Three Things Brands Need to Know Before Launching a New Product
What You Already Know
You already know your existing customer and what demographics they fall into. You may need to revise your customer profile as they and your product evolve to meet changing demands. You should also already have a good idea of customer behavior (e.g., how much they buy, when they buy and why they buy, etc.). You know who your competition is and your value prop: what you offer above and beyond your competition. In other words, why would someone want to buy your product and why would they want to keep coming back for more?
Now, on to what you need to learn as you launch something new.
1. What Is the Customer Need?
Let’s start with two reasons knowing the customer’s need is important. (There are many more, but let’s keep it to two here.) Right out of the gate, you’ve got to know what to make!
First, customers’ preferences change. If a brand has an existing product in the market that is losing ground or in danger of doing so, chances are they have not stayed current with their customers’ preferences. Especially if your product(s) are nice-to-have and not a need-to-have, brands must constantly ask the question “Have your needs changed?” Customers will not go out of their way to tell you, so you have to give them multiple outlets and ways to voice their response.
Focus groups are one way to keep abreast of your customers’ changing preferences, but that data can be skewed by the small sample. If you have a brick and mortar presence coupled with a growing digital presence, then using the two in conjunction can give you a great opportunity to stay in contact with the customer.
Whenever customers interact with the brand, you want to keep them engaged. Information has to go in both directions. As you are moving forward with new products—and just before they hit the market—loyal customers want to feel they are more in touch with the brand. Giving your loyal customers advance notice on new products and services will help maintain the relationship and make people feel more valued—and move a valued, loyal customer to a brand fan.
The second reason to stay on top of customer need is that technology changes, and your product has to keep up with the changes in the environment. Campbell Soup made major changes to the their brand because of changing tastes, but had to do so due to the rapid pace of change that has been lead by advances in technology. People educate themselves on the parts and pieces that make up your product. They are constantly taking in information about new options, and when they are ready to hear it, the message will hit home. Survey changing trends in any market and see how a whole host of technologies can impact a brand. Your customers are doing this all the time in the general media. If your brand does not keep pace with changing technology, your product can quickly fall behind.
The confluence and acceleration of the seismic shifts that are reshaping the established order of our industry — the rapid and monumental changes in demographics, consumer tastes, opinions and behaviors; the light-speed pace of technological change and the volatility of new global economic and political realities — creates the unprecedented context for our efforts. In essence, we have given Campbell an extreme makeover in a rapidly and fundamentally changing market. Our progress has been methodical. Undeniably, we have improved our company and shifted our center of gravity. But we are not satisfied. We have higher aspirations: for the food we make, the role we play in people’s lives and our growth trajectory. That is why it is necessary to relentlessly improve our food, our business and our culture to forge a meaningful and lasting place in the lives of new generations of consumers. —Campbell Soup Company 2016 Annual Report
2. What Can the Brand Successfully Produce?
Knowing the customer’s need means you know what to make. Being able to make it successfully is another thing! If your customer preference has changed from plastic to metal or from metal to wood, can you produce and match the customer’s new need?
This why your digital channel can be your best friend in staying far ahead of the curve. The last thing a brand wants to find out is that a change has happened and they are lagging behind the customer’s need. If your current customer has moved to a different product, can your product serve the need of a new customer? The biggest challenge for the brand is seeing far enough ahead to be in front of the curve and anticipate changes in the taste of the consumer so the brand can match up resources to the changes in expectation.
This is where knowing the market comes in.
3. What Is the Market?
Your product may complement another or be a competitor to another or, as mentioned just above, you may discover a new market that requires your product. If your product is a complement to another product and the market is expanding, then that is great for your brand. However, if the market is contracting or a competitor has now taken over your market share, you must be prepared to react and act quickly to move in a new direction. Being ready for changes in the market is accomplished is done by constantly testing the waters.
Market dynamics for consumer goods change quickly and can be affected by everything from the availability of resources to the cost of currency to weather—and so on. The availability of resources can affect your ability to get raw materials and produce enough to furnish demand. Companies like Mondelez have changed the size of their product—in this case, Toblerone candy bars, reducing the amount of chocolate in order to maintain price in the face of rising raw material costs. This was not met with cheers among customers; it was considered a real slap in the face.
The cost of currency may affect your ability to buy enough raw materials or to sell the finished product in a particular market. Weather can affect the speed with which you get the product to market—and fresh products beat out not-so-fresh ones. A prominent yogurt manufacturer lost market share when its product was shipped to shelves out of date. Consumers were treated to spoiled yogurt. Your product may not allow for the economies of shipping long distances when timing is of the essence; your market may demand you move the means of production closer to the consumer.
One big question in about your market is obvious: What kind of price change will consumers tolerate for your new product or service or can it fluctuate and not be affected by price changes? That is all worked out by the demand curve.
Starbucks has been leveraging its consumer loyalty and lack of elasticity among its consumers by continuously passing on increases in costs, due to wages and coffee prices, to its customers. As a result, in the period between 2014 and 2016 they have made four price hikes on their products, two of which were in 2016 alone. The rise in prices has been mainly aimed at protecting the company’s operating margins. In the financial year ended September 2016, Starbucks was able to expand its margin by 80 bps to 21.5%, and earnings by 17% y-o-y to $1.85 per share.
If the market is large enough and if the demand is great enough, you can weather the storms that will come your way if you are aware of your customer and you can be flexible enough to
- shift resources to new markets or
- modify your products
Like Starbucks has done, you can take a nice-to-have to a must-have, making a product that for the most part is elastic into one that is relatively inelastic. You will have little to worry about in the short term.
You will need to, like Starbucks, diversify your product portfolio, introducing new products to increase your profit margin. As some products lose favor, others will take their place. Although there is a natural life cycle to all products, by listening to your customer in real time and making changes based on your customer’s input, you can increase the life of any given product continuously.
Understanding your customer starts with understanding your brand. This is an introspective process that must be revisited regularly to see where you are on the mark. This means assessing internal strengths and weaknesses to ensure that competition, when it arises, is a source of innovation and not consternation.
Customers are people. As individuals and groups, we grow, we change, we evolve, and we can shift away from a brand. Brands are under constant pressure to deliver quality goods for the same price even as prices increase on raw materials and other factors affect quality. Knowledge and understanding of shifts in customer preferences can help align expectations and keep a brand in good standing even when the ground is shaky and things are in a constant state of flux.