£ Many millions wasted in easily avoidable NPD failure.

It is widely known that failure rates in new product development (NPD) in consumer goods industries are depressingly high. Statistics like 8 out of 10 new products failing are often quoted. A recent report by Reuters puts the figure in the food industry as high as 90% failing within 6 months.

It would surprise many outside the industry to know that each year thousands of new products are launched without ever having seen a consumer before the day they hit the shelves. Many businesses make little or no use of consumer research in the critical and risky activity which is NPD. Others use research sporadically or ineffectively.

So, alarmingly high NPD failure rates and the patchy and often poor application of consumer research to NPD. Is it unreasonable to suggest that there might just be a connection between these two facts?

In our view the connection is all too real and represents a great opportunity for both manufacturers and retailers to improve efficiency and profitability in product development.

Studies by business schools and management consultants confirm what common sense would suggest: the great majority of NPD launch failures are due in one way or another to flawed consumer appeal.

It’s a small step from acknowledging this to concluding that the more effective and systematic use of consumer research in NPD would be, to say the least, likely to reduce failure rates, cut costs, and improve efficiency.

So why do we so often find that consumer research is either not used at all or is mis-applied in the world of  NPD? In truth, for many businesses, the answer is simply “it’s not the way we’ve done things here”. In many businesses especially ones that solely or primarily supply retailer-branded products, a consumer marketing culture has often never existed. Market research is not well understood and is viewed variously as unnecessary, expensive, or an optional extra. A lot of businesses have simply not got to grips with the business case for using consumer research.

In fairness to these businesses, the market research industry has done little to help the cause. For reasons better known to themselves, many in the market research industry  seem unable to relate their craft to the everyday reality of manufacturing industry. The language spoken seems to be more that of the sociologist, the psychologist, the academic, or the pseudo-scientist than that of the hard-pressed business manager. How consumer research helps improve the bottom line is left unexplained.

In reality, the financial case for using consumer research to improve NPD effectiveness is overwhelming. Even a very modest improvement in success rate makes a very significant financial impact.

Imagine even a modest-sized business which looks to make a minimum profit contribution of £100k per year on any new product launch. If the use of consumer research could just cause its NPD failure rate to move from 8/10 to 6/10, then for every 10 products launched, profit contribution would be improved by £200k per year. This figure is dramatically larger than the amount of money that could sensibly be spent on the consumer research. This doesn’t even take into account the potentially massive saving in wasted cost and effort.

But is the use of consumer research likely to lead to such a significant reduction in failure rate? In short, the answer is an emphatic “yes”. Time and again in initial consumer research on NPD concepts, we see the following typical pattern emerge. Around 5 out of 10 of the concepts turn out to have seriously flawed consumer appeal and should be dropped; of the remainder, 2 or 3 have high consumer appeal and should be progressed directly to launch; and the other couple are found to be basically sound ideas which are in need of some degree of modification if they are to succeed.

The effect of acting on these consumer research findings is clear. Five potentially wasteful projects can be terminated resulting in great savings in cost and effort; the most successful concepts can be fast-tracked to launch; and those needing some degree of modification can be progressed with confidence towards an increased chance of success.

It’s all about stacking the odds in your favour and reducing the number of unnecessary failures.

Looked at another way, it’s a brave and foolish manager who claims he will have the same success rate without any consumer input as he would with all the insights gained in even the smallest piece of research.

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