We product managers currently manage to hit the nail on the head ONLY 1 out of 4 times with new product introductions. In other words, 3 out of 4 product launches FAIL to hit their revenue goals and some do quite badly.
Can our performance really be that horrible? I’m sorry to say that multiple studies verify this fact.
- 76% of new products fail to hit their revenue target according to the most recent PDMA (Product Development Marketing Association) Benchmarking Survey (2013)
- Between 65% and 75% of new offerings fail outright or miss their revenue and profit goal (quoted from Monetizing Innovation (2016) by Madhaven Ramanujam and Georg Tacke)
You might be tempted to think “Hey if 1 out of 4 is the benchmark – that’s a low bar! Why worry too much about my next launch? I’ll get another chance (or two).”
That is probably a reckless and dangerous attitude. Here’s why:
Years ago we spoke with a highly respected B2B executive about his company’s value-based strategy and he emphasized the importance of new product introductions. He told us that only 2.5% of his company’s current sales are from new products, but quickly pointed out that this would grow to 5% the next year and 10% two years later, and so on. In other words, his company simply could not afford a poor product launch because the consequences to the overall product portfolio are long lasting.
Experts say there are multiple explanations for the high product failure rate. In this article, I just want to focus on one: poor value communication. From my experience, this doesn’t get much attention and is a relatively easy one to address quickly – the proverbial low-hanging fruit.
In the movie classic, Cool Hand Luke, the hero Paul Newman winds up in a ditch because, as the prison warden infamously explains, “what we’ve got here is a failure to communicate.” Lesson: an otherwise handsome and likable new product can easily stumble and fall (just like poor Paul) unless we can effectively communicate value to customers.
Again, there is research that supports this. For example, the whitepaper, “Winning the Product Launch” from Altify (formerly TAS Group) states that the number one reason for success (and failure) is related to accurate value propositions. By accurate they mean value propositions that are customer-centric and business-focused.
As product managers, we own this issue. It’s up to us to create accurate value propositions. What I’m talking about goes beyond the standard sales collateral, technical documentation, playbooks and occasional one-off spreadsheet. The real issue here isn’t lack of content. Quite frankly, sales people already have a mountain of content to manage. I’m not talking about adding to the pile, but providing a more effective front-end to the value communication process.
We product managers are already familiar with the concept of user design, let’s apply that skill to the needs of the sales team. According to an Aberdeen Group study, sales people most desire value props that “improve positioning and differentiation . . . and tell a better, unique story.”
“Story” is the key word. To me, the essence of a value proposition is telling a good story about how your product delivers tangible value to your customer. As SOON as possible. Timing is everything, a Forrester Group study claims that the first vendor who succeeds in communicating a vision (i.e. accurate value proposition) to executives wins the business 74% of the time. The early bird gets the worm.
74% success rate! That statistic is a bit ironic, don’t you think? It’s practically the mirror image of the current new product success rate, 24%.
So hopefully I’ve convinced some of my fellow product managers to consider upping your game when it comes to producing value props.
Again, it’s important to get those value props developed as early in the process as possible. Don’t hold back because you haven’t collected all of your customer or competitor data yet. Your mantra should be: Don’t Wait, Iterate!
In our experience, a good value proposition encompasses the following:
- Customer-centric. In this story, there is one hero: the customer. The product is not the hero – it’s the helpful sidekick.
- Quantified value. Call it ROI or TCO or NPV or value added. We are all talking about quantifying the contribution to your customer’s bottom-line. Whether it be from reducing costs, growing top-line revenue, reducing risk or better asset utilization.
- Data transparency is key. No black-box calculations. An adjustable to the customer situation – avoiding the “One Size Fits None” proof point.
- Be on Message. Often it comes down to 2 or 3 key value messages that you want to continuously hammer home.
- Be digestible. It comes down to a 1 or 2 page presentation that it easy to read, graphs that are intuitive and which can be presented in 5 minutes.
Online content platforms are the best way to create, manage and distribute value propositions. LeveragePoint provides an excellent value selling platform that product managers can use to efficiently produce effective value propositions that sales people actually want to use. To see an example, click here.
Having the right tool like an online platform makes all the difference. Like the difference between a hammer and a nail gun.
This post was adapted from LeveragePoint’s June 2016 webinar, Increase Your Revenue from B2B New Product Launches. To access the recording and/or download the slide deck of this webinar On-Demand, click here: