Code RED: Relevance. Expensiveness. Differentiation. The Best Measures for Choosing High Potential Consumer Goods Concepts

Sometimes it's good to see red.

Many of today's most successful products achieved their prominence in the market because they were perceived by consumers to be relevant and differentiated at a competitive price. An excellent example is Colgate Total 174 toothpaste. In 1997 it was the only toothpaste approved by the FDA to have clinically proven ingredients to help prevent gingivitis, plaque and cavities. Colgate Total 174 was able to solve a problem important to consumers better than any other product on the market at a competitive price. As a result, Colgate Total 174 went on to become the number one selling toothpaste.

At Ipsos Marketing, we use Relevance, Expensiveness and Differentiation, or, as we refer to them, the RED measures, across the entire new product development process - from concept development to full simulated test markets and post-launch performance evaluation. "RED" is the engine that drives our innovation research.

Leveraging these three measures throughout the concept evaluation process, as opposed to relying on Purchase Intent, results in better decisions about which concepts should be pursued.

How do we know?

Ipsos Marketing conducted extensive R&D that reveals that Relevance, Expensiveness and Differentiation avoid two pitfalls inherent to Purchase Intent. Specifically:

1. The RED measures are less sensitive than Purchase Intent to executional differences in concepts. Executional differences relate to elements in the concept not directly associated with the insight or benefits, such as package image and price.

2. Unlike Purchase Intent, the RED measures do not favor familiar concepts (in essence, line extensions) and do not overlook promising niche and breakthrough ideas - which often generate higher profits than line extensions.

The RED measures not only avoid these pitfalls, but also can be used as diagnostic tools to uncover what drives concept performance. Armed with this information, Marketers can take specific actions to improve concept performance. For example, a concept that performs high on Differentiation but low on Relevance can be reworked to better address consumer needs or can be evaluated among a different target audience. On the contrary, Purchase Intent is an outcome measure that provides only an end result - the answer to whether or not the consumer is interested in buying the product. As such, Purchase Intent cannot be used by Marketers to determine which drivers can be changed to improve concept performance.

Defining RED: Relevance, Expensiveness and Differentiation

First, it is important to define these measures and offer our perspective on them:

• Relevance is the extent to which a product meets consumer needs, both functional and emotional. Relevance is a good predictor of short and long-term success because it indicates whether the problem solved by a concept is important to consumers.
• Expensiveness is the extent to which a product is priced higher or lower than the competition. Unlike Value for the Money, which is the relationship between the quality of the product and its price, Expensiveness is a pure measure of price.
• Differentiation is the extent to which a product has a unique benefit vs. competitors. Differentiation is a good predictor of short and long-term success because it indicates whether a concept is better than solutions currently available.

In our view, Relevance, Expensiveness and Differentiation are superior concept screening measures because they are less sensitive to differences in concept execution than Purchase Intent. Moreover, the RED measures, as summarized in the InnoTrial Potential, accurately identify the best decision routes for concepts - Go, Improve, Rethink or Stop - and can be used diagnostically to identify the underlying causes of concept performance. The RED measures enable the Marketer to avoid me-too ideas that may be doomed to product failure and convert seemingly marginal concepts into winners. Purchase Intent, on the other hand, is an outcome measure. As such, it represents the consequence of concept performance rather than the cause and offers little diagnostic value.

It is Ipsos Marketing's position, therefore, that the RED measures should be used as the primary action standards for evaluating new consumer goods concepts. Accordingly, we have a consistent research philosophy that integrates the RED measures throughout the new product development process.