it generates approximately 50% of all UK DVD rentals. The business has been a remarkable online success story with 94% of subscriber’s recommending the service to friends and LOVEFiLM CEO Simon Calver expects to hit the £100m-turnover mark in 2009.

So how did this small start-up enter the market and beat established players like Blockbuster? This post highlights the most important lessons and best practice from the LOVEFiLM experience.

1. Understand what your customers care about the most then deliver a great value proposition

LOVEFiLM is built on a simple idea that consumers passionate about film want choice, convenience and value-for-money. Your business must create a unique customer-focused value proposition to compete and win.

• Choice: While the average rental store can hold a few thousand titles LOVEFiLM can provide over 65,000 from the latest releases to cinema classics.

• Convenience: Website where you can fine-tune your rental order list and DVD’s are sent by next day delivery service.

• Value for money: Lower cost per rental, free delivery and no late fees.

2. Minimize operations costs and quickly generate cash flow to support brand building and customer acquisition

Lower fixed overheads and rent: Rather than retail stores LOVEFiLM has one centralized distribution centre that services all of the UK, providing lower fixed overheads and rent.

Inventory efficiency: LOVEFiLM can fulfill customer rental orders on the same day to provide a speedy service that delivers on its brand promise.

Generate cash: Importantly many new online start-ups struggle to generate positive earnings because they offer their product for free to early adopters who then resist paying when companies try to monetize their product. From the start LOVEFiLM insisted on a business model with a monthly subscription fee because it provided a positive cash-conversion cycle that enabled growth. This business model is smart since upfront cash can be reinvested quickly in brand advertising and customer acquisition.

Pay-for-performance contracts: Signing performance-based affiliate marketing and channel partnerships for new customer acquisition ensured LOVEFiLM only paid for an active subscriber and not clicks or cold leads.

3. Design your website to make navigation easy, provide relevant content and make the purchase and billing system simple to use

LOVEFiLM is essentially a long-tail business with 80% of DVD rentals coming from the back catalog – movies over 3 months old – so the website is designed to make it easy to search for popular titles or browse films by genre.

Your company website and the customer service experience is such a key driver for building your brand. In the digital world it’s important to understand how your customers search for information and move through the buying process. Therefore use customer research to make your website navigation intuitive, place content where it's easy to find and keep the registration and billing process simple.

4. Allow customer personalization and community to deepen engagement with the brand

The LOVEFiLM website not only lets customers create their own personalized rental lists and watch movie trailers but also encourages them to add to their own film ratings, reviews and recommendations. By creating an online community where customers create the content, share information and interact, LOVEFiLM deepens customer engagement with the brand.

It’s a common misconception that user-generated content is hard to control, requires additional resources and the ROI difficult to measure. Because fast-growth companies like eBay, Amazon, Expedia and now LOVEFiLM are using online user-generated content to give their customers a voice and to differentiate their brands in a crowded online space.

5. Make continuous product and pricing innovations

Product innovation:  By using data to understand unique customer needs LOVEFiLM was able to introduce new product packages such as Unlimited, Capped and Pay-as-you-go monthly rental plans, catering to different segments. LOVEFiLM has recently added video games and is also developing a movie on-demand service to address behaviour shifts in customer entertainment and media.

Flexible pricing: LOVEFiLM started with one standard price but soon after the initial marketing push the customer rate growth slowed. Research indicated they were missing out on different audiences who didn’t want one-size-fits-all pricing so LOVEFiLM now provides different price points. New businesses are often reluctant to discount their core offering then feel surprised when new lower priced competitors steal market share. A good lesson here is to listen to customers, be flexible on pricing models to serve different segments, lower the entry point and don’t be afraid to cannibalize your brand or someone else will.

6. Blend digital and offline channels to monetize your marketing

With growth in new subscribers and increased website traffic LOVEFiLM now has 4.3m unique visits per month to the UK site and has been able to monetize their website and weekly email newsletter via ad sales.

Since DVD’s are sent by first class post, LOVEFiLM generates additional revenue in partnership with film studios and distributors by using envelopes and inserts to advertise the latest upcoming blockbusters and new releases.

New films and Hollywood stars are always in the headlines. LOVEFiLM actively monitors the newswires and engages in proactive PR to connect with news stories drive awareness of the brand and traffic to the site. A quirky LOVEFiLM review of the latest Star Trek movie received national coverage on the BBC and YouTube promoting the back catalog of Star Trek DVD’s.

If your business has a customer database and regular communication channels you can explore ways to monetize and extract value through ad sales, PR and partnerships like LOVEFiLM.

A quick guide to successful strategy execution

Many companies hire expensive consultants, agency planning teams or innovation “gurus” to develop  new strategies but surprisingly many plans fall down due to poor execution.

So here’s a quick guide to help improve your strategy execution using my experience implementing large company-wide marketing strategies, major advertising campaigns and new product launches.

1. Inform people on the rationale for the change and improve the flow of information

Strategy execution is often ineffective in large organizations because a lack of vital information results in poor decision making.  Frequently, information is hoarded by corner-office executives, protected by gatekeepers or never transmitted beyond various business unit silos. The key steps to strengthen the information flow are;

• Communicate and supply information about your new strategy to your employees so they understand the major components of the plan and the projected benefits the strategy will deliver to your company and people
• Provide your employees up-to-date market intelligence on competitors, customers and key driver metrics that measure company performance
• Develop an internal communications plan comprising of management meetings, emails, conference calls, employee newsletters
• Setup informal Q&A forums to improve data visibility and use your company intranet or shared drive to post critical business information, competitor and customer research or important presentations.

2. Build ownership of the strategy at all levels

Strategy execution can fall down when there’s uncertainty around people’s roles and responsibilities, fuzzy accountability or ambiguity about the ownership of decision rights. Clarity around decision-making is important because people need to know who’s accountable and senior management need the ability to track achievement and success.

An important building block is to create ownership of the new strategy by using employee workshops because this makes the planning process inclusive and builds collaboration, teamwork and trust. Moreover, develop a blueprint and roadmap so people understand the strategy, new direction for the business and timelines for implementation. Finally, improve execution efficiency and remove decision making paralysis by documenting people’s roles and responsibilities, assigning accountability for critical projects and communicating these to the wider organization.
 
3. Create a sense of urgency to overcome challenges and maintain momentum

Motivation is a critical factor for effective execution since it can seem like an insurmountable task to suddenly change direction. As people, processes and products that are rooted in the past need to transform quickly, do you have the optimal organizational structure, best talent and a diverse rage of expertise on your team?

An important enabler for effective execution is to create cross-functional teams and assign process owners and project managers to coordinate strategy execution across business lines. Changing the organizational structure is difficult, so a good approach is to search your company for talented managers and functional experts to create your project teams.  Remember to keep employees motivated by using team performance awards and recognise individual achievement or top performers for their great work.

Every plan has its execution challenges but improving the flow of information and sharing best practices throughout the business can help overcome difficult problems, improve efficiency and maintain momentum. It’s a great idea to create a centre of excellence to distribute best practice and improve oversight, strategy delivery and cooperation between business units. Lastly, always be realistic about your organization’s capabilities and capacity for change; tackle small projects first and aim for bite-sized successes.

4. Inspire people to embrace change and lead by example

You cannot execute a strategy with an email, a few employee meetings or pep-talks. But how often have we seen senior management try it – or alternatively we see a big-bang new strategy launch followed by silence after just a few weeks.

To get your people inspired so they can champion the gameplan, leaders must be in tune with the pulse of the business. This starts with setting clear goals and priorities and getting to know your people and business inside-out. A critical element is for leaders to follow through on deliverables, anticipate roadblocks and obtaining timely performance feedback.

I’ve mentioned the importance of communication, improving the flow of information, recruiting the best talent and sharing best practices. With these tools in place, leaders should then support decision-making at lower levels since front-line employees usually have the best knowledge about customers, clients and suppliers. The result is empowerment that delivers faster speed-to-market and execution.

Acknowledgments:

Execution: The Discipline of Getting Things Done (2002), Larry Bossidy, Ram Charan and Charles Burck.

Harvard Business Review (June 2008), “The Secrets to Successful Strategy Execution”, Gary Neilson, Karla Martin and Elizabeth Powers.

The Essentials of Customer Marketing

 

The essentials of customer marketing are basic tools that every marketer today should use when developing integrated marketing communications. I have outlined these 8 essential toolbox items below.

1. Authenticity. Customer marketing must be authentic and direct to the point. Though for many businesses, personalized communications tailored to an individual are cost prohibitive. But marketing can engage segments of 200 customers rather than 200,000 using an authentic voice that is not presumptive and does not ingratiate itself with the audience.

2. Transparency. Customer marketing communications are transparent, straightforward and honest to deliver on promises. They're not disingenuous, with hidden conditions or caveats that are buried in the small print. So avoid complex language, excessive marketing ‘buzz’ words and tech-speak. If your product is technical then put the top 5 points in a call-out box using short bullets and avoid a laundry list of product features.

3. Simplicity. Customer marketing production should be simple and unvarnished rather than slick or glossy. Online, each page loads fast and is functional with informative-engaging content, practical customer information and tools. The website doesn’t need a ‘skip the intro’ button because it’s not flashy or pretentious plus it has an intuitive site-map and page layout designed for - and tested by - actual customers.

4. Insightful. Content reflects real personal or small business issues with an empathetic tone of voice. David Meerman Scott suggests that when you understand your customers’ unique problems you can then create buyer personas and tailor the communication content. This content should be straight-forward, non-complicated and does not over or under inflate the importance of issues. If content is not meaningful, informative, helpful or entertaining, or have genuine value, it’s just forgettable and a waste of your clients or company’s money.

5. Actionable. The communications have actionable content and any offers are relevant and tailored to the needs of the consumer or small business owner. It’s now time to ditch those highly promotional brochures filled with marketing fluff and sales hyperbole.

6. Organic. Any content is realistic and relevant to the customers visiting your website today. Your copy uses actual customer quotes or customer language and not something staged, highly polished and dreamed up by an office copywriter with no knowledge of the customer.

7. Personal. With the choice of channel from direct mail, email, online, radio, press, TV, direct sales and mobile, delivering unique content through the correct channel, at the best time is vital for effective customer marketing. Since the delivery channel is the first contact in the customer experience, personalize it by using registered mail, live stamps, clean outer envelopes, opt-in email addresses and phone numbers. Massed produced, non-personalized mail and promotional outer envelopes are cheap but ultimately drive low response rates, generate a poor brand experience and wasteful. Seth Godin talks about permission marketing and treating people with respect as the best way to earn their attention. If the customer has not ‘opted-in’ then any contact is just spam or cold-calling.

8. Intelligent. Of course selectively use humor in your communications but avoid child-like fun, slapstick comedy and puns. Humor should use an intelligent wit, with deep truths rooted in the customer experience. Try getting your best customers to share their experiences to inform and educate others. Gather relevant industry experts in panels or forums to discuss the latest trends and post relevant topics or white-papers on your website to provide inside information to help your audience.

The Path to Extraordinary Leadership

I recently attended a seminar by Michelle L. Buck, Clinical Professor of Management and Organizations at the Kellogg School of Management at Northwestern University, titled The Path to Extraordinary Leadership.

In times of economic crisis leaders are now in the spotlight and scrutinized more than ever. While the history annuals remain littered with catastrophic leadership failures some leaders rise above the ranks to become highly successful.

Extraordinary leaders seem to generate synergy and infuse collaboration. They have a global perspective with the ability to span cross-cultural and cross-functional boundaries, with the energy and knack to seize opportunities at the right time. Moreover, these great leaders seem to have authentic life stories and core values.

So how can we develop our leadership abilities from good to great? Professor Buck’s research suggests the path to extraordinary leadership can be broken down into four main areas below.

Assessment & Feedback

• By constantly seeking feedback and performance data - to understand their strengths and weaknesses - great leaders develop a balanced and rational perspective of themselves. They then apply this information and knowledge to effectively leverage their strengths and improve performance gaps.

Reflection & Planning

• Extraordinary leaders make time for reflection to review and analyze their actions and decision-making. They assess their individual performance and the perceptions of others then look for areas to optimize and improve. With true inner reflection they can then move forward and create better plans for the future.

Knowledge & Insight

• Great leaders place importance on continuous learning and challenge themselves to understand the detail and inner-workings of their industry. They spend time networking and asking questions to learn from others. Since this learning improves their expertise, knowledge and thought-leadership in their field these leaders can then move ahead of the curve by seeing what’s next. So they can use their insights and to identify new opportunities, challenge the status quo and drive real innovation and change. 

Experience & Action

• While the media emphasises heroic individuals and turns them into celebrities, great leaders embrace the importance of teamwork and cultivate interpersonal relationships. Through these relationships the best leaders make an impact by rallying people to their vision for the future. Then using their experience they implement action plans to drive results, by collaborating and influencing across teams or organizations to accomplish goals.

Some might say that many leaders are extremely lucky in their careers. However one underlying pillar is a disciplined mindset to focus on these four key areas. This enables great leaders to learn from experience, show resilience when faced with challenges, and leverage their core values - with a sense of purpose that remains stable - while their strategies and practices adapt to a changing world.

An Authentic Story

But most importantly is that each extraordinary leader has an authentic story, ethical core-values, and a powerful resonating message. Valeria Maltoni has a great summary of Barack Obama's Social Media Campaign and how his authentic life story was promoted across different media to keep his supporters engaged. While Lorissa Shepstone has written a fantastic article on Anita Roddick who founded The Body Shop and inspired women by never compromising her core-values. Finally Guy Kawasaki promotes mantras that are meaningful and memorable, and great leaders have powerful mantras so their message is instantly recognizable.

What makes a great product?

Today I was asked an important question that challenges most businesses - What makes a great product?

I propose the answer to this simple but elegant question is the synergy between Consumer Value, Company Value and the Creation Process. Because the right balance of these 3 areas produces a quality product, outstanding value for consumers and excellent financial returns for the company.

Consumer Value

From a consumer perspective the product must have the following elements;

• The most compelling value proposition in its market or segment – great products impel the target audience to buy them because the design, features, functionality and benefits are irresistible, compulsive and seductive so customers cannot resist.

• Make a meaningful difference in customer’s lives – great products solve consumer’s unresolved problems by tapping into relevant desired needs and this creates added value.

• Be easy for the buyer to understand and use – a product with clear, simple and transparent functionality with no complex manuals or terms and conditions.

• Establish an authentic and emotional connection with the user – great products allow you to personalize features to your individual tastes, they are accessible with an easy online interface and they enhance people’s lifestyles. When this happens products will establish emotional connections so users purchase more and recommend the product to their family or friends.

• Have a great customer experience across the life-cycle – the buying process, fulfillment, customer service, website, and ongoing communications are deliberate and compliment the product. Batteries are included!

• The purchase price maximizes consumer utility – great products are priced correctly so that the rational value, emotional benefits and satisfaction derived are greater than the asking price.

Company Value

These are the key elements of a great product from the company perspective;

• The product is number No.1 or No.2 in its market or segment – the GE strategy that being the No.1 or No.2 player generates significant cost, quality and production advantages over the competition.

• Delivers the company above-average profit margins – because this allows the company to reinvest in growth and product improvements.

• Builds on the core assets of the firm – great products utilize the company brand, technology, customer service, and design or production capabilities. This creates a powerful force when aligned with the organizations business model.

• Designed for a clearly defined market segment – the product provides an easy solution for a unique problem experienced by a large number of consumers. This problem cannot be readily solved by another substitute product.

• The ability to expand from the core business – great product can be extended into new customer segments, new geographies or new markets.

• Easy to advertise and communicate - great products sell themselves since celebrities and early opinion formers endorse product. As the product is rapidly adopted the customer experience generates advocacy and an army of supporters create buzz, excitement and free PR via word-of-mouth. The result is lower marketing and advertising costs.

• Complimentary to your product line strategy – the product has to make sense to customers, your employees and sales teams, and it must fit with your brand and the other products you sell. This limits cannibalization of your other products and makes marketing easier.

• A clear product strategy – products that try to be everything to everyone will fail because they confuse the market and potential buyers. Thus products should compete on price, significant differentiation of features and benefits, or serve a niche customer segment.

• The product is designed to drive ongoing usage, engagement and repeat purchase behaviour – the best brands know a product is more than design and packaging but includes the actual customer experience that surrounds it. When the product experience exceeds customer expectations, and surprises and delights, customers will return for more.

Creation Process

The most commercially successful products use a structured creative process with 2 key ingredients. OK - some products like the Post-it Note were accidents but they still need to get to market through; 

• A talented team of diverse experts - Thomas Edison said “success is 10% inspiration and 90% perspiration” but from my experience creating a new product is down to the blood, sweat and tears of individual champions and cross-functional experts in the team.

• A deliberate innovation process for new product development - this creation process starts with a maniacal customer focus to uncover unmet needs, then structured idea generation to harness creativity. Next energy and passion to create a competitive strategy, with a winning product concept and customer experience. Lastly, flawless execution focused on product design, testing, quality and performance.

 

Creating Integrated Marketing Communications

     

From my experience the best integrated marketing campaigns are driven by a process of discovery, problem solving and collaboration between the client-agency team. Because this process unlocks consumer insights and uses a detailed diagnosis of the marketing problem it invites the team to look at problems from different angles, challenge the status quo and inspires them to come up with breakthrough communications.

1. Consumer Data & Insights

The first step is to understand your target audience by using data and insights to develop pen-portraits of your best customers.

To create these pen-portraits review customer demographics, product usage rates, media consumption and research. Also, analyze your competitors and get Internet usage statistics for your products. These channel metrics should include – online click-through rates, keyword searches, direct mail response rates, email open rates, and phone conversion metrics – to assess how your best customers respond to various media formats.

This will assist the team answer these critical questions.

• Who are our best customers?
• How do we best communicate with them and attract more? 
• What are their attitudes towards the brand, product benefits, customer service, and content?
• What is driving their willingness to apply?
• What are their passions and motivations?
• What are the common characteristics that our top customers share?

2. Marketing Positioning & Customer Experience Mapping

Successful marketers understand how their product or brand is currently positioned in the market, because it allows them to reposition and differentiate their communications. To determine the dimensions supporting your product or brand positioning you may need to conduct focus groups with your target audience, and test different messages to uncover what resonates best.

If you are repositioning your communications it makes sense to also refresh your website and improve the online customer experience. By mapping the end-to-end online customer journey on your website, plus analyzing page traffic, links, online forms, content and functional design, you can start to streamline the customer experience. Use an expert like an agency Digital Planner or Information Architect to help you optimize your online content and media strategy.

How do your customers reach your website? This answer is to map the entire pre-purchase journey and buying process. For instance, a Hotel may find their customers view holiday photos from friends/family on Flickr, read the Sunday paper travel section for inspiration, then search on Tripadvisor or travel blogs to get recommendations, and finally compare prices on Priceline.com or Expedia before making a reservation. By understanding the purchase process you can now insert your media into the user experience, such as banners on Travel specific sites or cross-sell links on travel booking conformation pages.

3. Agency Brief

I believe the agency brief is a dynamic process and not just one-way communication from the client to the agency. Therefore I recommend using a workshop create the brief using the steps below.

• Create a vision for repositioning/refreshing the communications platform, put the strategy into context for the team plus outline targets and key milestones. Ask the team to present the latest consumer research and market trends

• You can task several members of the team with presenting best practice and a review of competitors and any previous communications. Collaborate with team and get them to contribute their ideas, share expertise, and learning’s to create the outline of the brief.

• Ensure you have the best talent and diversity in the workshop so include from the Agency – Account Manager, Planner, Art Director, Digital Planner, Media team, and from the client –  Marketing, Finance (yes the bean counters…and if you include them they’re more likely to approve your budget) and PR.

The workshop brings everyone up to speed quickly, generates new ideas and different perspectives, to develop solutions for your key marketing communications problems. You’ll find the agency-client team will work better, smarter and faster since people understand the strategy, customers, objectives and who to turn to for information.

The final brief should include the customer pen-portraits, a map of the online customer experience and buying process, competitor products, an overview of the marketing strategy, the communications problem to solve, product or brand positioning research, targets and metrics.

4. Creative Development & Testing

At this stage the agency has developed several different creative platform concepts and positioning statements. But many new communications fail to deliver results because marketers second-guess consumer reactions, or go with their gut instinct, rather than using a more robust process to evaluate the creative work.

An inexpensive and fast method of testing creative is online panels or forums. These show the creative concepts to your target segment – testing the appeal, excitement, consideration and intent to apply. For your website, customer labs can be a great way to test new navigation and the online customer experience.

5. Delivery

Your new integrated communications platform will contain online media and content – including banners, email newsletters, blogs, podcasts, whitepapers, e-books, webinars, and refreshed product pages – that will appeal to your targets audience and align with your marketing objectives.

Throughout the process, work with your media agency to enhance your prospect targeting strategy. It's also important to create search engine terms that integrate with your communications to drive awareness. Finally, ensure consistency across your communications by integrating the new creative in your offline channels like direct mail, press, radio and TV.

You're now ready to launch your successful new integrated marketing communications, website and media plan.

The New Product Development Process (Part 3)

Build & Pilot – prototype your product, marketing and customer experience

In the Concept Feasibility phase you developed the full product proposition, go-to market strategy, and financials. Your key stakeholders then reviewed the product plans and you gained approval to move the project forward. The next stage is a successful mobilization effort requiring you to identify and rally teams across your business for support to ultimately build, test and launch your new product. Some of the main tasks are;

1. Pull together a cross-functional team of experts from technologies, operations, risk management, legal, manufacturing and marketing/sales
2. Complete the design, build and testing of the product
3. Develop your marketing material, a PR communications plan and build the website
4. Setup manufacturing and production systems, develop customer delivery systems and logistics – online purchasing, warehousing, shipping and customs
5. Train customer service staff, finalize a risk management plan and seek legal or regulatory approval

Depending on your strategy, product and industry some companies go straight to the rollout phase. For instance the launch of a product line extension that leverages a successful brand may provide the confidence to rollout without further testing.

However for new products running a pilot program is often prudent to validate demand, refine the value proposition, and optimize design, packaging or formula. Testing allows you to observe and adjust the customer experience and stress-test operational procedures. Now is a great time to tweak your product positioning, distribution channels, advertising and sales plans. Technology companies will launch beta versions of software to a core group of users who help them test and improve the product before launch. Auto makers may develop a prototype or concept vehicle allowing enthusiasts to view at car shows or road test at special track days.

I recommend you define the measures of success for your pilot – including sales, revenues, product usage, consumer demand levels – and get commitment from key stakeholders that once these are achieved the product will move to full rollout in a specific timeframe. As some products delay reaching the market since internally no one could agree if the pilot was a success!

Rollout – accelerate your marketing and advertising for growth

This is the commercialization phase whereby you obtain the necessary investment to execute the full marketing plan, scale-up advertising and optimize your online search and media strategy. Moreover, increase manufacturing capacity and grow your salesforce to accelerate growth. Continue to manage your product through the life-cycle with CRM activity, evaluate the product against key performance indicators and manage for payback on your investment.

Good luck with your NPD process and please let me know if you have any questions or suggestions for improvement.

The New Product Development Process (Part 2)

Concept Feasibility – developing a winning product value proposition

At this point in the new product development process you have completed the first 2 stages (refer to my earlier post this month)

1. Strategy Development – to research customers and define the opportunity

2. Ideation – the generation of new ideas for the next breakthrough product or service

The next stage is to turn your ideas into full product concepts. Start by creating a 1 page product concept document for each idea that outlines the following;

• Describe the value the new product will deliver to the consumer. These will be the main product proof-points – Convenience, Reliability, Prestige, Safety, Environmentally Friendly, Relaxing, Quality, etc.
• Explain how the product works and the consumer need that it satisfies
• Detail the functional and emotional benefits of the product
• Choose 1-3 of the strongest proof-points associated with the product idea and expand on them to develop a value statement that describes your unique selling proposition (USP)

The most successful product concepts should effectively build on the economic strength of your existing business model, leverage assets you already have such as technology, service and branding, or expand the core business to target profitable new customer segments.

At this time your should engage with your Design, Manufacturing, Outsourcing or IT teams to conduct a detailed capability assessment of your systems, technology, partners and suppliers. Produce a product blueprint or technical specifications document with production processes, user processes, customer service linkages and any outsourced partner contracts.

You've developed a strategy in Stage 1 but now you need to create an action plan to commercialize the product – including an integrated marketing communications plan, operational plan, online and customer service experience – adding timelines and a roadmap to market.

• Make sure you clearly define the target segment for the product and market positioning. I recommend using a market map to plot your USP and that of your competitors, plus outline where this new product will live in your existing product line hierarchy. Because if you’re unclear you could cannibalize existing product sales and confuse your salespeople or customers.

• Develop a full business set of product financials to estimate cash flows and return on investment (ROI). Moreover run sensitivity analysis to factor in changing customer behaviors, competitive and macroeconomic conditions to stress test your financials.

Further consumer research using focus groups may be required to test the final concepts, product positioning or a prototype. Additionally, online consumer panels are a great way to get the data you need to support conjoint analysis for assessing product benefits, product positioning and pricing.

If the estimated financials meet your company ROI benchmarks then present your plan to secure commitment, investment and resources from your investors or senior management to build, test and eventually rollout your winning product.