How to test, sell and market new products.

Signs on beach on East Falkland warning of the dangers of unexploded mines and mine fields. Falkland Islands. ©Toby Adamson/Axiom
Companies as well as Entrepreneurs nowadays take a substantial risk, not only from a financial but also from a “innovation race” game perspective when developing new products. Betting on the wrong horse can get you anywhere from losing a fair amount of money to total bankruptcy. No wonder that companies are trying to minimize risk by being less radical and by conducting upfront research to come up with the safest plan and concept possible. But, as we all know; only a view “innovations” survives the first contact with a customer and a sustainable amount of products fail in the market.
So the question which comes to mind is, is it possible to make the right predictions upfront to have a save delivery in the end? Well, the cool thing is, there is such a thing and it which just appeared and it does much more.
Some time ago the Glif, an iPhone 4 Tipod Mount & Stand developed by Thomas Gerhardt and Dan Provost, two designers from NY was featured on the web (e.g. Economist) for the first time. The most intriguing thing about it, was not the product itself, but the process they used to to come up with their testing and the upfront investment for production.
Instead of looking for an investor, the two designers used kickstarter.com to pitch to the public. This, not only gave them more than the initial investment they needed ($10.000) but much more. By looking at the proposal of the Glif, visitors of the website evaluated the product and where showing their commitment by literally buying into the idea. By buying the product prior to production, not only financing but a secure customer base which expressed their belief and their trust into the product was secured. In addition one might only speculate about the viral marketing that took by committed customers who bought into the idea and send the links to family and friends. After achieving $80.000 the economist featured the product online which led to the final sum of $137,417.
Although the creators of the Glif might not have been aware about it, but their success already inspired another, Apple related, product Tik-Tok, a wrist bad for the ipod nano touch, which already gathered more than 182.000 US$.
So is this just hype or a real business model that we can see emerging. One might argue that there where others trying to make their luck using the same approach before. But if you look at how they did it, it never has been used so professionally in terms of preparation, creating and addressing a market need. By building on a “current hype” combined with a meaningful proposal and a good story to communicate it, these designers where able to successfully finance a product development even beyond their expectations.
So these two concepts might only be the first in a series to come, using this new business model in a professional way – which was rarely considered before. Showing how crowds could be used as a core principle to test, market, crowd-finance and deliver new and innovative products.
But this is not only great example when it comes to entrepreneurial endeavors but also when looking at it from a product evaluation and market testing perspective (Evidence Based Management …). Established companies who invest millions in new developments to see them fail on market release could also gain a substantial benefit using this approach. Using this approach for pre-market tests or radical ideas could substantially minimize the risk and therefore help mature business to test more radical ideas without endangering their existing businesses.
So by looking at these examples one might come up with a rough sketch of steps which emerges from the early examples at hand:
- Identify a market need related to a web save user base that is in high demand for innovative products and is web save (in means of trusting online services such as kickstarter.com).
- Develop and test a product idea to address this need and build a working prototype that is as close to the final product – and therefore as real – in terms of function, materials and look as possible.
- Calculate the price based on the minimum requirements to produce and ship a small quantity of approx. 100-1000 pieces. (reverse’ income statement – as described in the article „Discovery Driven Planning” by McGrath and MacMillian 1995)
- Publish the product story/pitch on kickstarter.com
- Publishing a pitch on an online platform like kickstarter.com which communicates the idea by an insightful story. The story needs to clearly show the advantages and the needs which are being addressed as lively and simple as possible.
- Rather than spending money on the project itself, offer the user to order the product by his investment upfront. With this, the user will not only pay for the product, but contribute to turn the idea into reality.
- Be authentic! Provide a compelling background story on your credibility is in terms of product development and why you developed the product in the first place.
- Provide info on how the product will be turned into reality.
- Market your product proposal using social networks and related user forums.
- Check on people’s interest (visits) vs. investment into your idea in order to recalculate and re-plan your production while the demand grows.
The great thing about this approach is, it shortcuts your way to the market and reduces the risk of spending a lot of money in tooling and infrastructure beforehand. In addition product, production method and profit can develop while getting feedback. However the downside might be a loss of a first mover advantage in terms of time to market. In addition this business model might be most suitable for products with low complexity that could be produced and shipped shortly after the crowd-financing pitch runs out.
Nevertheless, this might be as revolutionary to product design as t-shirt printing to graphic design. Once production facilities have adapted to this kind of business model and new web services have been set up, we will surely see much more niche product by entrepreneurs,designers, communities and private practitioners than ever before.
Thanks to Henrik Berglund and Sören Sjölander from CBI/Chalmers who inspired the links on Evidence Based Management and Discovery Driven Planning.