Spokane, WA United States of America

What Coca-Cola, Lululemon, and Tesla teach us about successful new product development

Great product ideas are developed by entrepreneurs on a routine basis.

However, very few make the leap from great idea to profitable product.  In the next series of posts I will examine several verticals that include retail, manufacturing, food and beverage from the perspective of a successful product launch.
Most startups are not “Unicorns” launched with “Blue Ocean Strategies” providing disruption or creating new markets.  In fact there are likely not enough of them in today’s market (see http://money.cnn.com/2016/02/24/technology/marc-andreessen-startup-grind-conference/index.html).  However, the majority of new offerings attempt to build upon an existing product, service or delivery model in unique and innovative ways.

Today most marketing professionals work to consider the impact of the endowment effect (Kahneman, D., Knetsch, J. L., & Thaler, R. H.,1990) and competitive pressures (Porter, 1979) on buyer preferences related to the introduction of products into existing markets.  When the endowment effect is measured in relation to the overall market environment we get a much clearer sense of where a new product or service sits in relation to its competitive peers.
Consider food and beverage giant Coca-Cola.  Started in 1886 we could track the growth the company’s brand, product offerings, and sales through the past 130 years (see graph 1.1).  In order to successfully change buyer preference a new product vendor must not only meet the current value delivered through the product(s) offered by Coca-Cola-they must exceed that value to a level that satisfies buyer unease of giving up their current product.  In addition to brand, supply-chain advantages, and distribution capacity Coca-Cola has pricing power that is formidable.

Not surprisingly this has proven difficult for new competitors in the soft-drink market for numerous reasons that go beyond the scope of this post.By this point the entrepreneur may ask what this has to do with new product development.The value in considering a case with a well-establish brand is to better understand new product position and to establish a plan of attack that not only can overcome the endowment effect-as marketers we seek to overwhelm it.

For soft drink providers the entry point is often on the periphery such as a premium soda (Hansen’s Natural c. 1935 or Jones Soda c. 1986) that initially start distribution on a regional level.  However, the low success rate for new soft drink products illustrates the importance of a well-constructed marketing plan.

Three key takeaways on brand positioning for new entrants and entrepreneurs:

1. Engage in creative positioning-build your ideal product and then look at where you line up with existing competitors.  Ask the critical question-where on the curve can I build overwhelming value?
2. Competition exists for every product whether it is readily apparent or not.  Ask the critical question-who out there is trying to solve the same problem or fill the same gap and how does this impact my brand?
3. In product categories with high-barriers to entry: Ask the question-can I build a product based on my idea that delivers overwhelming complimentary value to a well-entrenched competitor?


Next up-Lululemon and building value in premium retail.

Kahneman, D., Knetsch, J. L., & Thaler, R. H. (1990). Experimental tests of the endowment effect and the Coase theorem. Journal Of Political Economy, 98(6), 1352.
Porter, M. (1979). How Competitive Forces Shape Strategy. Harvard Business Review, 57(2), 137.

Related Posts