By Gary Shawhan, The CHEMARK Consulting Group
Plotting a successful business strategy for a new product presents a number of challenges. These challenges vary somewhat depending on the size of the company. In general, however, patience always has a value. Taking sufficient time to define a business plan that fits with the product advantages and the needs (or unmet needs) of customer within the markets being targeted is always important.
Determining the actual value that the features and benefits of the product bring to customers, and then to their customers, is extremely important in determining the actual market strategy you decide to implement.
A realistic appraisal of how unique or differentiated the product is versus other competitive products currently on the market is a necessary component of the process. In this regard, are these advantages supported by a strong IP position? This may be through trade secret or by patent.
If a strong IP position exists, then the market strategy needs to consider the companies actual ability to retain and protect the IP once the product is introduced (even sampled) to the market. The answer will vary based on the geographic scope of the market plan envisioned for the product and the competitive landscape and channels-to-market that are needed in order to succeed in the marketplace.
Smaller, entrepreneurial companies often share too much information early in the go-to-market process. It is driven by their enthusiasm for their product. It is also the result of the reality that the number of resources available to support development a more in-depth market plan is limited. The inventor sometime is also the business development person. Unfortunately, generating interest without a plausible and executable business strategy behind it is often a recipe for disappointment or even failure.
A starting point for developing a market plan for a new product includes identifying its unique features and benefits and then making sure they are supported by an adequate set of data. Before taking the first step toward trying to promote and sell the product, doing the additional homework necessary to gauge the actual value proposition that it may provide to customers in which markets and applications.
The best place to start is to identify the markets and applications that you feel will benefit the most from the product. This exercise puts a stake-in-the-ground that you can build upon in the process of determining an actual market strategy for the product.
Table 1. Some Key Questions to Ask
- How well does your company know these markets?
- Do you know the product performance requirements or customer expectations for the proposed target markets?
- What testing and supporting data do you have to support a value proposition to potential customers?
- Is there a benchmark product that you can compare your test results or data too that helps gauge the strength of your sales arguments to potential customers?
- Will the advantages provided by your product in different market segments support value-added pricing? What space exists in the value-chain to accommodate a high price position?
Temper the initial enthusiasm for the product. Assess where you are in developing sufficient supporting data and product-use information. It is critical to have a solid foundation of information on a new product. This provides the company confidence to support further product development, refine a market plan through further market research, and then prepare for a product launch.
Evaluate the company fit for the product and the market applications being envisioned as targets. What is the knowledge level within the company to support a market launch in specific market segments being considered for the product? Garnering internal resources for such an effort is linked to the confidence in the probability for success. Make sure that the market plan you envision does not exceed the capabilities of the organization.
As is often the case, the success of the market plan also becomes dependent upon the effective utilization of outside resources to complement in company assets. For smaller companies and entrepreneurs, the tendency is to focus on the size of the market and then translate this enthusiasm for the product into an assumption of commercial success. This optimism often leads to a premature effort to promote the expected benefits and presumed uniqueness of the product without having a well-prepared game plan to guide market entry.
For larger companies and corporations, this is not normally an issue. Organizational structure provides for internal checks and balances that come into play when a new product is being considered for introduction to the marketplace.
The consequences of product promotion without a plan behind it often fails to achieve any measurable level of market success. At best, the results are certainly at a level that is far below original aspirations and extend far beyond the timeline originally envisioned. It then leads to business traps that once created are difficult to undo.
Some things to consider in preparing to launch a new product:
- Sampling (without a market plan)
Avoid promoting and sampling the product to a large number of companies serving a variety of different end uses. Products sampled through general promotion, trade shows, conference, etc. under these circumstances and not supported with an effective follow up effort is a mistake.
While a number of these companies may have been good targets, sending samples without follow up almost never results in success, even if the initial level of interest at an account is high. An unwanted consequence of this approach is that competitors take advantage of learning about your plans. They then fill the void resulting from the poor follow up by bringing their own alternative product to these potential customers based on the sales arguments that you provided.
Premature product sampling and promotion has another potential consequence. If the initial test results at those customers sampled does not match or confirm the advantages projected, the level of interest in the product rapidly drops. Without timely follow up, samples quickly wind up on the shelf. Resources at these potential accounts are quickly diverted to other activities making the task of re-initiating interest in the product very difficult.
- Business Agreements
Business agreements, made early in the process of product introduction, can complicate, or even block implementation of a more suitable business strategy. It is important to avoid the instinct to align with certain companies too soon. Once the market plan has been refined and the attributes of the product more clearly characterized, better decision can be made.
There is normally a long list of companies that want to obtain new products that provide a level of differentiation from their competitors. Without a well thought out market plan, it is much more likely that establishing a business agreement with a company very early in the process of product introduction will create unwanted conflicts down the road.
Refinement of the market plan helps determine the best channels-to-market required to reach the actual customers and assist in identifying the appropriate companies to partner or work with going forward.
Smaller companies normally require support from a distribution network or other types of representation such as independent sales reps. If the view of the market opportunities for the product changes through test results and other market feedback, you do not want to be committed to a company that cannot address critical business needs.
Exclusivity has its place in a market plan. Consideration for granting exclusivity requires a clear understanding of the value the product brings to the market plan in relation to other business options. The more well developed the market plan is the easier it is to be confident in evaluating the merits of and exclusive business relationship.
Determine how well aligned the potential business partner is with your plan in areas like: The market or markets best suited for your products; the market geographies where the target customers are located; and the expectations customers in the target markets have from a supplier in that space to be successful.
For smaller company you can gain a lot if you can leap-frog the process by engaging with a company that brings a variety of resources and customer relationships to the effort. This can help produce results in a shorter period-of-time. You just need to pick the right companies carefully.
- Realistic Expectations
The value proposition for the product may be very compelling- perhaps even a potential game-changer. Successfully taking a product like this to market is difficult even for a large corporation. Integrating a new product into a large complex organization along-side existing product lines already serving many of the same customer is far from a simple job.
For smaller companies or entrepreneurs, this is a daunting task for sure. Narrowing the scope of the effort becomes key to managing the job of developing a workable market plan for the product.
Narrowing the scope of the effort to establish a viable plan is a necessary consequence for smaller companies. Geographically, a global approach makes little sense especially early in process product introduction. A regional or country approach becomes much more manageable and a better match for the resources which are available.
The market scope should be narrowed to focus on those applications which have a more concerted list of manufacturers. Validating the value proposition through commercial success is a necessary step in the process. Closely monitored test market efforts at several beta sites helps build and refine the product story and market strategy.