• Before you test your business concept, get your mind right…

Market Audit

Primary Research

Concept Testing

Business Launch

Remind Yourself What Your Testing

Product Benefit: Have I effectively addressed who wants or needs it and the signaling cues?

Consumption Chain: Have I effectively addressed the full consumption chain?

Competitive Response: How did they respond?

Price: Is the price achieving the targeted forecasts and profits?

Promotion: Is the packaging and merchandising having the desired effect?

Should I adjust, change direction, or get out?

Business Success

Matching a company's capabilities with the wants of customers and consumers in order

to achieve the objectives of both parties.

Testing Benefit Alignment

Source: Marketing Plans by Malcolm McDonald and Marketing Management by Kotler.

Product Features (Benefits)

Consumer Segment

NeedsAlignment

After all, you’re testing how well your benefit aligns with the consumer’s needs.

Take Their “Pain” Away

• The 3 Q’s

Your Product/ Service

Your End Consumer

Intermediary (Customers)

-What do they want?

-Why do they want it?

-How do they know they got it?

What Do Your Consumers Really Want?

• Remember, they don’t buy features, they buy benefits!– Don’t fall into the trap of talking about features,

rather talk about what they mean.

• Identify the feature, then ask two questions:– Which means what?

• Bug stops in its tracks

– So what?• Kills bugs while in sight

• Can you make money at it?

• What are they willing to pay?

• Is the price achieving the targeted forecasts and profits?

Realistic Market Pricing

• Start by looking at “similar to” products in the market.– Compare benefits and

features

Standard StandardWeb Dealer

Units per 1 1Retail % 0% 24%

Retail $ $3,500.00 $3,500.00

GM% 68% 58%Sell Price $3,500.00 $2,650.00Finished Goods $1,125.00 $1,125.00

Kit $1,000.00 $1,000.00

shipping crate $125.00 $125.00

Projected Volume 250 250

Mix 70% 30%

Sell Price @ Invoice $875,000 $662,500

Less: Vol/Grwth 1.0% $0 $6,625Net Sales $875,000 $655,875Cost $281,250 $281,250

Less: Commission 5.0% $43,750 $32,794

Less: Distribution 1.0% $8,750 $6,559Less: Engineering 15.2% $132,738 $99,497Less: Marketing 11.5% $100,459 $75,301Less: G&A 10.8% $94,822 $71,076OP $ $213,231 $89,399OP% 43.5% 24.4% 13.6%

Widget

• Understand the profit desires of your intermediaries.

• Develop pricing from the top-down, not bottom-up.

What will your competitors do? How low can you go and still make money?

Keep Your Mind Right While Testing

• Your are in the business of offering a sustainable (product or service) benefit to a targeted audience, while helping

others make money as you do.

What Are You Really Selling

• “I sell bicycles.”• What you’re really selling is:

– Exercise– Relaxation/escape– Competition (racing)– Transportation

•Knowing what you’re “really selling” allows you to include spec’s/services (benefits) that the consumer “really wants”.

Have A Plan And Stick To It

• Once you know what you’re “really selling” and to whom…follow your plan, but be ready to adjust.

• Set metrics to evaluate, which will define– Who you are– Where you are– Where you are going– How you will get there

• Don’t be a “puppy dog”…

chasing all the pretty balls.

Plan, Adjust….Persevere.

Vector Impact – Client Examples

Testing Prior To Full Market Launch

• Product/Website/Service– Prototype/Development Server

• Strength- close to real without significant dollars; changes not very expensive

• Weakness- not real product; limited sample size– First Production Run

• Strength- real product• Weakness- real dollars; changes are expensive

• Methods– Focus Groups

• Strength- real people not data; good for packaging, taste tests, controlled interaction

• Weakness- not absolute; only directional– Controlled “Limited Exposure” Testing

• Strength- real world dynamics; limited exposure and expense• Weakness- may not capture geographic differences; some

niche’ audience may be missed

Prototype: Controlled Testing

• Situation– Adjustable motorcycle handle bars

• Inventor with idea– Design not practical or safe

• Key Steps– Go-To-Market plan– Logo Development– Redesigned coupling– Patent refiling

• Testing Concept– Prototype and field testing– Controlled website launch– Target audience blogs

Redesigned product to reduce cost and eliminate poor “signaling cue” feature.

First Production: Controlled Testing

• Situation– Cat Allergy Relief product; worked for four years to

market product• Destroys allergy causing proteins

• Key Steps– Go-To-Market plan– Renamed, reformulated, added sku’s– Branding and logo– Packaging

• Testing Concept (retail store evaluation)– Selling in regional pet retailer– Store by store manager/employee evaluation– Multiple store consumer observation/discussion– Limited geographic advertising

Redesigned POP and conducted product knowledge training at corporate site and on location.

Development Server: Controlled Testing

• Situation– Branded apparel line

• Retail, web, and commercial

• Key Steps– Market Audit– Business Plan– Develop brand– Identify items

• Testing Concept (retail store evaluation)– Identified and implemented in limited retail stores– Controlled web launch allowing for feedback;

blogs, reviews, etc.– Established operations with a less time sensitive

segment

Controlled launch to evaluate signally cues, pricing, and adjust operations.

First Production: Controlled

• Situation– Patent pending flood barrier product; after

six years, still struggled to enter market

• Key Steps– Market Audit and Business Plan– Investor presentation– Branding and logo– Marketing plan– Market launch– Negotiated licensing program

• Testing Concept (field evaluation)– Contract with state of Kentucky

Developed a second type of installation unit and designed a “shorter life” product.

Prototype: Focus Group & Controlled

• Situation– Non-nicotine cigarette alternative

• Key Steps– Market Audit and Business Plan– Investor presentation– Branding and logo– Marketing plan– Focus group- concept, brand, product (pre-

production)

• Testing Concept (field evaluation)– Blind taste test of actual product– Controlled geographic launch

Controlled geographic launch underway.

First Production: Controlled Testing

• Situation – Personal health device

• Inventor with idea

• Key Steps– Go-to-Market report– Engineering work for proof of

concept– New consumer-friendly design– Model drawings

• Testing Concept– Direct response test market

• Evaluate concept and price point

– Website

Implementation and results forthcoming.

First Production: Controlled Testing

• Situation – UV system to kill airborne pathogens and

reduce energy costs in commercial buildings

• Patent pending angled lamp array in HVAC air handler

• Key Steps– Market Audit– Business Plan– Investor presentation– Secure management team

• Testing Concept– Implement manufacturing– Field evaluation

Developed 2nd generation array and manufacturing and adapted to sell-in cycles.

OutsideAir

Return air

OutsideAir

Return air

Prototype: Controlled Testing

• Situation – Radio frequency method to measure

liquid level in sealed vials• Inventors targeted vaccine market

(monitor usage and supply chain)

• Key Steps– Market Audit (changed target)– Business Plan– Investor presentation– Identify customer partners

• Testing Concept (funding received)– Build complete system prototype– Field evaluation

Results forthcoming…

Challenge The Opportunity

• Challenge the defined benefit opportunity.

• Get out into the market and “talk” with your defined target audience (segment).

– Face to face is best; phone is an option

– Field test– Limited geographic

evaluation• If you can’t adjust to

match the need, then be ready to signal a “No Go”.

Mindset: If the alignment is not there, you must be ready to terminate.

Product Challenge

Idea Alignment?

Determine if the original idea matches the actual opportunity you’ve identified in your

Market Audit and Business Plan.

Is there truly an alignment? If not, modify or terminate.

Product Features (Benefits)

Consumer Segment

NeedsAlignment

Market Audit: Challenge The Technology

• Proof of concept? Reduced to practice?

• Better/faster/cheaper? How much?

• Scalable?

• When, and at what price success?

• Patented? or patentable?

• Single-use technology/product, or technology/product platform?

• Enabling technologies/infrastructure required?

• Do we have technical know-how to make it work…or do we know how to obtain it

Mindset: If this is a unique idea, how do I protect it?

Knock Yourself Off

• Situation – Company wanted to ensure

patent was broad enough

• Key Steps– Bring in various

manufacturers• “How would you copy this

product?”

• Testing Concept– Use the information to build a

picket fence patent defense

Competitive knock-offs will come, so prepare yourself.

Be realistic, it costs lots of money to protect your idea.

Build various defensive barriers along the full consumption chain.

Risk

• There is risk in every venture. (No slam-dunks)• Assess risk factors at each stage – especially

important in the feasibility review– Define it (Assumptions)– Quantify it (L, M, H)– Manage it

• Don’t ignore it

“A year from now, if everything went south, what went wrong?”

Testing-Address The Risks

Mindset: Use concept testing to eliminate or minimize the defined risks.

Key AssumptionsLevel of Concern

(H,M, or L)What is the concern?

So What?What actions are being or

will be taken to prevent this event?

Key attractions beyond SCP will

be usedModerate

SCP alone will not provide

enough draw or repeat business

Insufficient revenue

Add aquariums, bird pavilion, botanic

garden, and games.

"Healthy" menu items will be the

focusHigh

Kids don't always like to eat healthy

Kids and parents will leave hungry.

Add a few basic pizza and sandwich

items.

Proper geographical

location will be found

Moderate

Poor location means poor recognition,

repeat business, and revenues.

Insufficient revenue

Key features will be identified early so a proper location can

be found.

Tiki Island is sufficiently

differentiated from direct

competitors.

Low

Lack of differentiation would benefit better known competitors.

Projections are not met.

Key differentiating features are

implemented and communicated.

Wrap-Up

• A well-executed validation and assessment process provides focus for strategic value and enhances the probability for success– And, ultimately can save time and money

• It often requires product and market recycle based on what you learn during the assessment process

• Be disciplined and thorough – with due haste