All too many of the new products that housewares manufacturers introduce fail to meet their sell-through or return-on-investment expectations.
These new product failures cost housewares manufacturers tens, if not hundreds, of thousands of dollars. For example, if a housewares manufacturer introduces 15 new products a year at a cost of $25,000 each for product development and tooling and 50% of them fail to meet the company’s success criteria, the company has wasted $175,000 developing marginal products that had a low probability of marketplace success.
How to prevent new costly product failures
Housewares manufacturers would not waste so much money developing marginal products if they routinely conducted product concept tests on every new product concept.
Investing in product concept testing saves money in the long run. Product concept tests cost a whole lot less than what it costs to develop a new product. By conducting concept testing early in the new product development process, housewares companies can identify the marginal products that have a low probability of success before they’ve invested tens of thousands of dollars in development and tooling.
Product concept testing is predictive of new product success
Research studies indicate that concept testing is highly correlated with new product success.
In the late 1980’s, Sunbeam Appliance Co., then a division of Allegheny International, determined that its concept testing procedure was predictive of the success of several product ideas that were developed, marketed and broadly distributed. The test also successfully predicted the failure of several products that the company did not develop but that were introduced by competitors.
A 2011 study we conducted found a correlation between purchase likelihood scores and how well the product met company expectations. All of the products with top two box purchase likelihood scores of 30% or more met or exceeded company expectations. All the products with purchase likelihood scores of 24% or below failed to meet expectations. Products with purchase likelihood scores in the range of 20% to 29% fell into the gray area: three failed to meet expectations and two exceeded expectations.
Should you add product concept testing to your company’s new product development process?
Ask yourself these three questions to find out.
- How many of the new products that your company introduced in the past couple of years failed to meet expectations?
- How much does it cost on average to develop a new product, including tooling?
- Now do the math. Based on that average cost, how much money has your company spent in the past several years developing products that failed to meet your success criteria?
If that number is shockingly high, you need to add product concept testing to your company’s new product development process.