You’ve been working on your new, groundbreaking product for six months. You’ve tweaked the mock-ups, attracted investors, guided the Agile software development team and compiled a killer marketing plan that will drop on the world at launch. What could possibly go wrong?
For starters, your product will most likely fail.
The ramifications of failure are enormous, because the cost of product development is so high. According to Harvard Business School professor Clayton Christensen, about 30,000 new products are launched each year, and 95% of them fail. Additionally, introducing a new product costs between $20,000 and $500,000, not including the high salaries of developers and engineers and the time and money wasted in getting the product to market.
Small businesses, in particular, can’t afford to get it wrong. We’ll explain the major pitfalls to avoid and the steps to take to ensure your product succeeds.
Signs that your product will fail
To significantly improve your chances of effective product creation, consider these four warning signs of impending product disaster.
1. You haven’t validated your product idea.
New products must fill a need in the market, so it’s essential to evaluate whether that need exists. Here are some ways to validate your product idea:
- Check Google for keyword searches. Use Google Trends to see if people are conducting keyword searches related to the product or the problem your product is supposed to solve. If people aren’t looking for a solution, that’s a red flag.
- Read competitor reviews. If the product category already exists, look at online reviews of competing products, focusing on the bad reviews. What do customers say is missing? What don’t they like about your competitors’ products? What else would they like it to do?
- Consult customer-facing employees. If you have an existing company in the space, ask your sales team what customers are requesting. Likewise, ask customer service reps what customers wish for and complain about.
- Get consumer feedback. Ask current customers what their needs are and how they feel about the proposed new product and its features. Customer surveys are an excellent way to gain insight into what customers want and need.
FYI: Among failed startups, more than a third (35%) didn’t make it because there was no market need or target audience for their product or service, according to CB Insights.
2. You haven’t thought about production and fulfillment.
You may have an excellent prototype, but it’s a mistake to start your marketing campaign before figuring out production and fulfillment logistics. What if your marketing is wildly successful? You must ensure you can quickly fulfill orders so you don’t disappoint customers, diminish customer loyalty and give competitors a heads-up to fill the gap with their product version.
At first, consider limiting your marketing and doing a soft launch to work out any production or fulfillment kinks while you gauge the market. Then, when you know there’s a strong demand, ramp up your marketing outreach and production capability to maximize sales and minimize warehousing costs. You may want to outsource your order fulfillment. Consider the many benefits of using an order fulfillment service.
3. You don’t have a marketing funnel in place.
Launching a new product without a way to generate demand for it is a sure way to fail. Invest in high-quality copywriting, website design, landing pages, a social media presence, ad copy and email drip campaigns. Be sure to allocate sufficient money to advertising, SEO and social media marketing to quickly get the word out about your amazing new product.
4. You don’t believe your product will succeed.
If you don’t believe in your product and its value, getting others on board is challenging. Concentrate on the product’s benefits for your customers, employees, company and yourself. This passion will give you the motivation to push through during challenging times and win over skeptical customers. Others will pick up on your energy, so keep it positive.
If you cannot fulfill your vision, try different approaches based on your customer and market research. If your product does end up failing, it doesn’t have to be the end. Use the lessons from the experience to make your next product launch more successful.
FYI: A positive sales culture is essential for success. When you create a motivated sales team with a shared vision and strategy, you’ll bring in more sales and lift the company’s bottom line.
How to ensure your product will succeed
Follow these six steps to give your product the best chance of succeeding:
1. Define your target market.
Who will buy your product? Your first reaction may be “everyone,” but that’s unlikely. Sit down with your team and discuss what problems the product solves and for whom it will solve them. Who will benefit from your product, and what types of people will buy it?
Sometimes, your buyers won’t be the people you expect. For example, as the COVID-19 pandemic kept millions of people at home, Lego shifted to embrace adult users in addition to children and their parents. To cater to this unexpected market, the company created more intricate and complex designs targeted at adult users, such as Lego flowers, bonsai trees and a large-scale Lamborghini. To reach this target audience during the pandemic, the company devoted more of its resources to social media advertising than to retailers and in-person outreach at shopping malls.
To help identify your target market, create buyer personas, especially if you have several customer types interested in your product for various reasons. Each persona should include an ideal customer’s age, income range and other demographics, as well as their motivations and pain points. Imagine what each buyer persona would consider when choosing whether to buy the product, what emotions and goals would motivate them to buy, and how they would use and react to the product.
2. Create a compelling value proposition.
Presumably, when you came up with the idea for your new product, you had a reason. Now it’s time to fine-tune that value proposition. Ask yourself why a customer would buy this product that they have never heard of before.
In most cases, your product will solve a problem, and sometimes, it’s a problem customers didn’t even know they had. This is common with tech products; for example, before the smartphone, most people didn’t know they “needed” a camera, phone, computer, video game console, GPS navigation, a clock and more all in one device, and before Facebook and Twitter, people didn’t think they had to know what all of their friends were doing and thinking at any given time.
Follow these steps to create a compelling value proposition:
- Define the customer’s problem. What are they trying to accomplish? Think about tangible goals (e.g., “I’m hungry, so I need to eat food”) and emotional goals (e.g., “I want to feel good about myself for eating healthy”).
- Research the competition. Be aware of your competitors’ value propositions. How are they positioning themselves, and how are you distinguishing your value proposition? Determine your unique selling point.
- Consider your competition’s shortcomings. Analyze competing products and substitute problems that currently address your value proposition. What is difficult, slow, inconvenient, unavailable, poor quality, boring, unaffordable or inefficient about them?
- Know how your product solves problems. Highlight the most fundamental ways your product solves the customer’s problems and does it better than existing options. Again, this analysis includes tangible and emotional outcomes. Outline how after (or while) using the product, the customer will be happier, more entertained, save time and money, or be more effective. This is your value proposition.
FYI: If you have multiple buyer personas, you may have different value propositions, and that’s OK. You’ll be able to pinpoint target audiences in each sector and communicate with them effectively.
3. Price your product correctly.
Success takes more than having the right product with the correct value proposition. You also need to set a price that customers are willing to pay and still provides the company with enough profit.
Here’s how to price your product correctly:
- Be aware of your costs and break-even point. You’ll need to conduct a break-even analysis. How much does it cost to produce or source the product? Include incidental costs, such as those for the shipping of raw materials, fulfillment, storage, manufacturing resources and sales. Add all of these costs to get your break-even point. Any amount over this will be profit.
- Determine how much competitors charge. Conduct a survey of competitive and substitute products and their prices. Be sure to compare “apples to apples” for a more accurate analysis.
- Consider your target market’s price sensitivity. Think about how much money your customers have (household income) and how willing they are to spend more on this product class. For example, a person may have a low to middle income but might be willing to spend more on a baby car seat because their child’s safety is their highest priority.
- Go back to your original value proposition. If your target customer already buys a competitive product, will they be willing to pay more for your product based on your value proposition?
- . If your value proposition includes saving money, you’ll likely want to price your product lower than the competition.
- If your value proposition is “better value” because it has higher product quality and lasts longer, consider pricing it higher than competing products.
- If your product’s value proposition is much stronger than competitors’ or it’s positioned as a luxury alternative, you should be able to command a higher price.
- Test your product’s price point. Test your product at the price you decide on, and see how customers react and how many products you sell. If sales are lower than expected, you may need to tweak your pricing or provide a lower introductory price.
4. Know what success looks like.
How will you know your product is a success? You may be shocked to find that everyone in your business has a different idea – or worse, no idea – of success. Your idea of success may change, but it’s crucial to set parameters early in product development.
Measure your product’s success with KPIs.
To help measure your product’s success, identify key performance indicators (KPIs). While it may sound like a buzzword developed in the halls of a far-off business school, KPIs are absolutely essential for product success. To set and track goals for your business, you need some quantifiable, data-based indication that defines success.
Surprisingly, developing KPIs could spark a crucial question you should have already answered: “What problem are we actually trying to solve here?” The answer could take you back to square one, but at least you figured this out early in the process instead of putting a marketing spin on a product that doesn’t do quite what anyone wants.
Use data to learn and adjust.
There’s a reason hyper-successful businesses such as Uber employ squads of data scientists, and even former neuroscientists, to use data to shape their products. Leveraging data is more about learning and adjusting than distributing cool-looking graphics to the public.
Nobody gets it right the first time, but the best companies are prepared at launch to use data to drive iterations of their product to chip away at success. Uber applies massive amounts of data from their drivers and customers to improve wait times, locate hotspots, estimate fares and help ops teams find new drivers.
Consider some KPIs.
Although you may not have as much funding as larger businesses, it’s imperative to identify KPIs to help you measure your product release’s early results. Consider these examples of KPIs:
- Total revenue
- Profit margin
- Number of unit sales needed to meet revenue goals
- Number of prospects, leads and conversions
- Number of repeat customers
KPIs should be key metrics for success, so you don’t need many. You’ll use the baselines for forecasting, risk mitigation and product maturation. Your team members must know what will indicate performance so they can tune their processes and strategies according to your KPIs. Anything else is just shooting in the dark.
No product improvement decision should be made without supporting KPI data and estimations based on a proposed change.
5. Ensure your entire organization understands the product.
You likely spend most of your efforts tailoring messaging to customers or the press, but is that messaging reaching your sales team? Are you asking your staff how the product should behave, or merely telling them?
Here’s an experiment you should try in your next sales meeting:
- Ask your sales team to describe the new product and how it will meet customers’ needs.
- If they can’t accurately articulate the product’s real benefits, you’re not ready to launch.
- Halt your release plan until your sales staff has a core understanding of the product to the point where they can confidently convey its benefits to your customers.
- Perform this experiment with all departments that have any association with the product.
Just as identifying KPIs early can help shape processes and strategies, ensuring all departments have an in-depth product understanding will lead to a much more successful launch and valuable product.
Airbnb is an example of a company with a hands-on approach that ensures employees are familiar with the product and customers’ needs. All new hires take a trip in their first or second week to document user pain points, and they bring this knowledge back to work along with an organic understanding of customers’ needs.
Bottom Line: When businesses invest in employee training and include extensive product knowledge in the training program, they create powerful ambassadors who can confidently convey product benefits and understand customer pain points.
6. Don’t put off tomorrow what you can do today.
In today’s highly advanced marketplace, you’re unlikely to be successful if you manage from the seat of your pants with no clear plan. Success requires more than just a good idea; otherwise, we’d all be millionaires.
The world’s newest generation of mega-companies has shown that incorporating customer needs into the fabric of a strong company culture can eliminate internal messaging crises at the end of product development, when it’s too late.
These companies have a seemingly telepathic understanding of their customers’ needs and how their products help solve those problems. They also know the data points that will clearly show how their product performs, allowing them to pivot quickly according to the market response.
Tim Sorweid contributed to the writing and research in this article.