How to Identify Your Next Hero Product

How to Identify Your Next Breakthrough Product

You’ve had success with your Hero Product, but now it’s time to expand your product line and improve your profit margin

With the success of your Hero Product, you have been able to build your company and your team, but you might be starting to get concerned that you are hitting a ceiling for that product’s market size. Sales are getting progressively harder to bring in for your Hero Product, and your Return on Ad Spend (ROAS) to drive new customers to your brand isn’t yielding the same returns that it used to. You know that there is still plenty of headroom for your company to grow into, but you aren’t sure that it is going to come from your existing product line.

At this point, customers are happy with their current products, and they have submitted plenty of feedback and feature requests. While you believe that your Hero Product will continue to drive your business forward, you also realize that it is time to start adding other hit products to your catalog. So, the real questions you are asking yourself are: What product do I make next? Will my customers love it as much as they loved my first Hero Product?

If you want to create another Hero Product, and many more after that, here’s what you’ll need to know:

• How to understand and analyze the data you already have
• How to use customer data to your advantage
• How to get customer input on new product development through effective surveys

Getting More out of Your Data

There are many insights into high-potential products from sales data on your current product catalog. Off the cuff, you’re probably very familiar with how your products are selling, but have you taken a deep dive to really understand how each product is selling?

You may have other questions. Why are some products outselling others? Why do some older products continue to outsell new releases? Why do I keep having to discount some products just to get them out of our warehouse?

Deeply analyzing your data with this sort of questioning will be necessary to help you paint a picture of what makes your Hero Product so popular and what makes your Slow Movers struggle in comparison. Focus on understanding what makes your Hero Product so successful and try to identify what were the misses with your Slow Movers. It can be tough to identify the exact causes. We recommend pulling in your Customer Support and Social Media teams to see if they can shed light on why customers loved your Hero Product and didn’t love your Slow Movers. They are on the front lines, and while their reports might be anecdotal, they will be able to provide common themes from the customer feedback.

An additional analysis we recommend is to calculate the Average Selling Price (ASP) for the products sold. This analysis is simple: for each product, divide the Total Revenue by the Total Units Sold to see the price that the products ended up selling for. It is helpful to see the difference between the MSRP and the price your customers purchased your products for, after factoring in discounts and other price changes.

By looking past just how many units were sold for how much revenue, you will able able to analyze how popular each product is. We typically find that Hero Products and Fast Movers typically have an Average Selling Price close to their MSRP, while Slow Movers typically have a much lower Average Selling Price than their MSRP.

Dig Deep to Draw Conclusions

Your data already gives you great information, but you will want to take a deeper look to identify commonalities or considerable differences across your product catalog. These patterns will be an indication of the most relevant product(s) to focus on making next.

Ask yourself:

• What other problems are my customers facing that our current products don’t solve?
• What are customers doing in their day-to-day lives that are related to the value we provide, but we don’t directly address today?
• What are the products/services that our customers have asked us to make? (Social media and customer service teams typically hear these requests the most.)

Understanding these questions and analyzing your company’s current catalog will help you arrive at solutions to problems that are adjacent to your customers’ pain points — and opportunities:

1. You’ll be able to cross-sell new items to your current customer base to increase their Customer Lifetime Value. Owned channels (email specifically) make this a low hanging sales strategy that will greatly increase profits.
2. Acquire new customers that might not have loved your original product solution, but are still in your target market. Your second product may appeal more to them.

The products that can fulfill both of these points should be at the top of your list to research further, as they provide the greatest opportunity to grow not only topline revenue, but profit as well.

Identifying Your Most Valuable Customers and What They’re Buying

Analyzing your customers’ spending habits through a Customer Value Insights Analysis (CVIA) will show you which products are generating the most revenue, but will also show you a breakdown of who spends how much at your store and what they are buying. If you aren’t familiar with what Customer Value Insights Analysis is and why it is important, please take a few minutes to read our article explaining it further.

The Customer Value Insights Analysis will help analyze your customers’ purchasing trends, identify the similarities in their purchasing behavior, and identify your most valuable customers. This identification is key, because 40–50% of revenue typically comes from the top 20% of customers (your Most Valuable Customers), and almost all revenue (80–90%) comes from the Top 80%.

There are many other insights to gather from a deeper dive into this data, but it is most important to focus on the common sales patterns of both the Top 20% and the Top 80% of your customers, because they buy your products more, and are your best customers. While it’s helpful to know who the Bottom 20% are, they won’t be as helpful in gathering feedback on what products you should be making next since they don’t buy enough of your current products to provide good feedback. The higher spenders are the customer segments that you want to take your surveys, since they buy the majority of your products.

Engaging Your Top Customers

Build stronger relationships and engage with your top customers when working to develop new products that benefit them.

Once your Customer Value Insights Analysis has shown you who is in the Top 80% of customers, it’s time to use their experiences and opinions to help build out your new product offerings. The most effective way to reach these customers is to email them a survey with questions that ask for feedback on your current products, collections, and what challenges they are facing.

This is a very important step in your product creation process. Customers who are frequently purchasing and using your products are your biggest resource into what complementary or new product offerings they want to see.

Talking to customers directly will offer you more benefits than you can imagine. They will bring light to the daily challenges they are facing, tell you why your products are better (or where you could improve) compared to the competition, and more. If you are asking about the problems customers are having when thinking about your current products, they will probably think of issues that are adjacent to the problems you’re currently addressing. It’s a great opportunity to expand the current feature set or introduce a new product that solves a specific problem that they’ve voiced.

In addition to insights, allowing them to participate in your product development process will help build brand loyalty. By allowing those customers who are already fans of your products to participate in your research, they will feel like their opinion matters to your company. This, in turn, will make them more inclined to purchase products in the future, and give you even more feedback. It might take an investment up front, but this is a virtuous cycle that will continue to feed itself as it gets bigger. It will also help you tighten the gap between your product development and sales cycle.

Developing an Exceptional Survey Experience

Now that you know the importance of your data and have your list of the Top 80% of your customer base, you’re ready to create your survey.

From the start, make sure you know exactly what you’re looking for from your customers. Being specific when starting out and clearly writing out the goals you want from this experience will help guide the flow of the survey. In this case, you are looking to understand what new products can help improve your customers’ challenges. So, keep this in mind from start to finish. The survey content should be heavily focused on getting feedback on areas to improve your current products and learn about future customer needs.

Once you have your goals set, you’ll want to determine which survey tool you’re going to use. There are many sites available that make survey creation and analysis very simple. We build all of our surveys through Typeform, and find their features really useful when analyzing the data and integrating the responses into our Marketing channels.

Now that the leg work is complete, it’s time to develop the questions for the survey. Keep your goals in mind when you begin to write out questions, and make sure you’re fulfilling the objectives you’ve set out to achieve. But make sure not to limit your customers by only asking them yes/no or multiple choice questions — leave some open-ended and offer the option for them to select “other” and explain their thoughts.

You’ll find that by leaving your customers space to share, there will be responses you never expected.

It’s also important to keep your survey short and concise. The longer a survey takes to complete, the more people you’ll lose in the process. We recommend keeping this survey to under 5 minutes. While that may not seem like a long time, you’d be surprised how many questions you can ask in a 5-minute survey.

Even if your survey is only 5 minutes long, make sure to incentivize your customers to take it. We highly recommend offering a special promo code they can use at your store. This will help increase completion rates and boost the number of participants. As a secondary benefit, it can function as a mini-promotion to encourage customers to make a purchase after they complete the survey.

If your survey is too long, you’re going to lose most of your respondents. This chart shows that people are not willing to spend much more than 10 minutes on a survey. Image courtesy of Survey Monkey

Here are some examples of how you should be phrasing your survey questions (placing your company name and branding throughout):

• If money didn’t matter, which one of our products would you buy?
• This is a great way to gauge interest in what products you already have released, but customers might not have bought yet. The most popular answers to this question should be featured more prominently in your current marketing.
• What product(s) would you like us to make next? (Please select all that apply)
• Use this as an opportunity to vet all of the ideas that the internal team has shared with you. It will be a great way to validate which ideas customers are interested in versus which ones shouldn’t be a priority right now.
• What types of products would you like to see us offer? (Please select all that apply)
• If you have mockups or photos of new concepts/prototypes that can explain what you are thinking about, this is an excellent forum to gain feedback before you spend money to start producing them. It is also an opportunity to investigate new product categories.

Some other tips for creating a great survey:

• You can add basic demographic questions before or after any survey to gather base level data from your customers without adding too much time.
• On the very last question of the survey, collect emails with a prompt along the lines of, “If you would like to speak to a member of our team to further expand on your responses, please leave your email below.”
• If you decide to use a discount code as an incentive for taking the survey, be sure to include it on the Thank You page of the survey.
• Make sure that you tell your customers before they take the survey that they will be able to copy and paste the discount code from the survey’s Thank You page.

As you receive responses to the survey, a pattern will emerge of what challenges your customers are facing, and what they want to see produced to address them. This is great! Pay attention to these, and if more than 30% of respondents select a specific idea, seriously consider creating the product/service. You then know that you have at least a third of your existing purchasing base that is interested in buying the new product.

Your Next Big Product

Now that you’ve done your research, analyzed the data, and engaged with your top customers, you should have plenty of information to point you in the right direction for your next product launch. You’ll also have a handle on a sophisticated and well-considered product development process.

Don’t forget that your customers are looking to you to solve a problem or make their lives easier in one way or another. Those survey results are a goldmine when it comes to knowing where to go next.

Once you have developed your next big product, make sure you contact the customers who participated in your survey when you launch the product. They will feel like they have ownership in the creation of the product, which will make them more excited about it. Also, it makes marketing pretty easy when you can say, “You asked for it and now here it is.’’

If you’re ready to start understanding your customers’ needs, but don’t know where to get started, or would like help in this process, the Erebral team is here to help you get started with a Customer Value Insights Analysis or assist in developing a customer-facing survey.

Originally published at Erebral.