Risk vs. Reward

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Your sales trends have been OK, showing modest year-over-year growth. However, your leadership team wants to be more aggressive to boost market share. As head of marketing, you have come up with some ideas to attract new users. All systems go, right?

Time out!

It may be prudent to assess how much risk is involved with launching a new campaign to go after new consumers. The key question is whether new messaging or new products represent a risk to your core user base. Yes, attracting a new audience can be a source of new revenue. Just be sure you keep current consumers satisfied and loyal. Consider if a new product should be marketed as a flanker brand, rather than as a product improvement. A flanker brand could attract new users, while leaving the core business intact.

It is a cautionary tale today when leading brands take risks and then suffer badly when things go wrong. Many of you saw how Bud Light recently misjudged the backlash from their core users when they made a well-intentioned move to attract LGBTQ users to grow the business. They partnered with a well-known transgender actress, Dylan Mulvaney, and launched colorful packaging to support the effort.

Oops! Boycotts ensued, sales of Bud Light—the #1 beer in America—dropped more than 25%, and the stock price of parent company AB Inbev lost $27 billion in market value. Even other Anheuser Busch beer brands saw sharp sales declines.

Test and learn first!

It might take some time (several weeks) to test new messaging prior to launch with both your proposed new audience and your core users. With testing, not only can you prevent disasters before they happen, but testing also affords the opportunity to tweak and refine. If you are contemplating new product launches with your new messaging, get consumer feedback on both. Does the product live up to the expectations of consumers, or does it outperform your existing formulations? Can you make any fact-based claims that are believable and compelling?

Let’s assume that you pass the first test, and you have the research data that builds your confidence to move forward. Ready, fire, aim?

A decision to go to market hinges on your team’s assessment of the risks versus the potential rewards. Get all the facts on the table, challenge each other, debate, and discuss. Then make a collective decision that everyone can support.

What are the risks?

This is a critical part of your team’s due diligence, and you should work through them one by one.

  • How big is the market opportunity?  
  • Is there a competitive advantage to be gained by going ahead?  
  • Is there any risk from your vendors? (For instance, is there a unique ingredient in the formulation where you can lock in supply, but only if you make a minimum dollar commitment?)
  • How big a spend in marketing and sales is required to get the product into distribution and to generate trial?
  • Do you have any production capacity constraints or changeover costs?  
  • Are there any sunk costs that cannot be recovered that were made to get to this point?
  •  Is there a reputation risk if the new campaign or product fails? (Think of the Bud Light fiasco!)
  • What is the upside if everything goes according to plan?

Let’s say that after much conversation, you believe the odds of success are good and the risks are manageable. Your finance team has run the numbers and the business case is solid. You still have the option of doing an in-market test before going national. Just be sure that the test market is representative and that the time and money invested further reduce the risk of going full bore. A market test likely will take 6 months (or more) to generate the data to validate the original business case. However, if the success of your product launch depends upon first-to-market timing, you must weigh the risk of moving ahead now vs. market testing.

If you are armed with positive results from the market test, you are now ready to pull the trigger and expand nationally. Your final step is to share the learnings from the work you have done with the entire employee base to get the team behind the launch. Do some show and tell, get folks excited and generate some buzz. And then get ready to roll!

Want some help with those tough decisions about test marketing and risk reduction?

At Damen Jackson, we thrive on helping clients get the biggest bang for their buck while staying keenly focused on being smart and nimble. We are here to be your partner, your conscience, your devil’s advocate—an extension of your team. And we will always bring the conversation back to strategy. How do we maximize the market opportunity for each and every market segment?

We were recently named #14 among the top 100 marketing and design agencies by Agency Spotter Top Agencies.

Importantly, we are pragmatic, focused, and energetic. We get assignments done well, and quickly.

Take the first step to a more successful business today.

1.    CLICK HERE to schedule a free 30-minute discussion. No pressure – we promise.
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