Get The Answers: Ingenious new idea? Define the market, be creative

Dr Mark Kilgour. Photo / Supplied

Pricing needs to consider customer willingness to pay, says Mark Kilgour, senior lecturer, marketing, at the University of Waikato management school.

Everyone dreams of thinking up the next big idea - businesses are often built on one good idea. But coming up with something new is just the beginning: you need to know what to do with it, how to test that the market really wants it and to position it correctly.

When your business has a new product which it truly believes is unique, how does it test it in the market. What is the procedure?

The first step in any research plan is, of course, to determine the target market. It may seem obvious that it is pointless asking people who are not potential customers about a new product, but it happens surprisingly often.

When determining your target market, also keep in mind who is not in your target market group, as too many companies make the mistake of trying to be everything to everyone and wasting limited resources.

While it may be hard for a firm to determine who the customers and direct competitors are for a unique product, there are always ways in which consumers are having those same needs met.

Next, an environmental analysis can be undertaken that primarily looks at broad information that can be obtained from industry experts or the web. Determine if there are signs that the environment will be conducive to the new product into the future.

Consumer research will then be needed to identify the key benefits consumers are wanting in the product category so the firm can determine if their new product - and its marketing mix - has or can be designed to meet those needs competitively.

How do you set a price for your new product if there is nothing else like it in the marketplace?

Pricing needs to consider competitive prices and costs, but most importantly customer willingness to pay, and this is dependent upon the perceived new product benefits.

In the case of the launch of a colourful bracelet that keeps track of young children, thereby providing peace of mind for parents, we would start by defining the final target-market group. In this case it would be upper income working parents. You would then determine the cost of alternative devices that can do a similar task, for instance, a mobile device.

From there we then undertake consumer research, initially perhaps through focus groups and later through experimental test marketing, of different prices regionally to determine price sensitivity.

How do you build up a sense of excitement about a new product? So many great ideas get lost through an inadequate marketing plan.

The aim is to do something creative. Good creative is original, different, novel, and hence grabs attention, as well as being appropriate - something suited to the target market that will be remembered in relation to the brand.

I saw a good example of this at the advertising creativity awards in Cannes last year. A company launching a new type of icecream set up a free icecream vending machine and attendees lined up in long queues to get one.

All they had to do was have their picture taken by the machine. No doubt those pictures had the brand information imprinted on them and were downloadable to mobile devices.

This would then go viral and create a buzz in social media among the very people they were targeting. Using social media such as Facebook and Twitter can be effective, but you need to beware of the pitfalls and costs.

Planning is the key. Start with an understanding of the target market and then determine the appropriate communication medium to reach them.