Marketing innovation is a key source of revenue and profit growth, as well as a great opportunity to strengthen your brand and competitive advantage. Most companies’ annual plans rely on marketing innovation. According to Ernst & Young and BASES, only 5% of U.S. new products are successful. These are the seven Best Practices, including the avoidable common mistakes, among successful innovation companies:
1. Set Innovation Goals and Accountability – This is a simple idea, but it is often overlooked. Successful innovators consistently set clear innovation goals, specifically:
• Sales, profit, and payback goals for the entire Innovation effort (all products and services), typically for a one-year or five-year timeframe and
• Sales, profit and payback hurdles for each project to merit consideration
• Both Marketing and Product Development have inter-dependent accountability for delivering these goals
2. Demonstrate project viability before committing resources – Each potential new product should have demonstrable financial viability and market need before resources are allocated. This simple step is skipped with alarming consistency and is a major cause of downstream profitability problems and innovation failures. Answer these two questions at the Idea stage:
• Is the product financially viable? Insist on reviewing crude Year 1 and Ongoing (typically Year 3) Profit & Loss statements on each proposed project. This demonstrates whether the project is financially worthy of being considered, needs rework, or should be thrown out. The Year 1 P&L is important to understand the potential investment issues. The Ongoing P&L illustrates the ongoing business model.
• Is there a true consumer unmet need for the product? You must be able to answer: 1) who is the target; 2) what is the relevant consumer benefit? (Note that it must be an important, motivating benefit to consumers, not a “nice to have,’ lower value benefit) 3) how is it superior to competition? When you launch a new product or service, you are betting that consumers will change their existing purchasing behaviors and choose you. You must be superior to their current options and solve issues they care about. Be sure. Ask your target market.
2. Leverage True Core Competencies – The most successful innovators exploit what they can and do best. They wisely avoid areas where they lag competitors. Innovation winners have a deeper self-knowledge of core competencies than the superficial “leader in X industry.” The Management Team has rigorously evaluated and determined their best internal processes, to find what they do, or realistically can do, better than their competitors. For example, Frito-Lay fully understands and leverages its store-door delivery, manufacturing, and snack innovation core competencies. Conversely, even uber-performer Frito-Lay has made the costly error of presuming snack food brilliance would translate to success in the very different cookie industry. Play from strength. Know and stick to your core competencies.
3. Drive Collaboration to Optimize Outcomes – Extraordinary innovation results consistently occur when R&D, Marketing and Operations collaborate and continue to improve the idea throughout its evolution. In most companies, this collaboration will need facilitation or intervention. This lack of sufficient collaboration is because of simple, addressable issues such as different department focuses, personalities, thinking styles, and often, location. One of my most lucrative and satisfying new product launches was a direct result of a brilliant, tenacious Project Engineer who showed me his proprietary, shelved innovation. It simply needed a marketing co-sponsor, business plan development, resource allocation, and a viable launch and rollout plan. It is now a global product that transformed its industry. There may be ideas, or partial ideas, like these in your developers’ hands today.
Breakthrough innovators structure collaboration between these separate groups on an ongoing basis to explore “what is possible,” in contrast with weaker innovators who form ad-hoc teams to execute the project. . Specifically, Marketing and R&D collaborate to blend market potential with technical feasibility. This is a powerful combination often yielding far superior possibilities and options than the original idea. Similarly, Marketing and Operations collaborate to align market demand with efficient manufacturing capabilities.
4. Make Innovation as a Priority Process, not an Event – Innovation leaders have ongoing innovation teams, Management commitment to innovation, assign Senior Management sponsors to priority projects (as enablers), and have a well-organized, structured innovation process. In fact, over 70% of leading U.S. companies use the timeless Stage-Gate® Process. It has survived and gathered momentum since its 1980’s launch because it works. The basic ideas are: 1) evaluate and develop product ideas with increasing levels of thoroughness as it evolves from and Idea to Launch; 2) complete the necessary cross-functional tasks at each phase of the product’s evolution; 3) methodically take ideas through six stages: Ideas, Scoping (what will it entail); Build Business Case (rationale for development); Development; Testing and Validation; and Launch; and 3) Proceed through stages only when each stage is complete and has achieved its hurdles. Simplify or expand this process to suit your company, but apply it. It is a great, proven way to ‘get it right’ each and every time.
5. Properly Position the Product – Effective innovation relies on offering a truly superior product and persuading target consumers to buy it. Winners build superiority into the product and communicate it persuasively. The frequently overlooked opportunity for greatness is in building superiority into the product. Lexus and Dyson are examples of visionary innovators who built superiority into their products.
New product winners hinge on clear, persuasive messaging that motivate consumers to buy. This includes: equipping the salesforce with key messages, a fully integrated and consistent consumer communication plan, and ensuring every aspect of the marketing mix (pricing, distribution channels and promotions) support the intended positioning. The marketing plan must be sufficiently funded and planned upfront. Keep it simple. Talk to your audience in their language. Focus on benefits, not features (what the product can do/how it’s made). Consumers buy benefits
6. Plan Sufficient Marketing to Drive Demand – Designing, producing, and gaining distribution on new products is only a part of successful innovation. Effective innovation relies on demand generation and retention. Early in the product economics, you must plan a realistic marketing plan and budget to gain awareness, get consumers to try your product, and continue to repurchase it. Set a realistic budget for your launch that is grounded in realistic costs of what investments you must make to support required trade and consumer behavior that tie to your unit projections. Challenge your marketing plan and budget assumptions with your history or industry information. Most helpful data is publicly available or accessible though company resources and allies.
7. Measure to Manage and Continuously Improve – Innovation leaders set in-market performance goals on key metrics and rigorously monitor performance vs. projections. This provides essential feedback on areas of leverageable strength and pinpoints areas that need further attention. Learning and adapting to both marketplace realities is the art of building and maintaining an ongoing growth project. If you have chosen to launch in a test or regional market to evaluate national expansion, set the performance criteria and time frames that you will read the test market upfront. This structures more objectivity into the important future decision.
Gather sufficient, objective data to factually assess market performance, rather than rely on biased updates from stakeholders. Most new product launches show healthy momentum, or lack of it, within the first six months they are in market. Leading indicators such as account reorders, consumer repurchases, and inventory turns emerge and foretell future project expectations and identify issues. Expect and respond to any escalating feedback you are getting from the market. Do not explain away negative feedback; it presents a rich opportunity to improve your new product. Capitalize and replicate unexpected pockets of success. Fortunes have been made by widespread communication and duplication of best performers’ early market wins.
Use these seven Best Practices and you will improve your new product results and increase the speed and accuracy of your efforts. New product success not only drives business results, it elevates creativity, teamwork and a thirst for continued improvement.