New Product Development: Do You Feel Lucky?
It happened again. We’ve observed another software vendor that released a new product that has generated almost no sales
in the first year and which faces an increasingly grim outlook.
does a vendor with an otherwise successful track
record in their bread-and-butter market fail so miserably?
The answer is a lack of insight into both
channel and end-user requirements—insight that could be
obtained through primary market research.
We’ve seen this scenario play out time and time again, with millions wasted and many people fired. Two
instances come to mind where products were launched with no evidence of market or channel demand, only to see them fail.
Does This Sound Familiar?
The first example comes from a software vendor
whose engineers came up with an interesting
concept that was a spin-off of a successful, narrowly
focused product. Internal discussions probably went
like this: “This is cool. It certainly satisfies the needs
of its existing users. Let’s develop it for a broader
market and get sales to sell it.”
Because the software vendor is more engineering than
market-driven, little or no feedback was likely
obtained from the reseller channel or from end-users.
As a result, the vendor was totally surprised
when it found its channel wasn’t interested in the
new product. Turns out, one reason was that the
selling price was lower than the vendor’s other
software products, and resellers wouldn’t make a
high enough margin to make it worth their effort to
take it on. And, end users weren’t interested
because the software simply didn’t meet their needs.
It was the classic case of a solution in search of a
Common Fallacy: High-End Features Equate to Value in Low-End Models
In another instance, a hardware manufacturer was
introduced with functionality previously only seen in
high-volume models. While this is certainly a nice
idea, there were two problems.
First, the company’s
own salespeople, as well as its channel partners,
made more on selling a single high-volume models than 50 low-end models.
Second, users of low-end models did not see the same value in the “high-end”
features that high-volume users did.
Additionally, the form factor of the new unit was
deemed inferior by users, which was significantly different when compared to the
form factor of other low-end models.
In neither case did these vendors talk to their
channels nor end-users before releasing new
The Result: millions of dollars were wasted
producing and marketing products that no one
wanted to sell or buy. It took over three years to sell through the mountain of inventory in the warehouse, and at fire sale prices. Every day, the CEO walked past that mountain and grew increasingly upset.
Note: it is possible that high-end features do have value in low-end models – just not always.
Market Research Equates to Insurance
Investing money in market research is like buying
insurance on new product development.
Understanding what salespeople will sell and end-users will buy is information that can be obtained
through primary market research—in other words,
asking people a structured series of open-ended
questions that seek both quantitative and qualitative
We know: insurance is not sexy, but new product development equates to gambling and doubling your growth rate with a successful new product that’s easy to sell and profitable is very sexy…
The Industry Analyst Trap
Some vendors confuse analyst reports as market
research. While industry analysts do talk with
vendors, their main shortcoming is that they do not
triangulate their findings with information collected
from channels or users. Thus, there are no checks
and balances to information obtained from
vendors—whose best interest may not be served by
sharing sensitive sales information that will be
aggregated and sold to their competitors in the form
of industry reports. Additionally, analyst information
is reported at a macro level while vendors seeking to
launch new products typically need information at a
micro level, which is almost always only available via
Internal Market Research vs. Outsourcing
Market research can certainly be conducted
internally, but that is a tough row to hoe. Vendors
need experienced people that can set aside several
days at a time to hit the phones—and do nothing
else. I have taught subordinates, co-workers and
students how to perform this research. It’s usually
painful at first, and it may not get better.
While hiring an experienced market research firm
can be a significant investment, it’s often a far better
option, in terms of quality and the avoidance of
pain. Just make sure to hire one where the people
making the calls are both experienced and involved
in the analysis. Many firms will blather on about
their methodology only to outsource their work to call
centers better suited for telemarketing or consumer surveys than
business-to-business (B2B market research.
The Truth Be Told…
It’s true that some vendors get lucky and hit a
home run without doing any market research.
when launching a new product, in the words of Clint Eastwood’s Dirty Harry, “You’ve got
to ask yourself, do you feel lucky? Well, do you?”