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
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
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
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.