By Guest Author, Barbara Foster of the Microscopy and Imaging Place.
Being a member of the C-Suite, you are on the firing line. You make decisions every day that influence the potential health of your company. You need concrete answers.
Weighing up the Risk
Consider this Case Study
A college professor-turned-entrepreneur envisioned a complex instrument combining imaging and chemical analysis that would cost hundreds of thousands of dollars in R&D and commercialization. No one had ever brought one to market before. The stakes… and the risk.. were high. We were called on to survey potential users regarding feasibility, technical parameters, applications, and price points.
Two weeks after we submitted our report, we got a call.
"We have good news and we have bad news," my client reported.
Always the optimist, I asked for the good news first. "We believe your results. They were forthright and unbiased."
"And the bad news," I asked.
He sighed, "We can’t build for what the customer is willing to pay. We aren’t going to commercialize."
Ever the pragmatist, I took the conversation a step further. "So, talk to me about the projected time and financial investment to commercialize."
"$500,000 and about 2 years of engineering," came the answer.
"Well," I responded. "That’s actually good news. These results just saved you half a million dollars and 2 years of time that you can invest in something that WILL succeed!" And they did just that!
Wherever you are in the C-Suite, there are some very real questions you need to get answered before that product you’ve been dreaming about even goes to CAD/CAM Design:
1. Is there a market for YOUR product?
2. In which market can we make those all-important early sales?
3. How big is the market for your technology? Is it big enough to sustain business?
4. What are the key applications? If you can’t address them, sales will be non-existent.
5. How much will users pay for this product? How does that dollar value compare to your COGS and your estimated profit margin?
6. What bells and whistles (technical parameters) do users want? Where is the “breakover point”? For your business plan to succeed, do you need to include every one of them.. or will 80% or 70%.. or even one key technical capability work? How does that information impact time, resources and budget in R&D?
7. How ready are your potential customers to buy? Will they need a long learning curve that will delay your time to revenue? How does that impact the development of sales and marketing materials? How will it impact the sales cycle?
8. Oh, and by the way, it would be nice to know the contact information for the potential end-users. Are some of them early adopters interested in buying some of that shiny new technology to solve problems they are currently facing in the lab or on the production line.
How can you get those answers?
The prof at the local university is a good starting point. However, especially if well-credentialed and experienced, that person is likely to want a top-of-the-line, all-singing and all-dancing Thingamajig.
What about off-the-shelf reports? They have several failings. While generated by well-intentioned individuals, the companies often lack experience in the niche that is important to YOU. Also, these reports are “top down”… they will give you the general lay of the land, but they won’t tell you how YOUR product fits into a given market or whether it is likely to be successful.
Finally, they are typically comprised from web searches and interviews with sales and marketing managers who have their own vested interests. The only people who can realistically give you answers for those key questions are your potential customers.
So, why AREN’T you doing user-based market research?
I’ve been doing market research and strategic planning for over a quarter of a century. Here’s what we typically hear from investors, developers, and entrepreneurs:
"I’m not ready to launch yet!"
If you wait until launch of a product to talk to your customers, it is too late. The best time to get their input is early in the process, even before you go to CAD/CAM. That’s when their input will maximize the benefits of reduced risk, optimized use of investment, more focused and productive engineering, shorter time to revenue and higher likelihood of product success.
"It takes too long."
That argument can be valid, depending on your approach. If your team is intent on spending months of time, lots of shoe leather and tire tread, talking to dozens and dozens of potential early adopters until the trends begin to converge, it will take a long time. While there are secondary advantages to spending so much time with customers, those advantages need to be weighed against your strategic goals and business development time line.
In comparison, with a well-constructed web based study and a carefully chosen test group, you can have preliminary answers in about 36 hours and statistically valid, definitive answers in about 3 weeks.
"It’s too expensive."
In response, I would ask you, “What’s the cost if you DON’T do it?” Many engineering-centric (versus customer-centric) companies get input from a few profs then skip this end-user research step and move right to engineering, often blowing through hundreds of thousands of dollars and dozens of man-years only to find that the product just won’t sell.
The ROI on a properly conducted user-based market study? In our experience, at least 10:1 within 12 months. One thing we couldn’t quantify: how much better the folks in the C-Suite sleep because they have better data and therefore less risk.
"How do I know that can trust the answers?"
If you are willing to trust the input of a few professors from the neighboring university, would you find the input of hundreds of potential customers as reliable? Doing research with a larger group gives you better statistics and more reliable trends
"It’s not in the marketing budget."
Since a proper user-based study affects C-Suite, R&D, Sales & Marketing, it makes sense to spread the cost across multiple departments. After all, the success of your company is your fiducial responsibility!
Where do I begin?
Providing you have the experience in-house, you can do the market research yourselves. Our counsel: Keep the questions and the survey short (about 15 questions) and, if possible, conduct the survey under a neutral banner to reduce bias.
If you don’t have that experience, consider a company that has both the business experience and technical expertise in your specific technology area, companies that will understand your users, help you to clarify your goals, and produce a survey that will give you the concrete answers that you need to make the best decisions from the C-Suite.