Most companies today don’t have a product innovation problem—they have a product profitability problem.
A recent study conducted by the pricing consultancy Simon-Kucher & Partners indicates that 72 percent of products released in the last five years have failed to meet their profitability targets. One in four companies admitted they didn’t have a single new product meet profit targets over the same time period.
These stats should be a wake-up call. Product marketers have two distinct roles: defining the market and planning for go-to-market success. The market failure of the majority of new products suggests that many product marketers aren’t succeeding in these responsibilities.
This blog post explores the challenges of defining the market and how engaging directly with customers can help. In a later blog post, I’ll dig into how that engagement can also help create a more effective go-to-market plan.
Using customer feedback to improve product INNOVATION profitability
Identify opportunities and accurately predict trends
Profitable companies succeed because they’ve identified, however serendipitously, an untapped opportunity.
Product marketers need to find market opportunities early and develop products that transcend fads. One example is Home Depot, a successful retailer founded in 1978 that now has 2,275 retail stores across North America.
“Home Depot looked at the existing industries serving home improvement needs,” W. Chan Kim and Renee Mauborgne, co-authors of the book Blue Ocean Strategy, wrote in in a Harvard Business Review article. “It saw that people had two choices: they could hire contractors, or they could buy tools and materials from a hardware store and do the work themselves. The key to Home Depot’s original insight was understanding why buyers would choose one substitute over another.”
Uncovering deep insight, as Home Depot has done, doesn’t happen by accident. To take advantage of underserved markets, product marketers must have fresh information about the consumer landscape—something they can gain only by engaging frequently with customers.
Understand what customers value
“A product succeeds because it solves a problem for people,” Julie Zhuo, vice president of product design at Facebook, recently wrote in a Medium post. “The first step in building something new is understanding what problem you want to solve, and for whom”
“A product succeeds because it solves a problem for people” – @Facebook’s #productdesign VP @ (TWEET THIS QUOTE)
Think about satisfying the needs of your customers, not about creating products. As a product marketer, you need an appreciation of customer pain points.
Making informed pricing decisions requires a shared vision of customer values from the onset. A crystal clear understanding of what customers want should inform your decisions throughout the entire product and marketing development cycle.
Kill unnecessary features
Paul Buchheit, the lead developer of Gmail and an angel investor, once argued that product developers should pick only three features, “get those things very, very right, and then forget about everything else.” Those features, Buchheit asserts, should define “the fundamental essence and value of the product.”
Product marketers often make the mistake of equating needs with features. Releasing bloated products into the market is a sure way of failing. Unnecessary features overwhelm and confuse customers and drive up costs. As the late French poet Antoine de Saint Exupéry once said, “Perfection is reached not when there is nothing left to add, but when there is nothing left to take away.”
To identify the most valuable features, you can’t afford to rely on gut feeling or opinion. Talk directly with customers to spot the features that may seem cool on paper but don’t provide added value. Engaging a segment of your customers will help prioritize what features to build and will distinguish focused, practical and actionable ideas.
Determine your product’s unique market position
In many industries, increased competition has placed additional pressure on product marketers to deliver deeper competitive intelligence. In the context of new products, an understanding of your competitors will help inform the story your company should tell as the product goes to market. Competitive analysis reveals your product’s unique value proposition and market position.
How do you keep an eye on your competitors? Most businesses start by searching through press releases or by checking what media outlets and analysts are saying about companies in the same industry.
Customer engagement can reveal who your competitors are, what their strengths are and how they impact your brand.
There is a better way: by going straight to your customers, and asking about their shopping habits and views about your sector. Customer engagement can reveal who your competitors are, what their strengths are and how they impact your brand. Talking to your customers to get objective competitive intelligence this way is a critical step in understanding your product’s market and evaluating its profitability.
Your customers have the answers
Defining your positioning in a new market ultimately comes down to an understanding of your target customers and their needs. This insight will not magically appear while you sit at your desk—you need to engage with your customers and prospects.
You need to gather customer feedback regularly and systematically. One-off surveys and the occasional focus group don’t constitute engagement. Real customer engagement requires two-way, ongoing conversation between your product team and your customers.
That’s a tall order, of course, but product marketers that champion early and regular customer engagement are in a good position to win.
To learn more about successful product innovation, join hundreds of product management experts at the 2016 Customer Intelligence Summit in Chicago and hear talks from top brands, including Wolverine Worldwide. Register today.