five strategies for developing the optimum product

 

  • Co-creation.
  • Balance.
  • Differentiation.
  • Continuous improvement.
  • Add value.

 

CUSTOMER-CENTRIC MARKETING

To be ethical, marketing must be customer-centric. For a business to be ethical, the marketing must be customer-centric. There are few things more unethical than trying to convince a human being they should buy something they neither need nor want.  

To maximise profitability and performance more generally, business and marketing, in particular, need to be customer-centric. Customer-centric marketing is the key to maximising sales, margins, the average sale per customer, repeat business rates and referral rates.

Alas, few businesses – with some notable exceptions – are as customer-centric as management might suggest. This series provides insights into how marketing can be truly customer-centric. 

PRODUCT DEVELOPMENT

Scott Galloway, Professor of marketing at New York University, once asked an audience what Facebook, Amazon, Apple, Netflix, and Google (the famous FAANG) have in common. Answering his own question, Galloway said – “a fucking-great product’. Galloway takes the view that few things in marketing are more important than the product. I agree with him.

My philosophy on product development might be summarised as follows:

  • Rather than finding the best market for a product (as most businesses seem to do, it is more cost-effective to find the right product for the market.
  • The optimum product is the one that the target market considers optimum. The market and not the business defines the ‘optimum’ product.
  • Very few optimum products have been developed through a stroke of genius. Most optimum products are developed following a painstaking methodical process.

 

 Central to optimum product development is defining the market before finalising the product. In the words of marketing guru Seth Godin:

  • ‘Don’t find customers for your products; find products for your customers.’

 

This is the very definition of customer-centric product development and the central tenant of this missive.

DEFINITIONS

Four terms require definition here:

  • Product – a good or service a target market is expected to purchase.
  • Optimum product – the product that will ultimately maximise returns.
  • Customer experience – the experience surrounding the product purchase.
  • Brand – the value (often intangible) added to a product.

 

 More goods and services are on offer to consumers than they could ever buy. Optimum products sell well and have the capacity to maximise performance. Dome products sell well, while others do not.

The customer experience and the brand have the capacity to add value to the product and, as such, make it more attractive to members of the target market.

THE IMPORTANCE OF PRODUCT DEVELOPMENT

The ever-growing list of product development processes highlights the importance of product development. As Scott Galloway suggested, few things in marketing are more critical than developing the optimum product. New product development:

  • Can drive sales.
  • Enhance margins.
  • Reinvigorate a declining market.

 

 The optimum product will:

  • Maximise sales.
  • Maximise margins.
  • Maximise customer satisfaction and therefore repeat business rates.

 

 ‘Product’ is far and above the most important of the four ‘Ps’ of marketing. It is the key to:

  • Minimising marketing costs – as great products generally require less promotion.
  • Building a long-term relationship with customers, maximising their lifetime value.
  • Creating the optimum brand ad culture – reflecting the mission, vision, and values.

 

 FIVE STRATEGIES

There are nearly as many strategies for developing and leveraging the optimum product as there are processes. The following discussion addresses just five of these strategies.

CO-CREATION

The product consumers buy the most and pay the most for (the optimum product) will be the one that meets all of their needs and exceeds all of their expectations. To develop the optimum product, it is, therefore, necessary to know the consumer’s needs and expectations. This, in turn, requires two things:

  • Research to understand the needs and expectations of the target market.
  • A resolve to fine-tune the product, customer experience and brand to satisfy the needs and wants of the target market.

 

 In the ideal world, product development should involve the following:

  • Establishing a product concept.
  • Identifying the market segments.
  • Researching the needs and expectations of key market segments.
  • Refining the product concept into a product that meets the needs and exceeds the target market’s expectations.

 

Reflecting this, an increasingly popular approach to product development involves ‘co-creation’. Co-creation involves:

A product design process in which the business works closely with target market members to develop an offering that meets their needs and exceeds their expectations.

This is a process commonly used by the likes of:

  • Unilever
  • Ikea
  • Lego

 

Traditional research has very clear shortcomings when it comes to product development. Steve Jobs famously noted that consumers do not know what they want, and Henry Ford before him said, ‘ If I had asked people what they wanted, they would have said faster horses.” It is so often the case that consumers find it very difficult to articulate specific needs and expectations.

Working together to co-create a product, however – the business and the target market can explore problems and opportunities in a way that enables needs, wants, and expectations to be revealed and solutions to be tested. Co-creation can be facilitated by way of the following:

  • A brand community.
  • Product development workshops.
  • Gathers insights from a panel.

 

 Highlighting the potential of co-creation are these research findings:

  • 58% of businessesare now piloting co-creation projects to help drive innovation.
  • 96%of companies see the value that customer collaboration presents for the marketing department
  • 81%of consumers say brands are more authentic when they collaborate with their customers 
  • 86%of consumers say brands are most trustworthy when they engage in co-creation.

 

Co-creation is perhaps the most effective, most cost-efficient and potentially most profitable approach to product development.

BALANCE

I rarely have time for balance, but research has repeatedly demonstrated the importance of balance in product development. The balance, in this case, is between:

  • Neo-philia, and
  • Neo-phobia.

 

 Neo-philia involves the attraction human beings have to things. In this case – products that are new and potentially innovative. Neo-phobia involves the attraction of human beings to things, in this case – familiar products. Research shows that while human beings or consumers are attracted to the new (and often claim to be so), they are equally attracted to the familiar (which they talk about less often). Consumers like new music – but only if they are familiar with and like the style or genre.   

Consumers are attracted to new and different products so long as they are not too new and different. Put differently; consumers tend to be attracted to products that retain the essence of the familiar with offering a new interpretation or presentation. This phenomenon is especially prevalent with food. While human beings often say they like to try different foods – they don’t want them to be too different.

While calling themselves innovative, businesses like Apple, Microsoft, and Google, rarely launch products that are way out of ‘left field. They almost always launch products that build on a familiar theme – improving some aspects but retaining the essence of the original products. Further, where a product differs from previous products, it will cost more to market and take longer to realise its potential.

DIFFERENTIATION.

In his book ‘Zero to One,’ the founder of Pay Pal and venture capitalist Peter Theil highlighted the potential for eliminating direct competition. He suggests that ‘competition is for suckers.’ Perhaps the most effective way to eliminate or, at least, reduce direct competition is to differentiate products to the extent that it is difficult to compare with other products. Product differentiation is central to reducing perceived competition and supporting higher sales and margins.

Co-creation and market research can be very helpful in gathering the data necessary to understand the needs and expectations of the target market and how to differentiate the offering (both the product and the experience when buying that product) in a way that makes it more likely to meet needs and exceed expectations. While differentiation is essential to minimising marketing costs – differentiating in a way that people relate to is essential for maximising sales and margins.

The differentiation indicated through the co-creation or research processes needs to add value to the product, which can be reflected in a value proposition. A value proposition involves – an innovation, service, or feature intended to make a product more attractive to customers. More broadly, a value proposition is – the mix of benefits delivered to current and future customers. Creating a new value proposition is central to differentiating when developing a new product.

Work with the target to differentiate and create a value proposition that reduces direct competition.

CONTINUOUS IMPROVEMENT

Continuous improvement is as much a mindset as it is a process. It involves embracing the fact that more can almost always be done to meet customer needs better and exceed their expectations. Embracing continuous improvement – or perhaps continuous innovation (as do most of the great brands, including Facebook, Apple, Amazon, Netflix, and Google) is essential given the continuous change that is occurring in the competitive, economic, political, and social environments.

Establishing a brand community is one of the most effective approaches to continuously improving the product and the customer experience. A brand community is a place where consumers who have a connection with a brand and connect both the business and others interested in the brand. Most brand communities in 2022 are online. Indeed, some 60% of Fortune 500 businesses have or are establishing a brand community – with one of the express purposes being to facilitate ongoing improvement.

A brand community provides an environment where the strengths and weaknesses of a product can be discussed along with the needs, wants and expectations of the target audience. Brand communities provide an inexpensive forum for gathering data, testing innovations, and identifying opportunities for differentiation. The following research findings highlight the potential of a brand community:

  • 66%of businesses surveyed use brand communities for product development.
  • 71%of businesses surveyed use customer collaborations for market research.
  • 64%of businesses surveyed report that a brand community has improved decision-making.

 

Recognise that needs, wants, expectations and environments change – making continuous improvement essential. Look at developing a brand community to drive continuous improvement.

ADD VALUE

The optimum product meets the needs and exceeds the target market’s expectations to a greater degree than its competitors – making it most likely that sales and margins will be maximised. Sometimes this can be achieved through product innovation alone. Other times there is a requirement to add value by way of:

  • The brand.
  • The customer experience.

 

The principal purpose of a brand is to add value to a product, perhaps helping it to evolve from a commodity to something more or perhaps helping it to become more distinctive. Branding is the process of creating a brand that adds value to a product. That value, in turn, increases trust in the brand. The importance of developing a brand that adds value and enhances trust is highlighted in this research finding:

  • 46%of consumers say they will pay more for a trustworthy brand.

 

The customer experience can be the differentiator. The customer experience through the journey to purchase can also add value to the product and brand. Indeed, the customer experience is often the point of difference that sets one product apart from its competitors. Highlighting the importance of the customer experience are these research findings:

  • 73%of consumers love a brand because of helpful customer service.

 

Both the brand and the customer experience can add value to the product, given that both directly address the needs and expectations of the target market. The values of the business or brand can also add value to the product – if those values align with those of consumers. Research has found that:

  • 71%of consumers prefer buying from companies aligned with their values

 

Research is increasingly demonstrating that values alignment is an important need or expectation for a growing number of consumers. Values most important to consumers include transparency, as this research finding suggests:

  • 94%of consumers are loyal to brands that display complete transparency.

 

 Another value prised by consumers that can add value to a product is authenticity. This is highlighted in this research finding:

  • 88%of consumers say authenticity is important when deciding what brands to buy.

 

Once the optimum product is defined, the real potential lies in working with the target market to add value through branding and an exceptional customer experience.

IN CONCLUSION

Product development is central to maximising profitability. The most ethical and potentially profitable approach to product development involves a customer-centric approach that ensures the target market is well-defined and the product meets all needs and exceeds expectations.

Strategies for developing the optimum product include – co-creating the product with the target market; finding the balance between newness and familiarity, differentiating the product in a manner directly relevant to the target market’s needs and expectations; and continuously improving the product, perhaps using a brand community and adding value through branding and an excellent experience.

INSIGHTS

  1. If marketing is not customer-centric, it is rarely ethical – no matter the commitment to CSR. Customer-centricity is a rare hallmark of ethical business.
  2. The most cost-effective yet rarest approach to marketing is customer-centric. If marketing is not customer-centric, it is unlikely to maximise ROI.
  3. The one thing the world’s greatest brands have in common is NOT a great advertising campaign – but rather – a great product. 
  4. For cost-effective marketing – the judgement as to what constitutes a great product is only relevant when made by members of the target market.  
  5. Marketing works best when the focus is on developing products for markets. It is inefficient to focus on finding markets for products.

 

ANOTHER PERSPECTIVE

 

RECOMMENDED READING

 

TIPS

  1. To maximise ROI – use co-creation to develop the optimum product. 
  2. To maximise ROI – find the balance between neo-philia and neo-phobia.
  3. To maximise ROI – reduce direct competition through differentiation. 
  4. To maximise ROI – embrace a mindset of community-driven continuous improvement. 
  5. To maximise ROI – add value to your product with a customer-centric experience. 

 

 QUESTIONS

  1. Since 88%of consumers say, authenticity is important when deciding what brands to buy – how authentic is your brand seen to be?
  2. Given that 96%of companies see the value that customer collaboration presents for the marketing department – how do you collaborate with customers?
  3. Noting that 66%of businesses surveyed use brand communities for product development – what scientific approach do you use for product development>.
  4. Noting that 86%of consumers say brands are most trustworthy when they engage in co-creation – why are you not using co-creation?
  5. Noting that 58% of businessesare piloting co-creation projects to help drive innovation – when do you intend to trial co-creation?

 

 STATISTICS

  1. 71%of businesses surveyed use customer collaborations for market research.
  2. 64%of businesses surveyed report that a brand community has improved decision-making.
  3. 46%of consumers say they will pay more for a trustworthy brand.
  4. 73%of consumers love a brand because of helpful customer service.
  5. 71%of consumers prefer buying from companies aligned with their values

 

Return on investment in marketing is maximised when the customer is at the centre of the strategic planning process. Many businesses claim to be customer-centric, but few are – resulting in higher marketing costs and a lower average customer lifetime value.

A customer-centric business understands the needs, wants, and expectations of its target market – why members do what they do – and how best to cause members of the market to behave in a way that maximises performance. 

I work with clients to understand customer needs, wants and expectations; and develop strategies that leverage the power of consumer behaviour to maximise return on investment while at the same time embracing the ethics of customer-centric business. 

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