Innovation Reactor

Online Customer Experience Innovation

Your customers, competition and the market are dynamic and constantly evolving. However many companies develop a product, launch a website and design the online customer experience, then struggle to adapt as the market dynamics change.

As publishers know, new news sells. So updating your website with fresh and relevant customer content and having a plan to continuously optimize your online customer experience will keep customers engaged.

This next series of blog posts looks at how you can imprve and innovate your customer experience by creating new online tools, connecting more buyers and sellers, increasing security benefits and delivering great customer communications across the entire lifecycle.

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.

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.

 

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.

Questions for evaluating and ranking new product ideas

 

In the Ideation stage of the new product development process you created a pipeline of breakthrough ideas. So what's the best way to rank and prioritize them for further concept development?

Start by bringing the team back together and also get key stakeholders in the room to discuss collectively the pros-cons of each idea or concept. Successful companies and leaders uncover the best ideas by asking the right questions. I’ve found somewhere in the region of 5-10 key questions focused on different elements - customer, brand, profitability, production, manufacturing, marketing, technology or distribution - are enough to create a short-list of ideas to take to the next stage. 

It’s best to apply a simple scoring system (1-5 points for each question) as this makes it easier to contrast and compare, while also helping to validate and communicate the choices within your organization. Here are some example questions for evaluating your ideas;

1. Does the idea fit with our business model, our brand or product portfolio?
2. Will this new product provide us with a competitive advantage?
3. Does the idea meet a customer need and add real value? Why do those needs exist?
4. What unique benefits will the new product provide to the consumer?
5. Can the product be copied? Is there patent protection or are there substitutes?
6. Is the market an attractive one – size, growth rates, profitability, competition?
7. What is the complexity of implementation? Will we have to build or acquire new technology?
8. Would the idea meet our minimum return on capital or profit margin requirements?
9. Is the product easy for the target customers to understand?
10. Can the product be sold through existing sales and distribution channels?

Phil McKinney www.philmckinney.com also suggests some great questions on his Killer Innovations Podcast to help rank your ideas.

The New Product Development Process (Part 1)

          

Innovation and new product development (NPD) can be managed and measured by using a standardized process. In many organizations the challenge for product development is to implement an efficient process, to improve speed-to-market and the chance of commercial success while preserving creativity. The critical phases of a robust stage-gate product development process are; Strategy Development, Ideation, Concept Feasibility, Build & Pilot and Rollout. Today we cover the first 2 stages and recommendations on how to implement the process within your business.

Strategy Development – research and defining the opportunity

The key ingredient of any innovation process should be the extensive use of data and analytics to support the strategy creation and ideation process.  Moreover, a clear understanding of your overall company strategy is important, since existing product lines and brand portfolios will define areas for new product development, product extensions or product refreshes. By understanding the consumer, competition, culture and macroeconomic environment you can then develop your strategy and identify potential opportunities.

Undertake primary research to gather intelligence into consumer behaviors, wants, needs, unresolved problems and attitudes. Because our thoughts, emotions, feelings and experiences lay mostly in the unconscious cognitive part of our minds, unlocking these is critical for finding unmet needs. Metaphor elicitation and observational research techniques have been proven to work best.

Host workshops and consumer labs that uncover emotions, feelings, passions and real-life experiences may also provide richer consumer feedback than your average focus group or survey. Gather relevant secondary data from market research reports and identify the latest social trends and technology from companies such as www.trendhunter.com. Finally, cluster your research data and market insights into opportunity segments and use them in the next phase to unlock new product ideas.

Ideation – generating the next breakthrough product or service

In the Ideation phase you use the opportunity segments and research to help develop the next breakthrough product or service. Brainstorming workshops can help you generate new ideas however planning is vital to make your sessions meaningful.

Before you start to brainstorm it’s best to send participants any competitor analysis or consumer research ahead of time so they can read and prepare. Make your sessions short (1-2 hours works best) to maximize concentration levels. Also develop some guidelines or principles to help focus your team’s mental efforts - these could be along the dimensions of economic, behavioral, pricing, production, manufacturing, technology or distribution – but don’t make them too narrow as to limit the creativity and fun!

While the CEO should champion innovation, ideas shouldn’t just come from the top down. Ideation sessions work well when comprised of people with diverse backgrounds, personalities or interests. Also try inviting creative Ad agency people, outside experts or cross-functional participants to bring in fresh thinking and alternative perspectives. Another great method is to host internal innovation labs with your customer service employees or suppliers, since they deal with your products and customer pain-points everyday. The result is better collaboration and a wider range of ideas through diversified thinking.

You’ve now created a pipeline of ideas to then rank and prioritize for further development. Additionally, by including people from all levels and giving them the ability to contribute their ideas and buy-in to the strategy, this creates collaboration and internal alignment that will ultimately speed-up the NPD process in your organization.

Creating an environment for breakthrough innovation

You want to create a new direction for your company and make innovation a top priority. However to make this new strategy work it’s the people within an organization must first transform their communication, relationships, thinking and focus.

To achieve this I suggest 3 steps to generate “Innovation from the inside”

1. Improve communication and relationships to challenge existing ways of thinking

2. Develop a vision for the future and design breakthrough projects to achieve the vision

3. Create dynamic networks inside your organization that focus on driving results

1. Every team consists of a Coach and Players –with their actions on the field determining whether the game is won or lost. However many people become Journalists and Spectators –sitting in the stands giving opinions,  judgements, explanations, telling stories, writing reports or spreading rumours. Since Journalist and Spectator perceptions are rooted in the past they stifle innovation, creativity and change. If you have too many in your organization you cannot begin to realise your new strategy. To provide the catalyst for change try hosting town-hall style meetings focused on putting the new direction into context. Then smaller workshops that highlight Journalist and Spectator behaviours and the resulting low-performance it delivers. By challenging existing ways of thinking and improving communication people can then open up to new possibilities.

2. Work with your teams to develop a new vision for the future –then facilitate open communication to create alignment and shared understanding of this vision. Build momentum by developing a list of breakthrough sprint-projects. These short-term projects could be improving a process, adding a new partnership, building new technology or sales/marketing capabilities.  These action-orientated projects will help refocus everyone on the game and beating the competition.

3. After choosing your sprint-projects develop a rough plan, outline milestones, align resource networks and determine what learning is required to be effective. Remember keep it simple and remove complexity. While every team needs a structure and game plan, too much control limits innovation, restricts ideas and blocks creativity. Space with empowerment allows self-organization to flourish and employees to take action themselves and drive the new strategy forward.

When companies let employees contribute to the vision, facilitate open communication and challenge established norms, they will volunteer for projects and self-organize into dynamic networks. With employees championing new ideas, driving change, and spreading your new innovation culture across your organization imagine what you could achieve.

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