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Page 20 GO IT ALONE!
The high value of working with actual customers—as opposed to relying on market research—is particularly noteworthy in light of with a well-publicized business failure that occurred last winter. MedImmune, a Maryland-based biotechnology company, developed FluMist, a flu vaccine that is administered as a nasal spray rather than a potentially painful shot. The company and Wythe, the comarketer of the nasal spray, forecast sales of four million to six million doses in the first year. This seemed possible, since 60 million to 90 million Americans receive shots annually. Unfortunately, actual sales were far below these expectations; the rollout was a failure. The New York Times reported that the company acted on flawed information that executives said “our market research led us to believe.” FluMist was positioned as a premium product, with a price of $49 per dose, several times higher than a flu shot. In contrast to the predictions generated from market research, it turned out that consumers preferred the pain of the shot, as opposed to paying extra for the nasal spray. This failure, as well as countless others, vividly illustrates that market research is never as valuable as actual experience with paying customers. People will say they’ll take a particular action, but what they actually do—when real expenses are involved—can turn out to be quite different. Innovators commonly assume that their products or services will quickly command an unrealistically high price. As a member of the board of directors of multiple start-ups, I’ve seen this phenomenon over and over again. The formal business plan—with supporting data—assumes that customers will, for example, jump to pay $29.95 for a product. But when the launch occurs, the firm discovers building a substantial customer base makes a far lower price necessary. Whatever the cause of these miscalculations, successful go-it-alone entrepreneurs do absolutely everything possible in advance to work with real customers to avoid these mistakes.
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GO IT ALONE! Copyright 2004 by Bruce Judson. Reprinted by permission of HarperCollins Publishers. All rights reserved.
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