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.
When moving demand is the point
Taking sales from your own range isn’t automatically a failure.
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 that keeps them with the brand gives up some margin on each sale, and may still protect the business.
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.
That is an association across firms, published in 1998, and it doesn’t mean any particular launch that takes from the range will pay. We read it as a caution: a business that protects every existing product may find it harder to make a significant new one.
A new product beside the flagship
Tonal had one product, a flagship home strength trainer, and was looking at what could come next. A new product can grow a business or split it.
Product and marketing leadership wanted to see the range as a whole, with the commercial consequences of each choice, from positioning to price.
That is the shift worth making: from asking whether people like the new product to asking what the whole offer looks like with it.
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 report answered every one of the brief’s questions on a single page.
Tonal’s customer insights director has said the report was shared with the company’s executive team and its board. The work is described in Pricing and positioning a future product for Tonal.
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 distribution and support: whether the range can get the space, the sales effort and the service an added product needs. So does the likely response from competitors. And so does 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.