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New Product/New Service Concept Development and Testing

Description of Our New Product / Service Concept Development and Testing

There is an old saying (generally attributed to Ralph Waldo Emerson), “Build a better mousetrap and the world will beat a path to your door.” Wrong! Even if you have built a better mousetrap, you must communicate that it is better to people who have a need for a better mousetrap.

Even the best new products/services can fail at the point of communicating the benefits of the product to the target market. That is why we, as communication consultants, are in the business of new product/service concept development and testing. And it is our communication perspective that makes us uniquely successful at it. Except for doing the internal product prototyping work that only the client can do, we offer a complete range of New Product/Service Concept Development and Testing as described below.

Unique Features of Our New Product/Service Concept Development and Testing

While this type of work can take many forms, generally speaking, there are three stages to our New Product/Service Concept Testing.

  • Stage 1: Problem-Solution Definition — This stage answers the questions, “What problem brings about the need for a new product/service?” and “What features and benefits does the new product/service need to offer to solve the problem?” The problem could be one perceived by the market or by the client. Often clients have already defined this when they first approach us. If not, then we do Qualitative Exploratory Research, using our proprietary Motivational Linguistics Analysis® tool with the market and with the client to define the problem, the needed solution, and the correct language (benefits) to use when talking to the market about the new product/service.
  • Stage 2: Concept Development — Having defined the problem and the needed solution, we consult with the client to help them develop the benefit attributes (variables like size, price, delivery method, etc.) that the new product should have, as well as the levels of those attributes (e.g., options like high-priced, medium-priced, low-priced) that should be considered. This should be done before any prototypes of the product/service are developed. The reason is that there could be thousands of possible combinations of attribute and levels. For example, a new product/service concept with 10 attributes, each of which has only three levels, could be configured 59,049 possible ways (found by multiplying the attribute levels, 3 x 3 x 3 x 3 x 3 x 3 x 3 x 3 x 3 x 3 = 59,049). How can the product development department cost-effectively develop prototypes without first knowing which combination(s) people will buy? We solve this in Stage 3.
  • Stage 3: Concept Testing and Refinement — Using an advanced marketing research “trade-off” technique known as conjoint analysis, we present a small, statistically selected fraction of all possible combinations of product/service configurations to present to respondents in a survey to have them rate or rank their preference for each. Using conjoint analysis, we are able tell clients which combinations warrant development into the prototype stage.

Key Benefit Deliverables from Our New Product/Service Concept Development and Testing

In addition to delivering the Stage 1 Problem-Solution Definition and the Stage 2 Concept Development, at the end of the Stage 3 Concept Testing we deliver the following.

  • Attribute Importance Ranking — Conjoint analysis provides a measure of the relative order of importance that each product/service attribute has on people’s decision to buy the product.
  • Preferences for Attribute Levels (Utility Values) — Conjoint analysis also provides measures of the how strongly people prefer each level of each attributes, known as utility values. In cases where the conjoint profiles contain existing products in the market, we can calibrate these utility values to actual sales of existing products and thereby create market projections of Demand Curves for the one or more possible configurations of the new product/service concept.
  • All Possible Products Report — The utility values are used to statistically model the preference for all possible combinations of the product/service, even though only a small fraction of them were presented to respondents. Thus, we rank order the market demand for all combinations in an All Possible Products Report. Clients can then look down the list to determine which combination(s) would be most profitable at that demand level and develop the most profitable product.
  • Benefit Segmentation Analysis — We submit the respondent level utility values to a statistical technique known as cluster analysis to identify different Benefit Segments. A Benefit Segment is a group of people who seeks a particular combination of product/service benefits that is different from other groups of people who seek different combinations of product/serviced benefits.
  • Competitive Market Share Simulations — Conjoint analysis provides a durable database of preferences (utility values) that can be used to simulate competitive market shares. This allows clients to simulate various scenarios, using “what if?” games, by answering questions like:
    • How much market share are we likely to capture when we enter the market with this new product/service?”
    • What if we enter the market with this new product/service and a competitor responds with a new competing product/service, how does that reduce our new market share?”
    • If a competitor responds to our new product/service with a new offering, what is our best response, in terms of product enhancements, to maintain our new market share?”

Thus, we are able to tell clients:

  • Which new product/service configuration(s) to offer to which segment(s) of the market to maximize market share and profitability
  • How best to refine a new product/service concept to maximize market share
  • How much priority should be given to each product/service benefit in marketing communication
  • What specific words, phrases and symbols should be used to most clearly communicate the benefits of the new product/service to the target market

Sometimes clients will want to do additional testing after Stage 3, such as Name Testing (although alternative names can be included in the conjoint analysis), Package Testing, or Market Testing of the actual product/service in selected test markets before rolling the product out nationally. If so, we assist clients with customer-designed research and consulting for those stages as well.

Types of Clients That Use New Product/Service Concept Development and Testing

Any type of organization that develops new products or services can benefit from our New Product/Service Concept Development and Testing. We have done this type of work for clients in industries as diverse as banks, overnight check clearing services, hotels, veterinarian pharmaceutical companies, entertainment companies, paper product manufacturers, food services (including taste testing), and consumer packaged goods. It can also be applied to churches to configure services.

Two Case Studies of Our Effective New Product/Service Concept Development and Testing Works

  • Case 1: A Bank Deposit Project — A bank had a balance sheet goal of increasing deposits at a limited interest rate cost. With our consulting, they came up with a range of possible configurations of a new Money Market package. We used conjoint analysis to help them determine the optimum minimum deposit, tiered interest rates and other features to use in configuring the product. We also identified the demographic profile of the Benefit Segment that was most likely to move deposits from one bank to another to get the new package. We then helped the bank buy a mailing list of people who met these demographic criteria. Next, we did a merge-purge of that list to purge out the client’s existing customers. Finally, we helped the client craft a direct mail offer targeted to those non-customers. In response to the offer, millions of dollars moved across the street from one bank to our client in a few weeks. The bank not only met their goal of increasing deposits at a limited cost, they also added many new customers.
  • Case 2: A New Hotel Concept — A new “suite hotel” brand had been positioned as one of the world’s first “extended stay” hotels. Corporate management knew that prospective franchisees were skeptical of the extended stay concept and wanted to do research to demonstrate sufficient demand for extended stay hotels. Using conjoint analysis, we interviewed extended stay guests of the new brand, compared to guests of a traditional brand across the street. We discovered that overnight guests were willing to pay more for a “suite hotel” that offered home-like amenities such as a kitchen, a separate bedroom and living room with two televisions. We recommended that the franchisor reposition the brand to appeal to the Psychological Benefit Segment called “Stress Relievers” — people who were so stressed out on the road that they were willing to pay more for a place like home even for a one-night stay. The franchisor repositioned the brand accordingly and franchise sales took off. As a result, other hotel brands began offering a certain number of their rooms as “suites” (e.g., “Hampton Inn and Suites”). This project changed the hotel industry for the better.