There are as many methods to screen new product ideas as there are consultants. Perhaps most, if not all of them, are valid. But small companies cannot afford to incur costly product development failures as part of "the normal course of big business." Even one product failure in a small company may threaten its survival if a large amount of time, scarce resources, and personnel are committed to it.
A small company often survives on its reputation with key customers, which can be threatened or weakened with product development failures. The risks of product development failure can be reduced with carefully constructed marketing strategies, even for small companies.
Step 1. Screen concepts against your company's marketing strategies. Concept screening against new or pre-existing company marketing strategies will reinforce company focus and use of scarce resources to successfully introduce new products.
A good overall company marketing strategy acts as a guideline for action. The marketing strategy should:
- define the target buyer, demographically and by lifestyle, if appropriate
- translate the company mission into a measurable annual objective
- tell how the goal will be accomplished in terms of:
- marketing spending vs. competition in the category
- brand positioning
- pricing actions
- product quality
- establish new product introduction standards
- achievement of overall marketing objective
- response to competitive new product introductions
If the new product concept does not fit the company's overall marketing strategy, serious consideration must be given to either changing the company marketing strategy or not pursuing the new product concept.
Step 2. Screen new products against company sales and profitability minimums. A new product must have the potential to generate minimum sales and profitability goals for the company with the right pricing structure. For example, many large consumer goods companies have minimum sales goals of $20 to $50 million per year, with a minimum gross margin before spending an overhead of 60 percent (i.e., cost of goods = 40 percent).
If a small company is competing with much larger companies, knowledge of these large company new product minimums can provide the basis for a successful new product development and marketing strategy. Most small companies would be very pleased with dominating niche market segments that amount to $5 to $20 million in total competition sales per year.
Step 3. Screen your new product concept with key customers and buyers. An important step that large and small companies often overlook is obtaining input and evaluation of new product ideas at an early stage with key customers (e.g., key account buyers and their management) and end user buyers. Business owners or managers may become so committed to a favorite new product development concept that they proceed to full development of a product prototype before outside input is obtained.
In certain high-tech industries and pharmaceuticals, where years and millions of dollars are committed to each new product development project, high security and long, complex development timetables may be necessary. Foregoing key customer and end-user input is part of the risk and cost of doing business in these industries.
Qualitative and quantitative consumer studies can be invaluable in this stage, as well as in earlier development stages.