Test, learn and test again
Even some of the best-known companies have experienced challenges when launching new products. Failures happen in all shapes and sizes, from food products like Cosmopolitan magazine’s yogurt line (decidedly off-brand) and Frito Lay’s WOW chips (caused digestive issues), to technology before its time such as Nintendo Virtual Boy’s early attempts with virtual reality and the Microsoft Zune, which couldn’t quite compete with the popular iPod. If established brands can make missteps like these—with all the benefits of loyal consumers and name recognition on their side—then what’s a brand new, never-heard-of product to do?
There’s no doubt that a product launch is a risky undertaking. In fact, it’s estimated that of the 30,000 new consumer products launched each year, up to 95% fail. Given the inherent risk in bringing a new product to market, utilizing a test market or “test and learn” strategy to product launch has gained popularity over the past several years across industries.
Various Approaches to Test and Learn
“Test and learn” is not one size fits all. Some companies use a typical innovation stage-gate process but leverage a test market to mitigate risk as they build wider distribution. Others take a lean approach, using test markets as an innovation ground zero in order to avoid a rigid stage-gate process and quickly uncover the viability of their business model. In fact, many larger companies have established separate business units within their organizations to function like startups, with the objective of bringing new-to-world innovation to market on a smaller scale.
While there is no universal blueprint for innovation success, a test and learn approach to product development gives us a unique opportunity to see our brands and products through a new lens. While pre-launch testing often has us developing and optimizing one element of a new product at a time—such as the positioning, product and package—test markets allow us to examine all elements in combination, as consumers actually experience them. Unlike the traditional home-use tests typically conducted pre-launch, we are not placing perfect prototypes with hand-picked consumers.
More Realistic Consumer Insights
When done right, a test and learn strategy can provide insights about real products from real consumers in real moments. Consumer insights gathered under real-world style circumstances will naturally give us a more accurate understanding of the strengths and weaknesses of our new products, as well as clear direction on next steps. One of the strongest use cases for test markets is to better understand product pricing. While pre-launch pricing research can certainly provide guidance on pricing strategy and purchase intent, willingness to pay is often inflated in a hypothetical situation. The best way to discover consumers’ true reactions to price is for them to see the product on the shelf and have the opportunity to buy it. Trial rates and an assessment of barriers at shelf can tell us whether the price point truly makes sense in market.
There are also important business advantages associated with a test market strategy. Understanding specifically how products perform in a test market can help to set appropriate expectations within an organization, helping to inform supply chain and hone forecasting. Further, test and learn results can be leveraged to create a sell-in story to arm the sales force. The insights can be offered as proof points on product performance. For example, that a product generates strong trial and repeat, is differentiated from competitors or is incremental to the category. These insights can help to build distribution, as they not only mitigate risk for the manufacturer, but also for the retailer.
Challenges to the Approach
There are some inherent challenges to the test and learn model. It can be difficult to convince traditional researchers to take a risk, step back and launch products at a scale using a “start up” approach of “test and learn.” It can be risky to put your product out into the market, not perfectly finished, not completely optimized, and learn. And, as most of us know, market research is rather risk-averse.
It’s taking that final step and applying the learning—and failures—from this approach that can sometimes prove the biggest obstacle. Which elements should you follow and take into the next stage of the process? Researchers must choose which paths to follow and where exactly to turn philosophy into practice and research into results.
Just as some of the world’s best-known brands have found out the hard way, product launches of any kind are risky. It’s better to take on this risk with a deep understanding of how a product will perform by using a test and learn approach.
Photo by SpaceX on Unsplash.