Unit J.11 – Challenges for New Products

What you’ll learn to do: identify the challenges associated with marketing a new product successfully

Have you ever waited in line to be among the first to buy a new product when it was released?

Are you careful, maybe pragmatic, about trying new products?

Do you continue to use products that your friends and family believe are outdated?

Your answers to these questions matter to the marketers who are targeting you. We have looked at the life cycle of products and the process for developing new products. As a buyer, you have specific attitudes and behaviors when it comes to new products—or at least toward groups of products. These behaviors are both intriguing and vexing to marketers.

The specific things you’ll learn in this section include:

• Explain common challenges of new products
• Identify approaches to improving the success of new products

Diffusion of Innovation

Just as the product life cycle has a typical bell-shaped pattern, there is a predictable—and similar-shaped—pattern of buying, or adoption, when it comes to new products. This customer adoption pattern is important because it can be used to inform marketing decisions.

Diffusion-of-Innovation Theory

Common sense suggests that not everyone will buy a new product at the same time. Some will rush out and buy first or try to get an early version of a product before it is widely available. Others will wait until many people have adopted a product before they reluctantly consider the purchase. As early as 1962, Everett Rogers recognized this phenomenon and described it as the “diffusion of innovation.” He developed a theory to support it, explaining how, why, and at what rate an innovation will be adopted by participants in a social system. The theory divides adopters into different groups with shared characteristics, as shown in Figure 1, below:

The purple line on the graph indicates the percentage of the market that will buy a new product in each phase of product adoption. You can see from the graph that there is a small number of innovators, and a large number of early majority and late majority adopters. The yellow line on the graph shows the cumulative market share gained. In other words, the yellow line shows the total of the market share gained at the end of each phase, adding together the share from each prior phase.

Consumer Adoption Patterns

Innovators

Innovators are willing to take risks and are viewed by their peers as risk takers. Innovators’ risk tolerance enables them to adopt technologies that may ultimately fail, and they typically need sufficient financial resources to absorb these failures. Innovators tend to be very tuned into market leaders and the latest developments. To stay on top of current trends, they research products thoroughly using “in-the-know” sources such as expert blogs and product forums. Innovators are willing to pay a premium to be the first to try a new offering. Although this is the smallest segment in the diffusion-of-innovation theory, if innovators approve of a product, it marks an important gateway toward generating broader market acceptance.

Early Adopters

Early adopters have a high degree of opinion leadership among the adopter categories. Others look to this group to road-test and validate new products. As a significantly larger segment than innovators, early adopters are influential in shaping the opinions of later adopters. Therefore it is essential to achieve high customer satisfaction with this segment. Early adopters are more aggressive than later adopters, but they are judicious about their adoption choices. Early adopters don’t look to be first at any cost, so they actively consider risk as part of the decision-making process. To illustrate, classic innovator behavior is to camp out overnight for the first showing of a new film, while early adopters read the reviews before deciding to see a film during the opening weekend.

Early Majority

Early majority adopters are more risk averse than early adopters, so they wait for the wrinkles to be ironed out of new products before making a purchase. Early majority buyers tend to seek a lot of opinion and validation to guide their choices: they want to know that the early adopters and innovators have had a good experience before they invest. The window of early majority purchasing spans a longer period of time than the innovators’ and early adopters.’ Early majority buyers generally have more choices in terms of quality, features, and price because competition tends to peak when this group’s buying cycle is in full swing. Like the early adopters, the early majority’s opinions and decisions carry weight across the adopter categories.

Late Majority

Late majority adopters arrive after the “average” participant has embraced an innovation. These individuals approach innovations reluctantly and with more skepticism than their predecessors. Late majority buyers are less likely to conduct extensive research about a purchase; instead they tend simply to follow the buying behaviors of earlier-adopting segments.

Laggards

Laggards are the last to adopt an innovation. Often they are older and less educated than buyers in the other diffusion of innovation segments. Laggards typically have little or no opinion leadership and are averse to things they perceive as “agents of change.” Laggards tend to be focused on traditions. They are less connected socially, less involved with media, and harder to reach than the other groups.

Marketing an Innovation

Figure 1, above, shows a tipping point between the early majority and the late majority adopters. A tipping point is the point at which small changes are enough to cause a larger, more substantial change. The challenge for the marketer is to encourage the adoption of a product by early adopters and the early majority in order to reach that tipping point. Once these groups are on board, their momentum helps drive the product from the introduction stage of the life cycle into the growth stage.

Often marketers are tempted to focus their marketing efforts on the innovators. Innovators are game to try the product, which makes them an easier target than risk-averse consumers. In all but the most unusual, extreme cases, though, this will be a flawed strategy. The early adopters are actually in a much better position to influence broad opinion of the product and to draw in the early majority. By the same token, aggressive marketing to laggards is unlikely to influence their pattern of adoption.

Understanding the patterns of adoption and adjusting the marketing strategy to address changes in adoption profiles is a challenge that marketers of new products need to understand and face.

Improved Success in Product Development

One common cause of failure in the developing and marketing of new products is something called “product-market fit.” Marc Andreesen, a technology entrepreneur and investor who has written about this, explains that product-market fit is simply being in a good market with a product that can satisfy that market.^[1]

New technologies enhance the ability of companies to bring products to market quickly, but speed doesn’t guarantee the right product-market fit. Without a good fit, companies risk launching a product that doesn’t satisfy the market need.

A couple of innovations in new-product development strategies have had a significant impact on the way companies improve their chances of a successful fit.

User-Centered Design

Have you ever found a product that seems like it was made for you? You don’t need to read the instructions. You don’t have to learn how to use it. It seems naturally to conform to your preferences and needs. The creation of such products is the goal of user-centered design.

User-centered design is a product development process in which the needs, wants, and limitations of end users are given extensive attention at each stage of the design process. The chief difference from other product design approaches is that user-centered design tries to optimize the product around how users can, want, or need to use the product, rather than forcing the users to change their behavior to accommodate the product.

In a user-centered design process the product team tries to understand user needs and define the requirements to meet those needs—but that’s true of any good product-design process. User-centered design requires the designers to test their assumptions about user behavior and requirements in real-world settings with actual users during every step of the product development process—all the way from product concept and requirements to production and prelaunch. This recursive approach gives designers a steady stream of information that confirms the original requirements or suggests needed modifications. The frequent user testing encourages designers to think of typical or recurring user challenges as design requirements rather than problems that ought to be solved by the user.

For example, most educational institutions want to make the course selection and registration process easier for students. Portland State University decided to employ a user-centered design process when it set out to improve its own system. After a number of student interviews, the university created a prototype of the new process. When they were ready to test the concept, the university registrar went to the homes of students and watched them try to work through the course selection and registration processes on their home computers. The idea was to gain information about students’ real experience of these processes in the places where they actually happen—and make design decisions accordingly. The home-setting experiment revealed a number of unanticipated design flaws and new requirements that hadn’t come to light during interviews or simulations run in the campus computer lab. As a result, by prioritizing the user perspective, the university was able to design a much more effective solution.

The Lean Startup Methodology

The “lean startup methodology” has been described by Eric Ries as an approach that helps new companies achieve product-market fit during their earliest product launch. The methodology is based on the assumption that it’s essential to get real market data from product users as early as possible in the design process. The challenge, as you have learned, is that marketers don’t see substantial, realistic market data (which are used to refine the marketing mix) until well after the product launch. The lean startup methodology tries to get around this problem by shortening the time frame needed to capture the data.

Ries proposes that rather launching a fully developed, full-featured product, companies should begin with a very limited launch of what he calls “the minimum viable product.” The minimum viable product (MVP) is the most streamlined product that any group of users will accept. According to this approach, the company develops and launches its MPV, captures market and user data, and quickly uses that information to make adjustments for its next minimal feature set. In each cycle of development the product team learns from actual market and user data, and uses them to refine the product and stay aligned with company goals.^[2]

The lean startup methodology is used by organizations of all sizes, but it’s particularly well suited to small companies that can’t afford the risk of a single product-fit issue and to software-based companies that can launch an online offering to a user base without needing complex manufacturing processes and distribution channels.

Neither of these approaches will address all new-product challenges or guarantee success, but both are considered important innovations in the new-product design process, since they improve the odds of new-product success and reduce the cost of product failure.

---