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Creating a Steady Stream of Great New Product Ideas

Posted By Ron Sidman, Monday, August 22, 2011
Updated: Tuesday, July 21, 2015

The lifeblood of many successful juvenile product companies is the regular introduction of innovative new products. Products have life cycles. At some point, whether because of new competitive entries or changing consumer tastes, sales of running items will start to tail off. So, if you want your sales to keep growing, and you’ve reached full distribution of your current line, you probably need to keep introducing new products to replace the tired old ones. Also, as I mentioned in an earlier post, it’s always safer to have a “diversified portfolio” of products rather than banking on just a few. Imagine then how much more successful your company could be if you could consistently generate a steady stream of great new product ideas year after year.

Many juvenile companies, even some larger players, rely heavily on submissions from outside sources or getting the US distribution rights for products found overseas. These are workable tactics and you certainly can be successful with those approaches. But, what if you didn’t have to depend on outsiders for great ideas? What if you could eliminate expensive royalties and limiting distribution contracts?

New product development is very much a numbers game. The more good ideas you can pour into the wide front end of the product development funnel, the more successful new product introductions will come out the other end. For consistency of quality and quantity year after year, you need a proactive idea generation process that keeps that funnel full of promising concepts. Here are some activities that could be part of your process to control your own new product destiny: 

·         Start with an understanding of your “corporate competitive advantage”. Before doing anything else, make sure you have a unique “superiority theme” that will run through all your products. For example, it might be exceptional durability, contemporary design excellence, superior facilitation of child development, state of the art technology, extended use for older ages, unparalleled convenience, or some other attribute that you can broadly apply. Having and consistently utilizing such a theme will both help you generate new ideas and help ensure their success in the marketplace.

·         Look for interesting products in the juvenile marketplace that would be even better if you put your stamp on them. This is one of the easiest and surest ways to generate new product ideas. If you have a sufficiently strong “superiority theme” (aka brand identity) of your own, you can succeed just by applying your secret sauce to a concept that already has shown traction with consumers. If you’re the “design aesthetics excellence” company, you could successfully compete by doing knock-em dead design versions of existing products. I’m not talking about “knock-offs”. That’s typically not a viable strategy. I’m talking about leveraging your unique brand strengths to create a product that is far more appealing to your target market than what the competition is offering. The reality is that often the company that first introduces a product concept is not the one that ultimately has the most success with it. What would be your brand’s version of that product is the actionable question.    

·         Immerse yourself in the consumers’ world and find ways to make their lives better. Every juvenile product company is in business for one purpose—to make the lives of new parents and their children better in some way. Parents perform multiple “processes” in their roles as caretakers—nurturing, feeding, bathing, grooming, educating, transporting, and so on. What if you approached new product idea generation as an exercise in parenting process improvement? What if you or your staff routinely observed how parents are performing these processes now and routinely looked for ways that they could do it with less stress, with more enjoyment, in less time, for less cost? Again, make sure you always look at things through your “superiority theme” lens. You’re bound to find ideas you can add to your list.

·         Proactively scan other marketplaces for new concepts that have juvenile product applications. One day a number of years ago, my wife came home from the supermarket with a new product for storing leftovers called GladWare. As you will recall, this Tupperware-like product was appealing because of its low cost and “semi-disposability”. Since my company was in the business of making cups, bowls, dishes, and utensils for toddlers, it occurred to me that there might be an application for this thin-wall injection molding technology in juvenile products. The Take and Toss line of products we developed quickly became by far our highest volume product group and is still highly successful today. Of course, it’s not necessary or desirable for you to wait for your wife, husband, or partner to bring home the stimulus for your next great creation. You and your staff could make a practice of doing periodic scans of new ideas and technologies in other fields. 

If developing successful new products year after year is important to you, you need to decide which techniques your company can best use to “mine for gold” and then apply them on a consistent basis. At The First Years, our marketing and design folks collaborated on idea generation using techniques like these as a part of their overall responsibilities. But, everyone in the company was encouraged to submit new product ideas and was recognized for it when they did. In future posts, I’ll be talking about how you can screen and enhance these ideas as they move through the product development process.   


Disclaimer: No warranties, express or implied, are contained herein. Purchasers, or users, of this information acknowledge that any errors or omission in the performance of the material contained herein or, any injuries resulting from its use, are the sole responsibility of the purchaser or user, and not JPMA or the author. Opinions expressed are those of the author only.

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The CEO as "Chief Reality Officer"

Posted By Ron Sidman, Sunday, August 7, 2011
Updated: Tuesday, July 21, 2015

Do you really know what’s going on—inside your company and in the marketplace? Chances are that if you’re not getting the business results you expected, the answer might well be no. Understanding reality, current and probable future, is one of the things all CEO’s need to own. It’s only from that understanding that you can determine whether the business model you have in place is appropriate to get you where you want to go or whether it’s time for a modest or major redesign.

You’d think that understanding what’s really happening would be simple. After all, it’s all around you. All you have to do is pay attention, right? Not so easy. What complicates things is that there are two important dimensions of reality you need to grasp—things you can readily measure (“objective reality”) like sales, profit, and service level, and things more intangible (“subjective reality”) like employee concerns, growth opportunities, brand reputation, and competitive threats. Many companies do a reasonable job of tracking objective reality with “key performance indicators” of one sort another. But these measurements often tell you only what’s happening—not why it’s happening, how much better you could be doing, or what’s creeping up on you behind the scenes.

To get the full picture, you need to monitor both reality dimensions. Unfortunately, subjective reality is not as easy to uncover. In fact, there are probably people working hard to hide the “story behind the story” from you. Or, you may actually be inadvertently making it difficult for them to communicate with you. That includes your suppliers and your employees. And, even your customers are not going to go out of their way to tell you how they really feel and are likely to paint a rosier than true picture if you ask them. The problem is only compounded as you grow and add management layers. So what can you do?

Every business model should include a feedback system that not only gives you the numbers you need but also makes it super easy for employees, suppliers, and customers to provide you with crucial subjective feedback as well. Here are some suggestions to help you keep your fingers on the subjective pulse of your business.

·         Make honesty, transparency, and continuous improvement part of your culture. This has to be step one.If you really want to know what’s going on, your company’s culture has to encourage visibility of the good, the bad, and the ugly. And, this has to be a two-way deal. You won’t hide important information from your employees and they won’t hide things from you and each other. It also has to be understood that top management’s job is to ensure that what’s supposed to be happening is actually happening at all levels of the company. The rationale for all of this is continuous improvement—something that is essential to the ongoing success of the company and therefore in everyone’s best interests. You can’t fix things if you don’t know they’re broken.

·         Make it easy for employees at all level to tell you what’s really happening. I used to gain a lot of insight into the tenor of the times at my company through a monthly “lunch with the president” with groups of randomly selected employees. Another practice is to hold so-called “skip-level” 1:1 meetings with your direct reports’ direct reports. If done right, these and other techniques can be very valuable for both gaining insight into how well your direct reports are managing as well as recognizing up and coming talent. With both of these initiatives, you need to be sensitive about what you ask and how you react to what you hear or you’ll risk discouraging the very openness you’re looking for.          

·         Get out of your office and look around. There are some things you can only observe on the “battlefield”. Management by Walking Around” (MBWA) is nothing more than another mechanism for staying in touch with subjective reality. Your personal schedule should have set times to visit key venues and mingle with the troops and customers. Sam Walton is famous for annually visiting every store in the Wal-Mart chain until there were too many to visit. When there, he walked around observing, talking to everyone (including delivery truck drivers), and taking notes. When he got back to Bentonville, he fixed what needed fixing.

·         Check in regularly with your retail customers. Even though your sales force has primary customer relationship responsibility, do you make a habit of periodically phoning or visiting key retail customers without the salesperson present? This can be difficult if you’re an introvert, which many CEO’s are, but I believe it’s critical. Retail buyers and managers will tell you things they’d never tell the person calling on them—especially if you ask probing questions or solicit reactions to possible new policies or services. Above all, you don’t want to find out you have a problem by losing an account. 

·         Find ways to engage with consumers. Social media is changing the dynamics of communication to and from consumers. Certainly you should find out where in cyberspace existing and potential customers are talking about your products and regularly listen in to what they are saying. But there’s also no substitute for a dialogue where you can present specific product or service ideas, get reactions, and follow up. While your staff will handle the bulk of this activity, you’ll find it both revealing and stimulating to periodically dialogue directly with consumers yourself—either online, in focus groups, or even at baby fairs.

Even large, seemingly well-established companies have failed because the CEO assumed he or she knew what reality was rather than always obsessively seeking it. The one thing you can be sure of is today’s reality will not be tomorrow’s. Are you as the CEO doing what you need to do to stay in touch with both your company’s objective and subjective reality?


Disclaimer: No warranties, express or implied, are contained herein. Purchasers, or users, of this information acknowledge that any errors or omission in the performance of the material contained herein or, any injuries resulting from its use, are the sole responsibility of the purchaser or user, and not JPMA or the author. Opinions expressed are those of the author only.

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Your Pricing Policy: Opportunities and Dangers

Posted By Ron Sidman, Thursday, July 21, 2011
Updated: Tuesday, July 21, 2015

Considering how critical pricing policy is as a component of a business’s design, it is surprising how many companies of all sizes often make pricing decisions in a reactive, inconsistent way as opposed to being directed by a thoughtful, long-term policy tied to corporate purpose, vision, and values. The potential negative results can include:

·         Failing to optimize retail price points

·         Encouraging retail buyers to always bargain your price down

·         Destroying credibility with buyers

·         Communicating a lack of confidence in a product’s potential

·         Undermining the value perception of consumers

·         Inability to sustain consistent overall profit margin because of profit disparity between customers

A well-crafted policy should address both how you initially set your base prices product by product as well as how you vary prices for the same product customer to customer. This is a complex topic that I can only touch on briefly in this blog. But, let me give you some suggestions from my own experience that might help you improve your profitability.

1.       Set base prices for products based on consumer perceived value not cost. Money is often left on the table by not pricing products high enough when you have the added value to support it. Consumer surveys and/or focus groups comparing your offering to the competition, if any, can help you get a sense for consumer perceptions before you finalize the price. The results may surprise you. On new products, if in doubt, go out at the higher price. You can always come down but you can’t go up. Remember that the price you set communicates both to retailers and consumers the level of quality and the confidence you have in the product. 

2.      Understand current marketplace reality. You’ve got to do your homework long before you start walking into those lions’ dens known as buyer’s offices. Retailers tell me they are shocked at how poorly prepared company personnel or sales reps often are. If you can’t offer a retailer pricing that allows them to meet their margin requirements while being competitive at retail with their principal competitors, maybe you shouldn’t be presenting the product to them at all. If you don’t have at least a sense of what your competition is charging for comparable products, you could be embarrassed. If you don’t know the retailer’s requirements up front with respect to sales allowances, special requirements, and other deductions, you might be pricing too low from the get go. 

3.      Assume that buyers and employees are going to change companies. Being able to sleep nights was always one of my priorities and I assume it’s one of yours. There’s no reason why you can’t or shouldn’t establish a pricing policy that can be justified no matter who becomes aware of it. You should expect that the prices you charge different customers for your products are going to become public at some time. And, trying to explain it by saying to buyer B that buyer A got a better price because she threatened to drop the product is not going to make anyone happy. Does that mean you have to charge everyone the same? No! But there ought to be an acceptable rationale, a set of guidelines, to justify the differences. Any customer that meets the guidelines should get the same price.

4.      Aim to equalize profitability by customer. Arguably the best basis for price variation by customer is equalization of profit contribution percentage*. It’s also the fairest. Why shouldn’t every customer contribute proportionately to your bottom line? Why should customers that pressure you for extra allowances, are costly to service, or abuse return policies get a better deal than other equal volume customers? Instead, build these costs into your price. Of course, you typically want to give better prices to your larger customers. Profit contribution-based pricing justifies and enables that because economies of scale reduce direct costs. Another benefit to equalizing profit contribution by customer is that you won’t find your margin suddenly eroding because the balance of your sales shifts to lower profitability customers. 
* Profit Contribution Percentage = (Sales – Direct Costs) ÷ Sales

5.       Be willing to walk away.This is a tough one, but if you or your salesmen are routinely lowering prices strictly based on pressure from customers, you’ve got serious problems. If you can’t set and hold to fair prices for your products, you better take a cold hard look at your competitive advantage product by product and your overall business model. Personally, I think you need to establish a reputation with buyers that the price you quote is the price they pay—unless the buyer is willing to work with you to pull some cost out of the product in some way so profit contribution is maintained (package change, minimum quantities, etc.). If you simply crumble under the pressure, guess what’s going to happen every time you quote a price to that buyer for evermore? You may lose some business in the short term with this approach but you’ll be better off overall by far!

6.      Proactively add value to your products. Products have a life cycle. You should enjoy the widest profit margin when the product is new and your competitive advantage is greatest. But, as you know, nature abhors a vacuum and competitors will flock to grab a piece of the action. Don’t wait for this to happen and then react. Create a product improvement process, if you don’t have one, and systematically improve especially your higher volume and most profitable products at least annually so that you can preempt competition without having to lower price. Don’t let your products become commodities.

Establishing an effective pricing policy can have an enormous impact on your level of business success. It’s well worth taking the time to think it through with your staff, document it, communicate it, and enforce it. Have you done this yet?

Questions? Comments? Let me know what you think.

Want to learn more? Sign up for a Skype session through the JPMA CEO Mentoring Program Page. It is a cost effective way to learn some tricks of the trade!


Disclaimer: No warranties, express or implied, are contained herein. Purchasers, or users, of this information acknowledge that any errors or omission in the performance of the material contained herein or, any injuries resulting from its use, are the sole responsibility of the purchaser or user, and not JPMA or the author. Opinions expressed are those of the author only.

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Working with Toys R Us

Posted By Ron Sidman, Thursday, July 14, 2011
Updated: Tuesday, July 21, 2015

Jerry Storch, Chairman and CEO of Toys"R"Us, is a very impressive and successful leader. In his breakfast keynote presentation at JPMA’s recent Summit in DC, he made it clear that his company, already one of the dominant retail forces in the industry, intends to continue to try to gain market share wherever it can in the US and abroad. The phrase, "We’re playing to win", has been used very successfully by Mr. Storch to motivate his company in this direction, evidenced most recently by reported market share increases in 2010 at the expense of his competitors.

But while leading in toy and baby market share and becoming the industry "voice of authority" is their goal, it was also clear from Mr. Storch’s very presence at our Summit and his comments about vendor partnerships that they also recognize how important branded suppliers are to their business model.

Having said that, it’s possible his comments about the critical importance of exclusive products and their intent to accelerate their private label program sent shivers up the spines of some of the manufacturers in attendance. This is not new news or a change in strategy for TRU. These strategic themes go back to at least the Marty Fogelman era if not before. As Mr. Storch admitted, TRU simply does not have the cost structure to compete with the likes of Walmart head to head on price and therefore needs as much as possible to have a different set of products in their stores. He highlighted Mayborn’s Tommee Tippee feeding line as an example of an exclusive TRU/BRU program that has been successful for both Toys"R"Us and the supplier.

The Challenges:

·         Those of you who count TRU/BRU among your customers are very fortunate in many respects but you also have some hairy issues to deal with.

·         Can you and should you create exclusive products for them?

·         Is it possible that one of your high volume, high profit products could appear some day in a Babies"R"Us private label package—a brand that Mr. Storch says scores very well with consumers.

·         Should you take the initiative and provide private label products to them yourself as Mr. Storch suggests?

·         What are the implications of TRU/BRU becoming a higher and higher percentage of your total business?

Some Suggestions:

Keep working at maximizing your competitive advantage.

Unless you’re Procter and Gamble, you are never in a great bargaining position with large retailers. And even P&G occasionally gets put in their place by the big guys. However, the more appealing your brand and products are to consumers versus the other guys, the stronger stand you can take on all these issues and still remain a supplier. Increasing competitive advantage is what strategic planning is all about.

Design your products with the ability to create multiple versions.

Exclusives of one sort or another are a fact of life in this industry. When you are in the design stage, plan for multiple versions in a way that minimizes tooling, production, and inventory costs.

Continually improve high volume products.

You can’t totally stop knock-offs either by competitors or retailers, but you can stay ahead of the game by annually upgrading your key products. That way they are always superior to copies whether by competitors or private label. Of course, you should patent whenever you can as long as the patent is strong enough.

Stay true to your core competencies and strategy.

Be careful about trying to be all things to all retailers. If your competitive advantage comes from being the low cost producer, it might make sense to consider being a private label provider to retailers. However, if your culture and product line is all about superior quality and performance, think three times before getting into it because you won’t be leading you’re your strength and you’ll dilute the focus of your staff.

Diversify, diversify, diversify.

That maxim that applies to investing applies just as much to your business. As the big retailers get bigger it becomes more difficult, but you will sleep better at night to the extent you can keep any customer from getting so big that losing all or part of their business could be fatal. Diversifying your customer portfolio needs to always be a strategic priority.

What are your thoughts? Submit a comment or question and I’ll respond to it.


Disclaimer: No warranties, express or implied, are contained herein. Purchasers, or users, of this information acknowledge that any errors or omission in the performance of the material contained herein or, any injuries resulting from its use, are the sole responsibility of the purchaser or user, and not JPMA or the author. Opinions expressed are those of the author only.

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