Editor’s Note: One of the ongoing challenges for business is successfully launching new products. A scandalous percentage of new products fail and are pulled from the market. How to improve the new product process has been a holy grail for marketers in all categories. Alan Hale discusses the problem from a b2b perspective and outlines a number of issues/challenges that b2b marketers, in particular, need to better consider as they develop and launch new products.
It is estimated by industry research that 70% to 95% of all new products introduced into the market fail (depending on the market sector). A key driver of this failure is the inability of the company to collect and analyze the proper insight from the market via “voice of the customer/market” research and incorporate it into their company DNA. To have a higher successful batting average, companies should obtain critical insight from customers, potential customers, influencers, channels and all the stakeholders that purchase, specify, use or influence the product prior to product design and launch.
The reluctance to utilize this necessary customer insight into the NPD (New Product Development) process is due to perceived added costs and delayed time to market. There is also a type of arrogance that we “know the market better than anyone else.”
The following are actual client examples in business to business markets. These examples outline the potential new product failures as well as how research has played a significant role in helping these new products eventually succeed:
1. The new product or service does not fit with the customers’ perceptions of the core capabilities of the supplier.
A chemical manufacturer received a request from a customer to build a chemical plant. The client wanted to explore whether it made sense to offer this capability to other customers. Other customers frankly said, “you have to be kidding – no”. They would rather purchase something so complicated from an engineering firm that had a track history of success.
When companies expand from their core products and services, they should conduct some qualitative discovery research with customers and potential customers. How well does this product or service fit with our core capabilities? How likely would you buy from us? How would we prove our credibility?
2. Lack of basic market understanding of the needs of customers.
A manufacturer of spray paint launched a new line of quick-dry paint that would dry within four hours. Research with maintenance managers indicated they had a different perception of “quick-dry”. There was a need for the product to be “tack-free” within one hour to avoid paint transfer onto their clothes. This insight led to a reformulation of the product.
3. Lack of technical support.
Companies assume their salesforce will sell it, and of course, their distributors will sell it (“that is what they are getting paid to do”).
A valve manufacturer sold its technical line of valves to general line distributors, who in turn resold these products to their process engineering customers. Research with these engineers indicated that technical support was required; specifying which valves were to be used for different chemicals. These distributors were unable to provide this required technical support as they did not have the appropriate engineering backgrounds. The answer was to utilize a separate engineering salesforce technical support and allow the product to flow through the distribution network.
4. Addressing the perceived “risk” of using new products/suppliers.
A client, new to the industry, had developed a new product specified by structural engineers for commercial construction. Growth was very slow; far slower than the company had expected. Research showed that the structural engineers demanded to see a field test consisting of a decade of freeze-thaw cycles to verify the product actually worked (talk about being risk-averse).
Research insights from structural engineers indicated that this risk could be mitigated by utilizing the results of testing of independent labs, conducting pilot field tests and obtaining referrals from highly visible and respected companies.
5. The correct set of features is not included, or the product is too complex to use.
A client of testing equipment allowed its engineers to design products with minimal direction from marketing. The engineers then designed all the features they “thought” the customers would want. These engineers were busy developing 25 different features. Interviews with their current customers and potential prospects indicated that only four out of the 25 features were desired and one was so critical that they were willing to pay a premium price. This reduction of irrelevant features launched the product ahead of time.
6. Poor/inconsistent product quality.
A client who made complex polymers was rated as having excellent product performance quality. According to customer satisfaction research from compounders, the formulation of the product varied significantly from batch to batch. It required more engineering time to “fine-tune” the final product, which added costs and extended delivery time for its customers. Since the polymer manufacturing could not be made consistent in the manufacturing stage, the client offered its larger key customers access to their engineering department to reduce the amount of “fine-tune” time.
7. Not providing qualified installation:
A client manufactured single-ply rubber roofing. In an effort to maximize their market share, they signed up every roofing contractor they could find.
Research indicated that roofing contractors were not properly trained on correct product installation, as it greatly differed from installing the current roofing technology. Roofs began to leak, and building owners complained loudly. Sales dropped as articles appeared in several trade magazines criticizing the product’s quality. The client re-examined their product and determined there were no issues with respect to product quality.
The solution was for each installer (not the contractor company) to become trained and certified. This project required extensive V.O.C. research with building owners and contractors to identify the systemic problem.
8. Selling skills of the salesforce do not match the requirements of the customer.
Companies launch new products/services and tell the salesforce to concentrate on selling it (“make your quotas”). In some instances, the salesforce may not be qualified to sell the product.
A client who sold products to facility managers of commercial and industrial facilities was tired of the low margins they had. Management wanted to make the sales reps sell consultative energy audits since the margins were significantly higher. The research was conducted with the facility managers of commercial accounts to determine the background of successful salespeople, who called on them for these types of services as well as the technical capability of the client’s current reps.
Research indicated each of these types of reps had different skill sets. One took orders, while the other one consulted in diagnosing and recommending solutions. It was difficult to train salespeople to be consultative sellers. The client reluctantly set up a separate salesforce consisting of engineering consultants.
9. Compensation is not tied to the sales cycle.
A lighting company used manufacturer reps to call on specifiers (architects and electrical engineers) of lighting products. The company had developed a new electronic product and offered the reps 15% commission (the industry standard was 10%) on each of these products sold.
The product stalled in the market. It was discovered that there was a lag of 18 to 24 months between the specifications and the actual sale of the product. The financially motivated reps decided it was a better investment to spend their selling time on products that had a much shorter sales cycle. CMG completed research profiling reps of the client and contrasted that to profiles of other industry reps who had successfully sold longer sales cycle products.
The company changed the compensation using the metric of the number of specifications written. Specifications increased greatly and were eventually followed by an increase in sales.
All nine examples have a common theme; there is a lack of customer insight in the NPD process. Companies decide to use a company-centric planning approach rather than using the optimal customer-centric planning approach. This is counter to successful marketing practices where you begin with the customer in mind.
An interesting aside is that marketing research becomes more valuable as an investment to optimize sales revenue, as opposed to only being viewed as a cost by senior management.
We wish you success in your new product launches.