Online Exclusive: Using Dog Bones: A New Product Development Rating System

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Insurance companies develop many new products or replicate products being marketed by "the competition." Developing even relatively simple products has become expensive and time consuming. This is partly because the cost of product introductions that fail has to be amortized over just the few new programs that succeed. As a consequence, insurers have grown reluctant to consider and invest in new products.


New products are a particularly important element of insurance direct marketing. Without new products, DM efforts -- be they telemarketing, direct mail or any other media -- tend to wear out and lose their responsiveness.


But there are a few steps that direct marketers, and particularly insurance direct marketers, can follow to improve the probability of offering new products that are successful. Though this article references insurance, the concepts are just as applicable to any DMer.


Let's face reality: Most insurance organizations haven't paid attention to creating the environment needed to make new products more likely to work. To create new products, the right organizational structure is needed. Typically, insurers assign the development of a new product to a person who also has production responsibilities. This is a recipe for failure, because once the boss puts pressure on meeting this year's goals, the effort directed to new products is reduced if not eliminated.


The first step to improving the product development process is to recognize that creating new products is a separate and distinct activity. New product responsibility must be assigned to a team that doesn't have to worry about meeting this year's sales goals. This team should include staff from marketing, actuarial, legal, compliance, administration, claims and underwriting departments.


Second, a simple yet objective criterion is needed for judging new products, one that considers how the product will fare in the marketplace and more than just a set of quantitative criteria. One way to do this would be for insurance companies to adopt the criteria that many non-insurance direct marketers use to evaluate the success of a new product. It is very simple: If the dogs eat the dog food, then the product is a success.


Who else besides man's best friend is better equipped to provide the objective criteria for a new (dog food) product? Dogs aren't influenced by hype and flashy packaging, which makes them professionally equipped to evaluate a new brand of dog food, not only in the most basic terms but also in the most realistic terms.


In insurance, when it comes time to decide whether a new product is successful, it is not how pretty the direct mail package looks or whether the new product wins an award or seems to answer some other need, but simply whether the public bought into the concept being marketed.


Too often, insurers waver when it comes to deciding the fate of a new product. There needs to be a way to quickly reach the point at which the decision is made about whether the product will succeed. To help me decide, I rate the various new products I work on as part of my consulting practice. I've adopted a rating system similar to what is used to rate movies or restaurants -- except that I use dog bones rather than stars to remind me that I need to put myself in the mindset of the consumer rather than an insurer or myself.


Here's how the rating system works. My file for a can't-miss new product is marked with four bones, whereas a product that I don't think is going to succeed might get only one or even just half a dog bone.


So the next time you consider creating a new product, remember what those little dog bones on the outside of the file mean. Think about whether your customers will buy the product and not whether the product is a technical masterpiece or whether its promotional piece will win an award.


This very simple approach for evaluating new products in terms of "whether the dog will eat the dog food" will go a long way toward making new products more likely to succeed, reducing the cost of new product development and creating more business.


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