We have all had them, the “business epiphanies” or “golden ideas” which come to us over the weekend whilst swinging a golf club, doing laps in the pool or just mowing the grass. In the moment….. these new product or service ideas are the perfect combination of simplicity, profitability and marketing brilliance.
By Monday morning these moments of creative thinking have….started to tarnish….with some more considered thought seeing a gap or two appear. By Wednesday, most of these ideas have been discounted and by Friday, are all but forgotten.
Would we have been better off not having the idea in the first place? – NOT AT ALL!
Even if only 1 in a 100 of these “golden ideas” came to fruition – you could reap significant benefit, so the key is to not only capture (and foster) these ideas when they come to you, but to then have a clear and efficient evaluation process.
So….when you have your next “brilliant idea”, quickly and objectively consider the following;
- Does it deliver?
An OK product may sell, but the litmus test for sustainable sales is whether it truly delivers. If your service is to “provide specialist advice to the engineering trade”, then your service needs to be specialised and you need to providing value in that industry. Equally if you are pitching an easy to assemble tent, then it needs to be exactly that, easy to assemble! Marketing to a need and not delivering on it will draw negative sentiment and impact the success of your concept.
- Confirm the market
A product or service with no market is unlikely to be successful – or more critically, be profitable. Consider the market for a need that your concept will fill or for a weaker product that it can replace. This is the time for an objective assessment – not an emotive one. For a deeper assessment of viability, consider the scale/quality of the potential market using appropriate market research, client/customer surveys and economic assessments.
- What are the alternatives?
Review what is currently in the market, its price, reliability, availability etc and then compare to your new product or service. Consider what is the same / what is different – looking for points of competitive difference or advantage. Remember, it is often difficult to edge out an existing established product without significant new features or price benefits. When considering the alternatives think also about packaging, brand recognition, durability, weight and distribution, as for some products and some customer groups – these can be more important than price.
- What is the expected product life span?
A product with only a limited life span relies on a strong margin and a well-managed set up cost base – as long term cost recovery is not an option. A longer product life span however provides greater opportunity to build marketing/awareness over the time as well to “evolve” the product to the “MK 2″ version which can often mean leveraging value out of the old product for a whole new sales series.
- What is the growth potential?
Stagnant sales in a growth market is actually going backwards. So if your new product/service only has very limited growth potential, then your viability assessment must be very strong and focus on the day one sale volumes as your baseline. Extra attention needs to be given to the pricing and costing assessments, as with a limited growth potential – the ability for longer term cost recovery is inhibited.
- Do your costings stack up?
Price and return are critical elements of your product or service. The cost of producing a new concept needs to be carefully calculated to ensure an accurate baseline for your sale price. If your pricing is pitched too high, you may turn away new customers, equally if it is too low then you may go broke. When considering your costings – give particular attention to the initial set up / production costs, the formation advertising and design, along with the higher manufacturing costs for small run batches.
- Market response
The introduction of a new product or service to a market will have flow on effects, so these should be considered. Basing a viability assessment on today’s volumes and prices alone is dangerous, as experience shows that most competitors will not simply sit back and watch you take their market. Evaluate the opposition and consider how they could react to a new competing product – ie. price discounting, greater marketing or new product enhancements.
- Do you have the capacity and capability?
Regardless of the new concept, it will require a mixture of time, money, expertise, energy and resource – so the question is – do you have what it takes? If you are short on these – then can you get them and is it viable to do so? The cost here can be significant, so for every business – the decision of where to use your finite resources is crucial. Equally, some expertise can be difficult or very costly to obtain, so be clear on this from the start.
- What’s the exit plan?
The best market research, product strategy and marketing plan won’t guarantee success. For any new concept, you must also consider the consequence of a total concept failure. This may be as simple as just the raw product cost, but generally goes deeper. The cost of unwinding a production or service set up can be excessive, so this risk must be considered (and where possible – mitigated) as part of your upfront evaluation.
These evaluation points are not designed to show what’s right or wrong – as that will be driven by the vision/strategy of the business owner, but instead are to ensure a robust assessment process is undertaken.
Armed with the output of your assessment, you can then make an informed decision as to whether your product idea is viable……or not!