Startup Marketing: Testing New Product Ideas Using Wow Focus Groups

Transcription

1 Startup Marketing: Testing New Product Ideas Using Wow Focus Groups Michael Swenson, Christensen Professor of Marketing, Brigham Young University, USA. Gary Rhoads, Covey Professor of Marketing and Entrepreneurship, Brigham Young University, USA. Abstract Validating a new product concept to address customer pain or opportunity, before developing the marketing strategy, are critical starting points for any new venture. In this paper, we highlight a proven procedure for testing new product ideas to determine if a given product/service will fail or succeed before allocating resources to launch. This research evolves from the relevant marketing and entrepreneurship literature, from field interviews, and from observation. Adapting a parallel thinking process, we present a framework for testing new product and service ideas to increase the probability of adoption for consumers and success for entrepreneurs. Key Words: Marketing, Entrepreneurship, Product Testing, Innovation JEL Classification: C 19, G13, G 14 1

2 1. Introduction Proceedings of the International Conference on Marketing, Tourism & Hospitality Innovation is the lifeblood for any business. Indeed, Peter Drucker (1954) noted, more than 60 years ago, Business has two basic functions marketing and innovation. Everything else is detail. Certainly for entrepreneurs, success depends on creating new products and services, then selling them. Validating a customer pain-point or opportunity and testing the new product idea before developing the marketing strategy, are critical starting points for any new venture (Rhoads, Swenson, and Whitlark, 2015). That is, the entrepreneur must test the new idea to determine if it has the potential to connect emotionally with customers before proceeding. 2. Literature Review Numerous studies estimate high percentages of new product failures. For example, Stevens and Burley (2003) estimate the failure rate of new products between 40 percent and 75 percent. Christensen, Allworth, and Dillon (2012) note, many products fail because companies develop them from the wrong perspective. Companies focus too much on what they want to sell their customers, rather than...what problems customers are trying to solve. That is, enriching customer information through sustained dialogue (McQuarrie, 2008). Engaging potential customers early in the new product development process to test ideas and concepts may reduce the failure rate of new products and improve service quality (Kumar and Bhagwat, 2010). Parallel thinking is a process that enables groups of individuals to explore ideas and contribute in parallel by focusing in the same direction at any moment. That is, each participant considers a specific point of view at the same time. Parallel thinking offers an alternative to argument. In traditional adversarial thinking, participants take sides seeking to criticize the other point of view. With parallel thinking, participants explore all sides of an issue or idea together or in parallel. They cooperatively explore a specific viewpoint. Then they move together to explore another viewpoint. Because parallel thinking focuses on exploration looking for what can be rather than what is the process is suitable for exploring and testing new product ideas. 3. Methodology 3.1 Research Questions Our research question focuses on the idea-testing phase of the new product development process for entrepreneurs. Specifically, how can the parallel thinking process help entrepreneurs test new product ideas with potential customers to determine if the product or service has a high probability for success or failure? 3.2 Parallel Thinking Using the Six Thinking Hats The Six Thinking Hats (de Bono, 1999) is a parallel thinking framework, designed to explore issues and ideas. For entrepreneurs, the approach provides a method for testing new product 2

3 ideas. The method enables potential customers to see the total picture when discussing and evaluating new product concepts and ideas. In this paper, we use the Six Thinking Hats to develop a framework for entrepreneurs to test new product or service ideas. Testing the new product idea with consumers, prior to launch, will increase the probability of consumer adoption and success. We present a six-step process using the Six Thinking Hats: (1) white hat facts, (2), red hat emotions, (3) yellow hat perceived benefits, (4) black hat perceived deficiencies, (5) green hat creativity, (6) blue hat summary. 3.3 White Hat--Facts The white hat represents information, objective facts, and figures about the new product idea. The white hat is used at the beginning of the thinking session to present information about the new product idea to participants. In the white hat, the entrepreneur can pitch his or her idea to a target group of consumers to determine if they can easily understand or comprehend the idea. Information may include hard facts and figures, product descriptions, pictures, photos, and prototypes of the product. Information is presented in a neutral, objective fashion. All participants focus in the same direction understanding the product idea. 3.4 Red Hat Emotions The red hat measures emotional reactions to the new product idea. In the red hat, we measure consumers positive reaction to the idea ranging from 1-10 (1 indicating no emotional connection or positive feelings and 10 indicating wow or high emotional connection. In recent years, a stream of research has focused on the role of emotion in consumer behavior (e.g., Magids, Zorfas, and Leemon, 2015, Gobe, 2010, McDonagh, Bruseberg, and Haslam, 2002). Indeed, consumers are influenced by their emotions because emotions shape attitudes that drive decisions and behaviors. Further, emotions may impact behavior more than technical or functional factors. The red hat allows participants an opportunity to express feelings, emotions, and intuitions without any need to explain or justify them (de Bono, 1999). If participants are expected to validate their feelings, then they will promote only those feelings that can be validated. Thus, no explanation should be required or expected so that emotions can be freely expressed. All participants focus in the same direction sharing feelings and emotions about the new product idea. Our experience using this process shows that ideas receiving an average of 7.5 or higher are highly likely to succeed in the market when followed up with adequate execution. On the other hand, ideas receiving 5 or less rarely succeed in the market. Positive personal connection is critical for innovative products or services to succeed. 3.5 Yellow Hat Perceived Benefits The yellow hat identifies perceived benefits the positive aspects of the new product idea. The yellow hat encourages positive thinking. What do you like about the new product idea? What works for you? What benefits do you believe you will receive by using this new product? What are the usage situations for this new product idea? Who would use this product under the 3

4 specific usage situations? The yellow hat highlights the top-of-mind benefits consumers see when evaluating a new idea. Indeed, the yellow hat forces participants to seek value in the new product idea. All participants focus in the same direction identifying the positive benefits of the new product idea. 3.6 Black Hat Perceived Deficiencies The black hat identifies perceived deficiencies the weaknesses of the new product idea. The black hat encourages critical thinking. What do you not like about the new product idea? What is broken? What does not work for you? What are the shortcomings or deficiencies of the new product idea? What are the barriers? What would prevent you from using the product? The black hat is the hat of caution because it stops the entrepreneur from pursuing something that just does not work in the minds of consumers. It helps the entrepreneur know what to avoid or what to fix. All participants focus in the same direction pointing out the perceived deficiencies of the new product idea. 3.7 Green Hat Creativity The green hat invites creativity. Under the green hat participants are encouraged to suggest new ideas, options, and alternatives for improvement. How could we make this product better? What should we modify to improve this new product? What changes would need to be made before you would use the product? Under the green hat participants are permitted, even encouraged, to suggest possibilities for improving the new product idea. All participants focus in the same direction generating new ideas to improve the product. 3.8 Blue Hat Summary The blue hat manages and summarizes the process. At the end of the thinking session, the blue hat encourages participants to form summary or concluding statements about the outcome. What did we learn? What are the key takeaways? Please summarize the key learning points of our thinking session. All participants focus in the same direction reviewing, organizing, and summarizing the thinking session. 4. Conducting a Wow Focus Group A Wow Focus Group provides a useful tool for entrepreneurs to test new product ideas. We call it a Wow Focus group because of Harvard Business School graduate Ken Hakuta, aka Dr. Fad (Rhoads, Swenson, and Whitlark, 2013). Ken Hakuta is the founder of the Wacky WallWalker those little toys molded out of a sticky elastomer and shaped like an octopus. When thrown against a wall, the Wacky WallWalker crawls or walks down the wall. When asked how he knew the Wacky WallWalker was going to be a hit Mr. Hakuta answered, It s really pretty easy. I show people the new product and look to see if they tilt their head slightly and say Wow! If they do, I ve got another hit (Swenson, Rhoads, and Whitlark, 2013). Although we believe this is a useful starting point for testing new product ideas with potential 4

5 customers, a deeper understanding of the meaning behind the Wow provides richer test information. To understand the meaning behind the Wow responses, we use the Six Thinking Hats framework (de Bono, 1999). Each thinking hat addresses a different activity carried out in a Wow Focus Group to distinguish it from traditional focus groups often used in marketing research. When testing new product ideas, we invite consumers from the target market to participate in the Wow Focus Group. We begin with the white hat by presenting information, objective facts, and figures about the new product. In the white hat, participants are allowed to ask clarifying questions to make sure they understand the product or service being presented. Most importantly, they are not allowed to show any positive or negative feelings about the product. When consumers ask a lot of clarifying questions, this may signal consumer confusion indicating the product being launched will require high levels of consumer education. Next, we measure emotions with the red hat by asking participants, How would you rate this new product idea from 1 to 10, where 1 means poor product idea and 10 means Wow great product idea. We look for average ratings at 7.5 or above. Then we use the next two hats (yellow hat and black hat) to understand the meaning behind the red-hat rating. We use the yellow hat to understand the perceived benefits of the new product idea. What do you like about the new product idea? What works for you? What benefits do you believe you will receive by using this new product? What are the usage situations for this new product idea? Who would use this product under the specific usage situations? Next, we use the black hat to understand perceived deficiencies or shortcomings of the new product idea. What do you not like about the new product idea? What is broken? What does not work for you? What are the shortcomings or deficiencies of the new product idea? What are the barriers? What would prevent you from purchasing the product? Then we explore creative ways to improve the new product idea with the green hat. How could we make this product better? What should we modify to improve this new product? What changes would need to be made before you would purchase the product? Finally, we use the blue hat to summarize the thinking session. What did we learn? What are the key takeaways? Please summarize the key learning points of our thinking session. The Wow Focus Group process requires management of group dynamics by the facilitator (entrepreneur). That is, some participants may look to others in the group for their answers. To minimize this, we ask participants to write their answers before we talk about them. For example, when we ask participants to rate the new product idea (red hat), we invite them to write their number, from 1 to 10, on a paper. Then we ask each respondent to read the number they wrote on the paper. Similarly, when we ask questions from the other hats, we invite participants to write down their responses before we talk about them. Then we ask participants to read one or two of their responses. At the end of the session, we ask participants to leave 5

6 their written responses. In the end, we have collected rich data, both spoken and written, about the new product idea. The Six Thinking Hats process, employed in a Wow Focus group, creates an opportunity for the entrepreneur to test a new product idea without leading participants. The approach allows for measurement of emotions, understanding of key positive and negative aspects of the idea, creation of ideas for improvement, and a summary of the thinking process. Furthermore, the process enables entrepreneurs and researchers to test whether they have found a correct target market by asking additional questions such as, Who would be interested in this type of product and how would they use it? Two important findings come from Wow Focus Groups: (1) willingness to pay (WTP) and (2) the strength of the personal or emotional connection of the new product and the customer. Willingness to pay is measured during the Wow Focus Group using an incentive-aligned willingness-to-pay measure designed to capture more accurate pricing thresholds for the new product (Becker, DeGroot, and Marschak, 1964). Using this method, participants are asked at predetermined price points whether they would take the new idea or the cash equivalent. The optimal price for the participant is determined by continuing this until the participant makes the economic tradeoff to take the cash equivalent over the product (the price ceiling for the participant). Since product success is determined by emotions that shape attitudes and drive behavior, Wow Focus Groups provide insight into the emotional or gut reaction (the Wow Factor) of consumers when first introduced to a new product. Wow factors over a certain threshold (e.g., 7.5 on a 10 point scale) are predictive of new product success (Rhoads, Swenson, and Whitlark, 2015) 5. Conclusions and Recommendations For entrepreneurs, validating customer pain points or opportunities and testing new product ideas to address the pain or opportunity, before developing the marketing strategy, are critical staring points for any new venture. Wow Focus Groups, using the parallel thinking process developed by de Bono (1999), provide a useful framework for entrepreneurs to quickly test new product ideas. The results determine commercial viability of the new product idea and offer guidance about (1) How to or whether to move forward with the new idea, or (2) How to move forward to find a better idea, or (3) How to move forward and find a better target market. The Wow Focus Group process does not lead participants to provide answers they believe the entrepreneur wants to hear. Instead, the process allows potential customers to view the new product idea from different perspectives facts, emotions, positive judgment, critical judgment, creativity, and summary. At this stage we are not claiming that our Wow Focus Group process, using the Six Thinking Hats, is complete. We continue to refine the thinking and testing process as we observe and 6

7 work with successful entrepreneurs. Our purpose is to initiate a process for entrepreneurs to test new product ideas with potential customers. We believe the proposed process provides a structured framework for testing new product ideas that is amenable to purposeful application by entrepreneurs and systematic evaluation by researchers. References Becker, G., M DeGroot, and J. Marschak 1964, Measuring Utility by a Single-Response Sequential Method. Behavioral Science, 9 (July), Christensen, C., J. Allworth, and K. Dillon, 2012, How Will You Measure Your Life? New York: Harper- Collins. de Bono, E., 1999, The Six Thinking Hats, New York: Little, Brown and Company. Drucker, P.,1954, The Practice of Management, New York: Harper-Collins. Gobe, M., 2010, Emotional Branding: The New Science for Connecting Brands to People, New York: Allworth Press. Kumar, V. and Y. Bhagwat, 2010, Listen to the Customer. Marketing Research 22(2), Magids, S., A. Zorfas, and D. Leemon, 2015, The New Science of Customer Emotions. Harvard Business Review, 93 (11), McDonagh, D., A. Bruseberg, and C. Haslam, 2002, Visual Product Evaluation: Exploring Users Emotional Relationships with Products. Applied Ergonomics, 33 (3), McQuarrie, E., 2008, Customer Visits: Building a Better Market Focus, Armonk, NY: M.E. Sharpe. Rhoads, G., M. Swenson, and D. Whitlark, 2013, Startup Marketing Essentials, Orem, UT: MyEducator.com. Stevens, G. and J. Burley, 2003, Piloting the Rocket of Radical Innovation. Research-Technology Management 46(2), Swenson, M., G. Rhoads, and D. Whitlark, 2013, Finding and Developing New Product Ideas: An Ideation Process for Entrepreneurs. Journal of Applied Business and Economics, 15(3),