W. Edwards Deming, the father of Total Quality and one of my business heroes, once said: “It is not enough to do your best; you must know what to do, and then do your best.”

This simple statement applies to many things in business, not the least of which is the new product innovation process and concept testing. How so? In the early days of commerce, the product was the obvious “what to do.”

Inventors or innovators had either a fully researched or intuitive understanding of an important consumer opportunity, and they got down to the business at hand: designing a new product. This approach was only occasionally right on target, but often fraught with blind alleys and dead-ends. It was mostly hit or miss with infrequent payoffs, and inefficiency reigned.

The Advent of Concept Testing

Then, in the 1970s, a new approach was born: concept testing. Why go to all of the trouble of designing, making, and testing a real product when you could just test the product idea―quickly, cheaply, and reliably? Why indeed.

Concept testing had the benefit of narrowing the focus of the R&D product development efforts, making them much more efficient while simultaneously predicting in-market success with a reasonably high degree of accuracy―all without the need for a real product.

It was almost a gift from heaven. These benefits were not lost on marketers and the R&D community. They latched onto concept testing with a vengeance, dramatically increasing their efforts to refine the core idea before actually creating a product. In fact, concept testing became the standard in FMCG (fast moving consumer goods), and many companies now routinely test thousands of new product ideas with concept testing every year.

Thus, concept testing became the second “what to do.” Focus not just on the product, but, first and foremost, focus on the concept and the core idea.

A New Philosophy Emerges―Concept over Product

Companies tested more and more concepts. Repetition being a good thing, they tested more and also improved their ability to develop “winning” concepts.

A new governing philosophy began to take shape: without a good idea, there was no need for a product. Hence, test the idea and worry about the product later. Companies reasoned: if we can predict in-market success from concept testing only, let’s simply assume we’ll get the product right and speed up the development process.

This new “concept only” philosophy had the benefit of dramatically reducing the time and cost of qualifying new initiatives―which was highly appealing in a hyper-competitive market with shrinking research budgets.

The Dangers of a Concept Only Focus

This inversion of “focus on the product” to “focus on the concept,” however, is a dangerous one.

Here’s why:

  • Even when new product concepts score strongly and are “ready for market” based on Nielsen’s validated Factors for Success, fully 50% move to “high risk” after consumers use the actual test product.
  • Only 5% of products that score poorly on Nielsen BASES product test measures are successful in market. That is, 95% fail in market.
  • In order for a product to succeed in the long-term, consumers must like the experience enough to purchase the product not just once but again and again. Strong repeat is especially critical for driving volume in shorter purchase cycle categories. For example, in a thirty-five-day purchase cycle category, going from low repeat to high repeat provides a 50% volume lift.

Relearning an Old Lesson―Product Is the Primary “What”

We have, unfortunately, relearned an old lesson―the primacy of the product. It’s so obvious that it’s almost silly to have to say it again: companies that forego pre-market testing to ensure that the product actually delivers on the concept do so at great risk. Product testing is just as important as concept testing. Simply put, don’t skip the product testing.

Other Key Product Optimization Opportunities

Over the years, we’ve learned that both concept and product testing are essential—but what else have we gleaned when it comes to developing successful innovations? Here are a few additional tips for how to make the most of your innovations:

1. Product Acceptance Modeling―Since long-term success in almost any category relies on product performance, building a model of consumer acceptance and key drivers is key to the design process.

This typically involves several steps. First, test all of the key brands in the category to measure consumer acceptance. Second, measure technical performance for each brand across all important attributes. For example, in the paper towel category, wet strength, absorbent capacity, and other attributes can be measure technically (e.g., absorbent capacity is measured in grams of liquid absorbed per unit of paper). Finally, build a regression model that accurately and reliably predicts consumer acceptance based on technical attributes so you can focus on designing a product with the attribute performance that will increase consumer ratings.

With this model in hand, the Innovation task moves from a focus on “what” to “how.” That is, how to actually design in the necessary attribute technical performance using process, materials, technology, etc., to achieve the predicted higher level of consumer acceptance.

2. Line-up and Pricing―A surprising number of companies do all of the hard work of developing winning concepts and products and then utterly fail to optimize their line-up and pricing―a key opportunity to add significant volume.Optimizing line-up and pricing can pay big dividends. For example, line extensions have the potential to grow the franchise by 21%+ (Nielsen Global Database, 2008). And a 1% price increase can yield an 8% increase in profits (McKinsey, “The Power of Pricing,” 2003), assuming stable volumes.

3. Packaging―As I wrote in an earlier MENG blog post, “Asymmetric Marketing,” packaging is probably the single most important marketing element beyond the product itself for any FMCG brand. On average, optimized package redesigns generate a 5.5% lift in Nielsen BASES forecasted revenue (Nielsen, “Packaging Sells,” 2015).

The great thing about packaging is that it’s “always on” at the moment of truth―when consumers make their purchase decision. This means that the ROI can be much, much higher than other episodic marketing activities because it’s always working for you and typically lasts for years.

Innovative packaging can yield huge gains. A good example: Heinekens’ 8 to 8.9-ounce can sizes grew case volume by 356% and dollar volume by 522% in 2012 (Nielsen Scan Track).

Marketers need to start thinking about packaging, whether it’s functional or aesthetic, as part of the product itself as well as applying key design principles of broad scale creative exploration and objective, consumer based measurement in selecting a winning design.

Where to Focus―Concept Testing or Product?

So, do you focus on the concept or the product? Like many false choices, it’s no choice at all. You do both. Concept testing and product testing both play an important role in the new product innovation process.

Doing one without the other is like dollars without cents. They’re the indispensable “whats” that require excellence. If Deming were here today, he’d no doubt proclaim:

“It is not enough to do your best; you must do both concept and product testing, and then do your best.”