Contact BSI
Derrick Daye
888.706.5489 Email us
Brand Innovation

8 Requirements For New Market Success


8 Requirements For New Market Success

Why is it that some great ideas take forever to take root, whereas others flourish fast? What lessons do these patterns of struggle and success hold for new markets today?

Several great innovations took exceedingly long to become popular. The Indus Valley cities of Harappa and Mohenjo-daro, located in present-day Pakistan, contained the world’s first known flushing toilets some 4500 years ago. A king of China’s Western Han dynasty (which ended in 24 ad) placed one in his palace as well. Britain’s Queen Elizabeth I had one installed at Richmond Palace. Yet this exceptionally good idea did not take off in earnest until the middle of the nineteenth century.

In another vein, the first American sushi restaurant appeared in 1966, but it took decades for the cuisine to become popular. Similarly, prior to wildly successful Internet services that enable subscribers to listen to music through their computers, there was Tel-musici. The firm offered subscribers the ability to listen to music on demand through their telephone wires, which were attached to special speakers that could be used for the occasion. This was in 1909.

Of course, many other innovations have caught fire fast. Radio, energy drinks, and the bicycle each become popular within five years. Eight factors explain the difference. Lacking any of these variables can be enough to hinder a market. In combination, their absence can be devastating.

 1. Physical Infrastructure

If an innovation relies on others laying the groundwork, a firm might wait a long time for change to happen. This was literally the case with indoor plumbing, which is scalable only if there is a water supply system. Perhaps domestic servants could have brought well water to each toilet, but it would be a labor-intensive chore involving things that the upper classes did not like to discuss. Families also would need to design their new houses for indoor plumbing from the ground up, and prior to the nineteenth century, new housing stock for the wealthy was not built very frequently—social immobility kept the same wealthy families in the same places for long periods. The industrial revolution started to change things. Mobility increased, and densely packed cities demanded infrastructure such as water being pumped to neighborhoods.

By contrast, in the 1920s, it was easy to set up an amateur radio station, and receivers needed no infrastructure except the ubiquitous electrical socket. There was no dependency on new infrastructure, only on the growth of transmitters and receivers that were inexpensive, fast to install, relatively simple to operate, and fun.

2. Business Infrastructure

Groundwork can be economic as well as physical. Sushi needed no building projects, but it did require (at least initially) a restaurant with highly trained sushi masters, almost all of them Japanese. It also needed an adequate supply of appropriate fresh fish. Local demand for the food and the supply of both sushi masters and fish were sufficient in Los Angeles’ Little Tokyo for the first sushi restaurants to emerge in the 1960s, but the situation was quite different in most of the United States. Energy drinks faced no such obstacles. Nightclubs—the first foothold for these drinks—exist everywhere, and they were motivated to sell high-priced mixers that kept people dancing longer. Groceries and convenience stores also liked the small physical footprint and high margins of these drinks.

3. Few Decision Makers

World War II U.S. Rear Admiral Robert Copeland once said, “To get something done, a committee should consist of no more than three people, two of whom are absent.” Alas, indoor plumbing required an army of decision makers to agree on a need and a solution. Urban planners, architects, builders, and families all had to align. Trying to coordinate diffuse decision makers is very difficult. In a modern context, when makers of intriguing energy-efficient technologies target automakers, they often have to work with electrical engineers, mechanical engineers, designers, marketing, finance, and many other functions – it is exceptionally hard to get traction. This sort of situation often occurs in selling to businesses, which is why the initial customer in many corporate contexts is not a company as a whole but an isolated department with a small, flexible budget and a willingness to try new things.

4. Depth Of Need And Relative Performance

To get noticed, a new offering has to excel over competitors on at least some important criteria. Tel-musici was an intriguing idea with a supportive physical and business infrastructure in place, but it had stiff competition in the phonograph and live music. There was an advantage in being able to choose the music type you wished and in paying per listen—3 cents for popular recordings and 7 cents for grand opera—but the proposition was unattractive in other ways. Subscribers were constrained by the extent of the company’s music catalogue, and they had to guarantee to spend at least $18 per year. Competitive offerings did not face these issues. Once the radio emerged roughly 15 years later, listeners had a wide variety of choices for free listening, and the bar for any competitive service rose quickly.

Would-be inventors of the bicycle struggled for decades to create a workable design—something light and with minimal rolling resistance. Once this design finally emerged in France in 1864, it took off very rapidly. The bicycle met a clear need for transportation, and it beat the competition -it was inexpensive, easy to maintain, and did not require feeding. While the device took some training to use, potential consumers could readily see others riding this contraption and became inspired to try it themselves.

5. Behavior Change

Behavior change can be vital for new markets to emerge, and it is very difficult to rush. This was unfortunate for sushi, which violated several taboos. After all, this stuff is raw fish wrapped in seaweed. Many prospective diners heard about this idea and had the identical thought: “Yuck!” In contrast, energy drinks built on existing familiarity with athletic drinks such as Gatorade, and some were consumed initially in place of soda mixers. They required almost no behavior change to adopt. Indeed, smart marketers try to link fundamentally new offerings to existing behaviors—Procter & Gamble’s Swiffer looks like a mop and the company’s Febreze looks like air freshener, but they are not. Customers often start using a new offering by applying current behaviors and subsequently discover that it enables new behaviors as well.

6. Speedy Sales And Use Cycle

An innovation’s penetration into the market is directly related to how fast prospective customers can understand whether it is really useful for people like themselves. Often these prospects cannot be convinced by marketing materials—they need to see the innovation in action.

The resulting imperative for fast sales and use of an innovation has big implications for selecting target markets. For instance, automakers typically require four years to design and build a car, making them a poor choice of target market for innovative devices. By the time other customers can see the device being used in a mass-produced car, the industry may well have moved on. The infrastructure for indoor plumbing had a longer sales cycle, to the extent that one even existed. In contrast, the bicycle was quickly purchased and used, as were radio receivers and Red Bull.

The late Everett Rogers compiled a wide array of academic studies on market penetration in his classic work, Diffusion of Innovations. His influential list of traits of quickly adopted innovations included trialability, as well as observability and the homogeneity of a customer group (because potential users can quickly cross-apply the experience of a current user).

While trialability continues to be a significant barrier to market penetration, the importance of observability and customer homogeneity may be declining. Mass-media advertising, the Internet, digital cameras, social networks, and other technologies have improved communication dramatically since the decades when many of these studies were conducted, and good marketers can leverage these mechanisms to help ensure that people trying a new offering can provide quick endorsement to relevant peers.

7. Low Switching Cost

Switching costs make it more difficult for potential adopters of an innovation to sign on. Tel-musici required the listener to install a speaker in the home in addition to spending $18 annually. These were high barriers. Indoor plumbing was so hard to retrofit into existing homes that the viable market was confined to new construction.

8. Low Risk Of Failure

Customer trial also will proceed slowly if the result of an innovation’s failure would be far worse than its potential benefit, no matter how slight the risk of that event might be. There were dire consequences if indoor plumbing failed. As many of the early adopters of this technology learned, leaks, poor ventilation, or improper sloping of pipes could end the allure of this idea in a hurry. If a person invested in Tel-musici but was disappointed in the service, he was out a relatively significant sum of money. A bad sushi experience . . . we need not explore. Risks like these make potential customers want to see others adopting the innovation first, lengthening the overall penetration process.

The Blake Project Can Help You Expand To New Markets. Take The First Step With Us.

Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Licensing and Brand Education

FREE Publications And Resources For Marketers

Recommend this story

Subscribe, Follow and Stay Connected to BSI


Leave a Reply

Submit your comment