Evaluating New Products: Part 1

by Ken Wong

According to Harvard Business School, 95 per cent of new products fail. With grocery alone accounting for roughly 15,000 new products each year, that is a staggering number of false starts, and everyone in the industry knows the fully loaded cost of taking on a failed new product is far greater than the amount recorded on the supplier’s invoice.

In coming issues, I’ll look at research on the characteristics found in innovations that gain rapid and deep consumer acceptance. You can use these characteristics to compare the potential of different innovations, identify the work required for the new product to reach its full potential and thus inform you of the time and money required to nurse them to success.

Start with why it is purchased

We tend to think of the term “works” as reflecting the technical or even emotional merits of the innovation: does it do what it says it does? Don’t worry about whether it technically works. Success requires meeting customer expectations, and those are tied to the reason for purchase. So, start by asking “what problem does this innovation solve?”

For example, do people buy drills or the ability to make a hole?” 

1. If people buy drills, then we compare the capabilities of the new drill to those already sold and base the evaluation on whether enough people are prepared to pay for that capability. It is pretty straightforward.
   
   
2. If people buy the ability to make a hole, the evaluation should consider:
   1. Market size and longevity: is there an enduring need for holes that drills cannot satisfy? Demand for the innovation cannot outlive the lifespan of the problem it solves.
   1. Market share: how does the innovation’s technology compare to drill technology on factors that influence customer selection? For example, a laser pen could burn a hole, without drill bits, at variable angles and sizes in a lighter-weight instrument with more portable power supply. And, since it burns a hole, no sawdust to clean.
   1. Differentiability: as the industry matures, suppliers will aim to carve out a unique positioning, often by choosing to focus on one or two features of the new technology. The larger the set of features, the larger the number of feasible positions and the greater the battle (and resulting profits) for your shelf space and promotional considerations.

Products aren’t bought mindlessly, even when they are bought on impulse; they’re purchased to solve problems. Start with “why buy” and you will be able to assess whether the innovation has the profit potential to merit further considerations, something I will discuss in future articles.

Ken Wong is a distinguished professor of marketing at the Stephen J.R. Smith School of Business at Queen’s University

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