Expand new-product acceptanceBy seeing the world as your customers do
Sustaining growth is typically harder to attain than initial growth. Whenever a company takes off and then stalls out, it is usually because they have failed to see the world as their customers do — which is the foundation of whole product definition. A whole product is everything the target customer needs to make a positive purchase decision. We call it the low-risk recipe™
How do customers define products?
Typically, when an organization brings a new product (or service) to market, the initial customers and users are intrigued with the tangible features of the product itself: its performance, its specifications, its size, color, shape, weight or even “footprint.” Moreover, the entrepreneurial team that conceived, developed and first sold the product is ALSO often consumed by these tangible aspects. Tangible aspects of the product — at the time of introduction — often become the only focus of the product team.
But as the product moves from the lab to development to prototyping to beta testing to introduction and then to distribution and use, a subtle yet powerful change occurs. Tangible aspects of the product inevitably decline in importance and intangible aspects surrounding the product begin to emerge. This is the point where whole product definition becomes critical.
Customers begin with an appreciation of the tangible product, but they soon appreciate more the aspects of intangibles surrounding the product, such as service and support, the image of the company, the nature of the underlying technology, and product reliability. Defining the product so it is “whole” in the eyes of the end user addresses this change.
Intangibles expand product acceptance
The relationship between product tangibles and intangibles shifts dramatically as different stages of the adoption process are achieved. As products move through the adoption process, intangibles assume more importance. This is the essence of whole product definition. Often, pioneering new products lose their initial prominence because a new entrant is more successful in product positioning based on a more effective mix of intangibles. This can be the case even if the second product is not technically superior.
IBM was not the first mainframe computer company. A number of others were ahead of IBM including Univac which is credited as being the first moderately successful mainframe company. But IBM was ultimately successful in dominating the mainframe market. The main reason was an appropriate emphasis on intangibles in the early stages of market development. Univac and the others continued to compete mainly on the tangible aspects of the product, even though the situation had changed.
The power of the tangible/ intangible mix of the perceived product is so strong that it can be used to identify markets and product categories where pioneers can be superseded.
Formulas that fail
When taking your new innovation to market, early adopters will be your biggest supporters. They see the world the same way as innovative entrepreneurs, and early adopters are happy to be the first to try something new. The fatal mistake managers make is assuming all customers have early-adopter personalities and characteristics. Unfortunately, the familiar characteristics of your early customers are in direct opposition to the characteristics of mainstream customers. So the reluctance to see future customers as fundamentally different, and the tendency to treat all customers as early adopters, combine to give you the early adopter disease, which is fatal.
Avoid the common mistake of leaving mainstream customers behind. Many high-tech companies ASSUME their target audience has the technical skill needed to adopt and utilize a new product. Unfortunately, many of the technologies we see in the world today actually leave more people behind than they pull forward. So the market adoption you were planning on (which is driven by word of mouth) doesn’t materialize because significant numbers of people are saying negative rather than positive things about you.
Product value is in the eye of the beholder
In an existing business, with existing products, customers and competitors, the process of determining the intangible factors that influence purchasing decisions is relatively simple. It means obtaining answers from customers (and other buying influences) to two basic questions:
1. What factors in the purchase and use of this product are important to you?
2. How does our product compare on these factors to other alternatives (including related but not directly competitive products)?
This type of research is easy to describe but difficult to do. In our experience, many research efforts fail to achieve adequate answers to these two questions.
When it does, however, the results can be dramatic. In one recent case, interviews with 200 computer hardware customers and potential customers found that users valued the reputation of the supplier, the service and support of the company, the reliability of the product, and the availability of a number of existing software packages as the most important intangible attributes of the product. In fact, the tangible characteristics of the product ranked no higher than sixth in the customer’s ranking.
However, this company had based the majority of its marketing and sales messages on tangible product attributes: performance, technology and architecture, and product features. The research was commissioned only after a year of frustration and declining sales, and after two new competitors had made substantial early inroads into the company’s customer base.
After the product perception research was completed and after the company’s sales and marketing messages changed to reflect the results, revenues reversed their decline and climbed twenty-four percent the first year, gross margins tripled, and the market value of the company doubled. All of this occurred with only a slight increase in marketing expenditures, and with no change in the tangible product.
Intangibles will determine the success of your new product
For an emerging business, the base of customers is small, and many customers represent innovators and early adopters — buyers whose characteristics are not typical of the majority of the future market. Indeed, attempting to build a business based on innovators is often a course that leads to bankruptcy. Even if the company does not fail, relying on innovators leaves the majority of the market open to new competitors who focus more effectively on the intangibles important to other adoption segments. It is this phenomenon that results in pioneering firms doing all the early education and market development, only to find the lion’s share of the market falling to a later entrant.
Building intangibles for emerging businesses remains a special art, particularly in markets where the majority of customers are still classified as innovators. In this situation, traditional research techniques usually do not provide adequate insight into potential intangibles. Instead, the entrepreneur is often wiser to embark on a course of creating intangibles rather than searching for them in the customer base.