People can like a new product without the business having a good reason to launch it. They may be customers who already buy the range, looking at a new version of something they’d have bought anyway. That doesn’t make it a bad idea. It changes the question: what would this product add, replace or protect, and is that worth it?
Appeal measured one product at a time can’t settle that. A new product’s value to the business depends on what it does to the whole offer: who it brings in, whose sales it takes, and what it costs to run alongside everything else.
What a new product can do
A launch can grow a business in several distinct ways, and each asks something different of the product.
It can reach people the brand doesn’t serve today, or create an occasion the brand had no part in before. It can win buyers from competitors. It can keep customers who would otherwise drift away. It can deliberately replace an older product, on the business’s own timetable.
It can also do something less welcome: add range, stock and complexity while moving demand between products the business already sells. Two products then share sales that one product used to make, and the business pays to support both.
Early on, these outcomes can look alike. A concept can appeal as strongly to people who would be new to the brand as to people who would only move their spending within it. The difference shows only when the new product is seen beside the alternatives people actually have, inside the range and outside it.
Early evidence also misleads in predictable ways. A choice exercise measures which product people pick, not how much more they buy, so it can miss the extra occasions and the variety that let some additions grow a category.
When moving demand is the point
Taking sales from your own range isn’t automatically a failure. Some draw is expected. If your products hold a third of the market, then of the buyers a new one wins from existing products, about a third coming from your own range is its fair share.
A close variant of your own product will almost always take more than that, so the test that matters is what the whole range earns with it, against what you would lose anyway if a competitor launched it first.
Say an older product is losing ground and a newer one would take most of its buyers. That launch moves demand, and moving it may be exactly the plan.
Or say some customers are leaving for cheaper competitors. A lower-priced option keeps them with the brand, and it also invites loyal buyers to trade down, so it protects the business only if the buyers it keeps are worth more than the margin the loyal ones give up.
A blanket rule against cannibalization is no more strategic than celebrating every launch. In a survey of firms in three high-tech industries, Chandy and Tellis found that a firm’s willingness to cannibalize its own investments predicted its record in radical product innovation more strongly than its size did.
It is an association across high-tech firms, and we read it as a caution: a business that protects every existing product may find it harder to make a significant new one.
Seeing the whole range
When a food brand built one innovation pipeline from its existing studies, each idea was judged by what it would add to the range as well as on its own merits, and a reason was recorded for each idea parked.
A connected fitness company had one product, a flagship for training at home, and was looking at what could come next. Product and marketing leadership wanted to see the range as a whole, with the commercial consequences of each choice, from positioning to price.
We ran qualitative research first, then a choice model, so a range with a new product could be compared with the flagship on its own. The work is described in Pricing and positioning a future connected fitness product.
That is the shift worth making: from asking whether people like the new product to asking what the whole offer looks like with it.
What else decides it
Evidence about customers answers part of the question. The rest depends on the business.
Margin matters. A product that mostly moves buyers to a higher-margin version can be well worth having, and one that moves them to a lower-margin version may not be.
So do the shelf and the retailer. A new product usually takes space from an existing one, often your own, and the retailer judges it by whether it grows the category, not the brand. The cost of a longer range shows up in its slowest sellers.
So do the sales effort and the service an added product needs, the likely response from competitors and direction, meaning where the business has chosen to go. Those decisions belong to leadership, and good customer evidence informs them without making them.
Before asking whether people like a new product, then, it helps to be clear what kind of growth the business is after: new customers, new occasions, keeping the customers it has, or renewing an aging range. And what it is willing to change for that growth, including, sometimes, its own best seller.
If your team is weighing an addition like this, we’d be glad to think it through with you.
Sources
- Chandy, R. K. and Tellis, G. J., “Organizing for Radical Product Innovation: The Overlooked Role of Willingness to Cannibalize,” Journal of Marketing Research 35(4): 474 to 487 (1998). Peer-reviewed; a survey of firms in three high-tech industries.