Estimating the Market Potential for New and Innovative Products

As researchers in a rapidly changing environment, we are often faced with the challenge of assessing the potential for a product or technology that is entirely new to the marketplace. In this situation, traditional research techniques such as trend analysis and traditional concept tests may fail.

It is prudent to search for analogous situations to help frame expectations for a new opportunity, and models can be developed to leverage previous marketplace learning. However, complete reliance on previous market performance to predict future buying patterns can lead to unrealistic expectations. Concept tests provide a means of gathering future buying intentions, but a new technology platform or application will present consumers with a new experience, therefore making it difficult for them to report their future buying intentions accurately. Concept tests also tend to produce static `point-in-time' evaluations that do not reflect purchase patterns over time. Challenges related to how to adjust the data to reflect reality and how to use the data to develop a dynamic model are inherent in this approach. Choice-based techniques provide some improvement over concept tests, but often fail to incorporate true marketplace dynamics such as marketing.

So how can we use market research to manage business decisions for new technologies and new product launches?

Because new technologies have the potential to create new business models, the researcher must consider all aspects of the business proposition in order to provide meaningful information to the corporation. Outcomes related to potential platforms, applications, pricing strategies, channels, and branding must be modeled together in order to provide a complete assessment of the opportunity and, more importantly, to serve as a tool for managing the many possible scenarios through to product launch.

With the proper sampling, stimulus, and choice scenarios, it is possible to develop a model that will provide reliable marketplace simulations for new and innovative products. First, the sample must reflect the relevant buying population. It is important to identify and understand the opinions of the early adopter segment to determine the initial success of the product. Consumers who may have a need for the product but may not be the first to adopt should also be included, as this is the group who will drive the product to mass adoption.

Second, to provide useful data, the consumer must be fully educated on the new proposition and alternative solutions. Specifically, the consumer must understand the product benefit and have some education about how it will be delivered. Several sources of stimuli, including articles, videos, and marketplace descriptions, can be used to present consumers with the future marketplace scenarios and options that will be available to them. A phased education process that allows consumers to digest the information works best.

Finally, the myriad of possible product configurations, channel and partnership opportunities, and branding and pricing strategies requires that the scenarios be defined and incorporated into a choice exercise in which consumers are exposed to a series of options representing different versions of the future marketplace. Consumer claims cannot be taken at face value, so a method such as the Ipsos-Vantis validated forecasting model should be used to adjust the consumer data to reflect behavior.

A model that incorporates the adjusted data as well as judgment about the unknowns, such as marketing, partner participation, and the timeframe for competing platforms, will allow for the creation of a simulation tool. The simulator can then be used to run `what if' simulations so the demand and revenue can be determined for key scenarios. The result is a reliable methodology and means of decision-making to set expectations for developing and launching new and innovative products.