Concept testing might seem like an unnecessary waste of time and money, but research shows that not doing your homework is a primary cause of business failures.
Concept testing costs money – fact. It involves a level of investment in consumer surveys or focus groups and, for that reason, companies often decide to forgo it.
Instead, business leaders put faith in their intuition and experience, or the opinions of their peers, and take a gamble that the idea they’re backing will be a winner. Just like putting money on the horses, sometimes companies will ‘get lucky’ and their gamble will pay off. But there’s always a risk with gambling.
Not doing proper concept testing can cost companies in a big way, and this doesn’t just apply to new product development. It includes testing creative concepts (like ads, branding and packaging) as well as strategic concepts, like changing your business model or entering a new market.
Whether these ideas bomb or simply don’t hit the mark, it can impact both revenue and the more intangible aspects of brand value, like customer confidence and loyalty.
Not testing strategic concepts is a key cause of failure
A study of 163 CEOs by Forbes Insights found that nearly a third of all business strategies never reach their mark.
The main reason for this is unforeseen external circumstances (24%), like a downturn in the economy. But the second reason is that the strategy itself is flawed (18%). Usually, this is because the business has failed to properly research the potential market or likely demand.
Says Forbes: “What is striking is that 82% of failures are due to reasons that are preventable, e.g. by better analyzing potential market size or better communication. The implication is clear: failure is an option, and many companies don’t plan or implement sufficiently to avoid it.”
On the flip side, the study found that the biggest single factor behind successful initiatives was getting the strategy and planning right. More than half the time, doing the homework upfront was the single element that drove success.
Interestingly, another factor that plays a major role in success is getting the understanding and commitment of stakeholders – something which can also be enhanced through concept testing. Having consumer data that backs up your concepts helps stakeholders understand why they should buy-into them.
Think you don’t need concept testing because your ideas never fail?
Companies don’t always avoid concept testing on the grounds of cost; sometimes they just don’t think they need to do such regular or iterative tests. If you’re experienced in business and have good instincts, you might feel confident pursuing your ideas without consumer context.
Perhaps this approach has served you well in the past? Maybe you have a good track record of successes… but do you? It’s time for some honesty. In the Forbes Insights study referenced above, respondents were asked to rank the success rate of 13 types of initiatives, both strategic and non-strategic.
What they found is that managers almost always rank their initiatives as successful, even when empirical evidence indicates the opposite. For example, according to DTI data, within the UK less than 5% of all products and services launched survive beyond two years. And yet, three-fourths of the survey respondents reported that their new product introductions were successes.
Forbes Insights thinks it’s likely that the number of business concepts that actually fail is higher than the one-third cited in its research. “Generally, while survey respondents believe their strategic initiatives tend to be successful, when compared to other studies, it is possible the true failure rate may be twice as high as reported in the survey and the costs of strategic mistakes greater.”
It’s time to take off the rose-tinted glasses and truly evaluate the success of your concepts. Did they exceed expectations, or could some initial concept testing have allowed you to focus time and money on the bits with the most potential for success?
How costly is a lack of concept testing?
When a concept is unsuccessful, the repercussions can be devastating for a business – like when cosmetics company Avon lost $545 million through an unwise venture into retirement homes (as detailed in the book Never Go With Your Gut).
Naturally, it’s these kinds of failures we tend to focus on but actually business failures happen all the time. Maybe your customers think your new logo is a bit off or you managed to alienate a target demographic with your latest campaign? Perhaps a change in pricing strategy has affected sales, or you’ve lost customers by altering your sales channel mix?
The impact of these types of scenarios might not be seven-figure losses. But make no mistake – they do cost your business. On top of the dip in revenue, you have the resources that went into creating and implementing the failed strategy, and the cost of the subsequent changes made.
While you might be able to swallow the cost of the odd lacklustre project, if small failures happen consistently, the costs in time and cash begin to stack up. When you understand the cumulative impact of not concept testing, it becomes clear that it’s a no-brainer.
Avoiding failure with concept testing
According to Mark McNeilly, author of Sun Tzu and the Art of Business, ‘understanding the environment’ is crucial to avoiding strategic fails. This not only includes testing new concepts with consumers but also grounding your concepts in insights in the first place.
Writing for Fast Company, he says: “This is basic blocking and tackling – you must invest the time and money into research and analysis on customer needs, competitive capabilities, and political, economic, social and technological trends. But to be really useful you need to get to a higher plane by structuring your research to uncover insights that provide real competitive advantage.”
Still not convinced that you need to be testing your concepts? Is it because you think it will be too time-consuming? As a fast-moving company, it’s understandable that you don’t want to wait weeks and months on research agencies. That’s when your competitors could pip you to the post, right?
It’s a misconception that concept testing has to be a lengthy process. Self-service solutions like Attest provide non-specialists with feedback in a matter of hours. With Attest, you can instantly access your target audience to understand how concepts, messaging, creative, etc. are likely to be received. You can even conduct an online focus group to gather qualitative feedback.
When it’s this quick and easy, the question you should be asking yourself is, can you afford not to invest in concept testing?
We now have a ready made a concept testing survey template that you can try out for free.