For a mathematician who "wanted to earn a lot of money", market research may be quite a come down. The only other option for the 37-year old Julian Bond, was to be an actuary. Today, as managing director of UK-based Research International New Product Development is content helping marketing companies develop new products. "I am not qualified for anything else that will pay me as much as research," says the acknowledged authority on methods for predicting success of new products. Bond says he is concerned about the short-termism that's afflicting a great many marketing companies the world over, as they rush products that they don't plan to support to the market.
In India recently, he talks about risks and strengths of new product development.
Excerpts from the interview:
Q: How do you explain the trend in India of marketing companies preferring to launching line extensions rather than new products?
A: There are two reasons for this. The cost of developing a new brand is very expensive. Companies find it quite cheap to stretch an existing brand. I also think that they believe they will do better by leveraging the heritage of the mother brand. In a sense, it is true. But the problem with something like this is that it is difficult to generate awareness and visibility without advertising. If you advertise a line extension, especially in-store, very often the packaging is similar. When people go to the shop, they don't often notice the new extension but think it is the existing brand. How successful this will be, time will tell.
The risk involved is high as there is a lot of money involved in building new brands, because you have to be committed to it for a number of years. You can't simply launch it and 12 months later withdraw support. You really have to support a new brand for nearly five years. And a lot of companies don't want that sort of commitment. They also believe that they'll do a lot better if you have built up a strong brand and then you launch a new product based on that brand name. You will expect that the consumer will like it more. The problem is that sometimes companies launch things they shouldn't. Very often, a product may not be good enough, but you've been led along the path because of a strong brand.
Q: Is the profusion of line extensions a trend overseas as well?
A: Oh yes! Absolutely! I'd say that over 50 per cent of our market tests are line extensions. A lot of it is to do with stock market pressures, there is a short termism there which has always been there. And I don't have full details about India but I can't believe it is any different from UK or USA.
Q: What should companies look for in new products?
A: The key question is does the product have a role, is it fulfilling the need that people have. Most of the time, does it really fit in with people's lifestyle? You'll get some revolutionary new products that will change things, like mobile phones. But most of the time, successful new products fit in with what people do. So if you are asking someone to change their behaviour dramatically, then it is unlikely to be successful. Also, you need to ask if it is different to what else is available. If you are Unilever, you can probably afford to support me-too products. But most other companies can't, it is very expensive. There is no real rationale. You should be looking at points of difference. You've got to bear in mind that sometimes the point of difference might be a negative. So you have to make sure what people like but at the same time it should be perceived to be different.
A lot of time when companies go wrong in their development is in the little things. Small things wrong with the product can cause as many problems as getting the big things right. A lot of products don't do well because of small little bits that really should have been sorted out at the preliminary stage. Like readymeals is becoming a very big market in Europe, and a lot of companies are developing them. It might be a meat dish with rice. It could be nice tenderised meat with the right ingredients but the rice could be awful. If the rice is awful, no matter how good the meat is, it is a problem. We did an analysis which showed that to a large extent, the products are as successful as their worst component. So it's important to get the worst bit better than it is to get the best bit even better. Sometimes, in a rush to get the product into the market, people overlook little things. Once you've got it right do not to spend too much time to get it that little bit better. It is a problem with companies now especially as the lead times are getting amazingly shorter. There has to be a balance between getting everything right and not taking too long. As a result, sometimes they miss simple little things which they might have picked up before.
Q: When you say point of difference in products, most of the time in line extensions, the benefit is largely aspirational. Do consumers really perceive that as a clear benefit?
A: That's true. What makes a good new product is a point of difference, but I am not saying that a lot of new products launched do have a point of difference. In a sense, you can argue that the whole point of building brands is to build a notional difference. A lot of companies are trying to say that what are the reasons that we have to give the consumer to believe the benefit. Particularly, with cosmetics, it makes your skin better or whatever, and the reason if you believe the benefits are the ingredients. If the reason is plausible, the benefit becomes credible. As long as you give people a reason you feel they can comprehend, then that's okay.
What happens when someone else comes along and does the same thing better? All the time consumers will experiment, and in the long term, they will go with a product which does actually benefit them.
Q: Why is it that most of the innovations are only technology-based?
A: Companies are still looking. Major companies like Procter, Unilever and Reckitt are investing a lot on R&D. It seems to be there is less innovation. May be there is a feeling that there is so much technological innovation as it is that a slightly better fabric detergent doesn't interest people very much. They are seeking it but they are not finding it very easy, therefore they are turning to standard line extensions. It is not the lack of will but the difficulty involved.
Q: Why is the diffusion larger in packaged goods?
A: It's quicker in packaged goods as they are frequently purchased compared to durables or services. The other thing is that they tend to have less risk attached to them. Like the risk of buying a soft drink is very low but the risk of buying a mobile phone is fairly high.
Q: Do companies have a clear idea of what they want in terms of both research and the new product?
A: Let me be diplomatic here. Sometimes, some companies are getting much better now at saying it used to be that we simply wanted a new product. Now they are being more specific. Some of them have reasonably clear objectives about the volumes they want, the gaps in the market. They are better than they were earlier.
The difficulty from the research point of view is getting them to share with you and the risk sometimes is that you do research without knowing what their objectives are. You come back and say this is good news and they say yes well, but it is not positioned where I wanted it to be, it is not addressing the target I wanted. So quite often, it can be difficult for the researcher to understand fully what those objectives are. Or the objectives researched can be rather too simplistic that they end up being a wishlist. A lot of that has got to do with the relationship that the research agency has with the marketing company. That's changing.
Today there is much more dialogue than there was 10 years ago, but still there's a long way to go. We are nowhere near to the kind of relationships management consultants have with clients. Management consultants will come in and they'll be talking directly to the managing directors. They can stand up and talk in an amazing way and drivel but no evidence to back it up, and people believe them and pay them huge amounts of money. Researchers can have a huge amount of evidence based on research, but no one is ready to pay us that much. Actually, it is our fault. We haven't set our targets higher, we should be important to marketing directors of the company and the managing directors shouldn't know us. Marketing directors should look at us as partners in what they do. That's happening.
Q: What are some of the barriers to brand trial?
A: Price is the biggest barrier. You can get a potential fear with ingredients like say in hair care, baby products or animal foods, that's a risk. You can have social risks with say, soft drinks or clothes. Like Coke has been the brand in many markets and you are cool and hip if you drink it and you are not if you drink local cola.
It's also inertia. Marketing companies have always believed that consumers are far more interested in their products than they really have. Like people will not spend much time on toothpastes. For them it is something to put on your brush and clean your teeth. Very few people actually compare tartar control with this or that. That in a sense, where advertising and point of sale comes in. You've got to jolt people out of this state, you've got to blast this message.
Q: What are some of the new product development myths that companies have?
A: The biggest single problem is that companies do not relatively view new products. We test a lot of new products, but companies see very few. They tend to take the last one and draw amazing conclusions from it. The reason it failed was the same as why it became successful and these things are rarely black and white. And the biggest problem tends to happen is that a company which has had a successful launch, everything is always compared to that and you have always got to reproduce it identically and they find it difficult. It isn't surprising because you can't have generalised lessons for a specific case. And I don't see why research can't help. We've got databases of 10,000 cases and we can draw general lessons, companies can't quantify that. Quite often, we are very good at post-rationalisation, the way the product was actually launched, the success it had had nothing to do with it.
Some people also go by gut feel. By and large, you should listen to research. You may get it wrong sometimes but if you want to reduce risk, you have to research. There has been a myth that pricing doesn't matter too much. Like if a product is good enough, it is felt that people will want to buy it irrespective of price. I don't think if it was ever true. If you don't get your pricing right, you're in trouble. And a lot of companies and products fail because they don't look at pricing. They set prices based on their accountant or based on the consumer. If companies set prices on what the consumer wants, they will never make money. It should be a reasonable compromise between projected profitability and what the consumer is looking for. If you can't do that then you have to see if you want to launch the product.
So much of marketing is short term now. Are companies really building a ten-year brand? I don't know but my suspicion is they are not.
Q: What are some of the international trends in market research?
A: An interesting thing is research on the Internet. In 10 years time, most of the interviews will be on the Internet. We are also looking at interactive voice response. Like if you purchase a new product, we put a label on the back of the pack. It will have a free phone number which you could then call and say whether you like the product or not and why. Increasingly, technology is going to play a major role. There is more emphasis on retail, and companies are spending much more time to find out how people shop. So we are doing everything about the shopping process.
Companies are also looking at brand equity. For long, they mistook brand equity for product equity. Now they want to know what the brand means to the consumer.n
The key question is does the product have a role, is it fulfilling the need that people have. Most of the time, does it really fit in with people's lifestyle?
