|
|
| |
Home > Press > ArticleItem
|
4/12/2006 9:21:55 PM
Bryan Foss
New product development – accelerated marketing
Customers and competition
Accelerated new product development (NPD) is an essential capability in a fast changing marketplace, whether your customers are businesses or consumers. New product developments are usually initiated by innovation, customer input or the combination that is sometimes called customer centric innovation. Innovation tends to introduce step changes in the goods and services available (e.g. a new and brave design of Ferrari), while customer input shapes the proposition to be a better fit to current needs. The combination of both innovation and customer input enables real competitive advantage, at least for as long as this can be sustained.
At other times the new product development cycle is engaged purely to replicate the competitive advantage gained by a competitor. In any of these situations the pressure to accelerate the development and launch cycle has increased, but also to ensure that any advantage is retained for as long as possible – even if this proves to be very short.
Innovation
Leading businesses create an end-to-end and systematic innovation management process that encourages the generation of new ideas and manages them through to value. Looking internally and externally (to clients and alliances) for continuing sources of innovation.
Many new businesses start with a brilliant idea, but multiple innovations are required to maintain a unique positioning of the company with longevity of differentiation from competitors. Best practice suggests that an environment can be created for continuing innovation, but innovation must also be supported by a rigorous process funnel to assess, develop, test and launch selected innovations.
Some businesses start with a single core idea, but need regeneration through new ideas from the market and from customer requirements. UK-based Direct Line insurance adopted ideas from US-based Progressive insurance to develop new marketing, sales, pricing and claims processes based on market needs and feedback from ‘closer to the customer’ linkages. Through this approach Direct Line regenerated their initial business model to support a major new growth phase. While the original ‘cut out the middle man’ idea worked well, their new approach to learning from the market provides continuous improvement and differentiation, with strong customer engagement in the product and service design process.
Continuous learning
Best practice companies create a closed-loop evaluation process which is fast, flexible, cost-effective and consistently used. This requires an approach to product, services and solutions testing which essentially has four phases:
1. Identify a small group of early-adopter customers
2. Collaborate with those customers to identify specific buyer types, needs and solutions
3. Conduct rapid pilot testing and evaluate business potential for supplier and value to buyer
4. Deploy or reject the proposition
This well-tried framework will provide continuous learning, a process for rapid fact-based decision-making, and an effective customer-centric approach to the challenges of solution (not only product) development. Much more information and practical support is available on this topic from the book ‘Business Solutions on demand’ co-authored by Prof. Merlin Stone and Mark Cerasale.
Speed to market is important, even if lead is not sustainable
Increasingly almost any innovation can be copied and copied very quickly. Only a few years ago Legal and General launched an innovative PEP investment product that was only unique for a matter of months, however during that short period around 85% of all PEP investments were made to L&G funds. This was a substantial business boost within that financial year, setting L&G apart from its competitors financially and in reputation with advisers – but clearly it put huge internal pressure on finding the next high performing innovation.
Retail stores can now stock new products within days of their competitors and spot and match their price changes even faster. Competitive response is essential but no longer enough. An ability to accelerate product innovation or competitive response must be supplemented by differentiation from loyalty schemes, data analysis, merchandising, assured stock availability and more.
Impact of regulation (e.g. TCF in FS on NPD process)
There is an increasing impact from regulation within the NPD process. A current example of this is in the application of the Financial Service Authority (FSA) Treating Customers Fairly (TCF) regulation. A recent survey by Mulberry House Consulting www.mulberryhouseconsulting.com highlighted that most banks and insurers had moved quickly to ensure that internal TCF approvals were an embedded part of the new product development process – far better to address these in an early an integrated manner than to attempt to change products and services (and their sales processes and commission structures) later. Similar regulatory issues increasingly affect other industries.
Value added selling
Identifying buyer types and understanding the needs and buying processes of these buyers become far more critical as a supplier aims to ensure that the value of their products, services and solutions are recognised as differentiated. The aim is to keep prices firm and profits higher, avoiding the commoditisation that becomes inevitable through traditional product selling processes.
Understanding the value chain and how your product or service contributes to what your customer needs to achieve downstream (with their customers and eventual consumers) becomes far more important. Some excellent B2B value added sales approaches are outline in the book ‘Key Account Management’ by Peter Cheverton, also recently available in an adapted form as ‘Key Account Management in Financial Services’.
Best practice companies have differentiated themselves through a deep understanding of their clients’ businesses and how the innovation of solutions helps their clients to grow profitably. Their perspective of the value chain is far wider, understanding how consumers and/or employees eventually use the final offerings of their client and how these are designed, developed and delivered through combining internal and external resources. Key Account Management models and techniques have proven results from supporting the full value chain. Using these approaches IBM has now developed business and IT services to be in excess of 50% of its revenues, increasing its solutions delivery value to major clients and sustaining strong levels of profitability in a very demanding and competitive investment environment.
From products to solutions
As buyer types are separately identified and their needs are addressed in a more focused and deliberate manner, traditional products will need to be enhanced, packaged and supplemented. Training and implementation, even outsourcing services, are required to meet needs more fully and at the same time offer additional revenue streams and increased profitability for the solutions supplier.
The New Product Development processes needs to reflect this, with more focus on packaged, customised and extended products than on completely new developments. Terms & Conditions often need special attention in order to remain competitive in meeting customers needs, or to make variations of the same product package competitive to the different buyer types. For example an investment management services company offered an ‘audit’ software solution to Pension managers, while the core same products with very different T&C’s were available to the Investment Managers themselves. The value, usage, T&C’s and prices needed to be customised by buyer type to maximise market penetration and profitable growth,
Alliances become essential for the supplementary sales and delivery capabilities where offer extensions are valued by the customer not to be delivered by the supplier itself. IBM increasingly built alliances for the delivery of application software, while focusing on business services and IT infrastructure solution components itself. The book ‘Business solutions on demand’ also expands on this important topic area.
Packaged components
Packaging of product and service components has been proven to aid customer retention and cross sell. The Woolwich Building Society pioneered such an approach prior to its acquisition by Barclays Bank. Four product packaging groups were developed, in each group customer retention levels increased, as did cross sell ratios. While lower profitability levels were measured for each product that had previously been available separately, the measures of profit per customer increased substantially. An unexpected additional benefit was that new customer acquisition also increased, making this a success story that is still just as relevant today.
Accelerated communication of new offerings
While there have been major changes to the new product development process, the improvements cannot afford to stop there. What use is an accelerated product development if we cannot communicate its availability and value to the potential customer very rapidly? Alongside the improved NPD process there are many emerging examples of accelerated communication. Two leading examples are highlighted here.
Email has emerged as an outstanding communication medium within the multi-channel mix. When new products developments take place it is becomes critical to advise both existing and new customers of this purchase opportunity. Often even strategic customers who are primarily managed through face to face contact can benefit from earlier email notification of new products. Using email customers who merit lower cost contact methods can be kept right up to date with latest product and service innovations, uses, ROI cases and deployment examples. Email templates can be used for consistency of branded messages and accelerated customisation of emails by new product development and launch staff.
Increasingly these techniques are being used to remain competitive and timely in both B2B and B2C (especially with high value consumers and opt-in membership groups). Although email is an effective new medium a great deal of new product communication material is still produced in print at high cost and with inherent design and production delays. Concep Global (www.concepglobal.com) are currently launching a new set of online print tools that enable users to have similar facilities for print as they rely on when using Concep’s flexible email services. For example an estate agent or realtor could create magazine pages (printed and online), brochures and print inserts within minutes, showing their best new properties in print within hours of visiting and photographing them (this is effectively an NPD and communication process in the property sales sector). Again the use of templates enables consistency of branding and accelerated message development. Speed, ease and quality of communication are increased and costs simultaneously reduced. Traditional processes, agency roles and cost structures are rewritten.
Conclusion
What we mean by new product development has moved on. These processes are more responsive and integrated, with improved innovation and customer sensing, delivering more complex and valued packages of products and services to create new types of business solution for commercial clients and consumers. Accelerating the NPD process is not enough, best practice companies accelerate new product communication too, for maximum market impact.
Bryan Foss is a partner (with Professor Merlin Stone) of Foss & Stone Marketing, non executive director and advisor to a number of fast growth businesses. Bryan previously worked in a worldwide role with IBM and has co-authored a number of Kogan Page books related to B2B and B2C customer-centric marketing. He can be contacted via email at
-----------------------------------
CIM Tech
|
|
|
|
|
|
|
|
Receive our newsletter and updates of GCG activities
|
| |
|
|
|
