Insights: AMA's digest of the latest findings from marketing's top
How important is the quality of the raw idea to new product success? It seems like a no-brainer to say that it is critically important. Research certainly shows that superior products are more likely to succeed. The problem is – that’s the final product, not the original idea.
By the time a new product or service concept gets to market, it may not even resemble the original idea. If that’s the case, then design and development would be critically important, but not the original idea. Beyond that, others would contend that what matters most is the marketing resources a company puts behind a product – even bad ideas can succeed with enough marketing muscle, the thinking goes.
This is certainly more than just an academic question. If the raw idea isn’t that important to success, then companies can forego any rigor in idea screening early in the innovation process. If, on the other hand, the raw idea is an important determinant of success, then most companies would probably do well to increase the level of rigor and resources they put into filtering ideas early in the process.
Does the Raw Idea Matter? We Haven’t Known Until Now
To gain insight into the importance of the raw idea, Professors Laura Kornish and Karl Ulrich of University of Colorado and Wharton, respectively, have published an interesting research study that relies on data from the community product development website Quirky.
Quirky specializes in consumer products that retail for under $150. Each week, Quirky runs contests in which more than 100 ideas are submitted by community members. The best ideas, described in text and/or images, are selected for development. Members earn points for contributions to the development process and then earn money for points and product sales. Given its structure, both the original ideas and product sales via the Quirky store are publicly available.
The paper, “The Importance of the Raw Idea in Innovation: Testing the Sow’s Ear Hypothesis,” published in the February 2014 issue of Journal of Marketing Research, presents results of an investigation of 160 products in the Quirky store. In addition to the raw idea description and product sales, the research team used two separate panels of consumers and consumer products marketing and product development experts (none of whom were familiar with the Quirky products) to get ratings of the quality of the raw ideas.
Consumers rated ideas (without price information) using a 5-point purchase intent scale: (1 = “definitely not,” and 5 = “definitely”). Experts rated ideas “on a ten-point scale on the basis of anticipated units sold.”
The analyses revealed that higher quality raw ideas do generate more sales. In fact, the results indicated that a one standard deviation increase in the average purchase intent rating by consumers (.0841 on the 5-point scale) led to a 51% increase in sales. And the strength of this relationship was even stronger for products that had been on the market longer. Wow!
Expert ratings also performed well at predicting sales, but not as well as consumer ratings. Further, expert ratings did not perform well at predicting other market outcomes such as units sold, but consumer ratings did. So, while expert ratings have some merit, consumer ratings were more predictive.
The Raw Idea Does Matter! Now What?
Perhaps the key implication of the research is stated succinctly by the authors, “Because a good idea leads to a greater level of success, there is value in accurate selection” (p. 24). Indeed, the results make it clear that “higher-fidelity screening in the earlier stages may be worth the investment.”
In particular, the research shows that companies should incorporate consumer ratings into the evaluation of raw ideas. And the research shows that a simple purchase intent measure is useful for consumer evaluation.
By its very nature, innovation is uncertain. As such, it is critical that a company spend as little as possible as early as possible to learn as much as possible. Having a consumer panel use a simple measure to rate a range of candidate ideas to determine which should move forward into development fits this description.
My own consulting reveals that most companies have lots of ideas, but they don’t know which are most valuable. This research indicates that getting consumer input early in the innovation process can be immensely valuable.
Although companies might be hesitant to expose early concepts to the market, there are two things to keep in mind. First, the sample of consumers need not be large and can certainly come with confidentiality protections. Second, every company has a ready pool of employees who themselves are probably like target consumers.
And, although not a direct conclusion of the research, this also points to the importance of having a solid understanding of customer needs when generating ideas. It also points to the importance of having these needs front and center during design and development so that the fundamental value in the raw idea is maintained during the development process.
While this study was narrowly focused on the question, “How important is the raw idea to market success?,” the question could also be framed as:
• How important is the front-end of innovation to market success?
• How important is the idea generation process to market success?
• How important is a solid understanding of unmet needs to guide idea generation?
To all of these questions, the research answers, “Very important!”