Chapter 5: What's a Good Idea?

If you weren't already interested in inventions, you wouldn't be reading this book. After all, no matter how easy I try to make it, learning the ins and outs of becoming a successful inventor isn't exactly light entertainment. You could have more fun watching a grease job.

So, since you're here instead of watching TV or catching a good movie, I can only assume you're pretty serious about this whole business of making money with your idea. Good for you! That means you're ready to start thinking about the first hurdle on your way to success -- figuring out just how good this idea of yours really is.

It doesn't count that your Uncle Ernie thinks it's the greatest thing since the invention of the inside straight. It's not enough that your neighbor says everybody would want one. Your uncle and your neighbor -- wonderful persons that they may be -- are a little less than totally objective about your invention. You need something a little more concrete to go on before you sink the family fortune, or at least a lot of the family's time and effort, into your idea or invention.

The question at hand, then, is the one at the top of this chapter: "What's a good idea?" I'll give you a short answer.

I don't know.

Nobody does.

There simply is no surefire way of telling if you have a good idea on your hands. Believe me, if I knew a foolproof way of finding that out, I would have retired a long, long time ago. I also would have saved myself all kinds of trouble down through the years because I've spent plenty of time and money chasing what turned out to be bad ideas. Anybody in the idea business who says he hasn't done that at least once is probably lying at least a little.

All is not lost, however. You may not be able to tell a good idea when you've got it, but a loser you can tell. No guesswork and gambling about it. There are some reasonably concrete requirements for a good idea, and if your invention doesn't meet those requirements, it's a loser. I still can't guarantee that your idea will be a success if it meets all the requirements, of course. All I can do is give you a way to tell whether you've got a turkey on your hands.

No, there isn't any nice, simple rule that you can write down on a piece of paper and carry around in your wallet. The key is a little more complicated. It is an understanding of how business works.

THE THREE-CUSHION SHOT

It isn't enough that your product seems desirable to a lot of people. Nor is it enough that the price seems right. It has to be both of those things at the same time -- and one thing more. It must be profitable to the seller, the manufacturer, and all the other various people along the line of distribution. Every successful product is a three-cushion shot that touches all of these points: desirability, value, and profitability. If somebody offers you prunes at a good price, but what you really wanted was plums, there's no sale. On the other hand, if somebody offers you the plums you want but at a $100 a pound, there's no sale either. And unless everybody from the farmer to the grocer can make a fair profit out of the transaction, nobody's going to offer you either one -- plums or prunes.

Let's take a look at the first of the three points, desirability. It's the toughest, most subjective of all the three points you have to meet. Not that the definition is difficult. If anything, it's simplistic: A product I s desirable if a market exists for it. But simplistic or not, big companies spend millions of dollars every year trying to see if their products fit that magic definition. To give you a few examples of the kind of testing that goes on:

To update this book, I visited with a vice president of one of the giant toy companies in America. Every year, it adds approximately twenty new items to its line. In other words, twenty times per year, that company has to go through all of the steps of developing and marketing a new product. Those twenty winners are selected from among some two thousands new ideas reviewed every year. So the early discards are pretty much on the basis of their own feelings about the market. (When I say "they," I'm referring to the triumvirate at the company in charge of selecting and developing new ideas: the president, the vice president for new products, and vice president for marketing. They work with a twelve-person staff.) Previous experience with a similar product, feedback from their retailers or sales organizations, analysis of market trends, and sometimes just gut instinct honed by many years in the business tell them to drop this idea or that one. Eventually they narrow the field down to twenty ideas that they believe will be winners.

Do they just dive right into production, distribution, and merchandising? Hardly. The next step is to mount a full-bore research project on each of the twenty ideas. No matter how sure they are of a product, nothing goes to market without some form of testing. There's just too much at stake. Basically, the research they do falls into one of three different levels of sophistication.

IT TAKES ALL KINDS

With ideas they're pretty sure of, they'll do a fairly unsophisticated kind of testing. They have artists make up some well-finished drawings or "comps" (short for comprehensive drawings") of the products. They'll show these artists' renderings to a few hundred people who seem to fit the profile of their market -- the right number of children, the right income, education, and so forth. And they'll interview test subjects about the product. Would they buy it? How do they think their children would like it? What would they consider a fair price to pay? Things like that. Perhaps no more than a dozen or so questions, depending on the kind of information they are seeking.

The next level of sophistication is basically the same kind of testing, with one important difference. In this level of testing, Mr. Giant U.S. Toy Company will actually make a model of the new toy. The model will be practically identical to the way the toy will look when it's manufactured. These models will be photographed -- perhaps even with children. Now the interviews are conducted with these photographs of the product instead of the artists' renderings. The test subjects need to use less of their imagination to figure out what the toy will be like, so their reactions are likely to be more accurate reflections of how they'll feel about the real toy. Again, their answers to the test questions will be carefully analyzed to get an idea of how popular the toy will be, to determine what the price level should be, and to ferret out any unnoticed drawbacks about the toy. Naturally, it's more expensive to make a model and have it photographed than to just do a drawing, so this level of sophistication costs a bit more than the lower level.

The most sophisticated type of testing is reserved for toys about which Mr. Giant U.S. Toy Company has some doubts. (Obviously, they couldn't have any really serious doubts or the toy wouldn't have made it this far.) For this type of research, the toys will actually be produced as prototypes, either handmade models or production items from a short test run in the factory. They'll be as much like the real thing as possible -- so much so that you and I probably couldn't tell the difference. These samples will then be given out to groups of children who have been brought by their parents to the test labs. While the kids play with the toys, the researchers will watch their reactions through one-way mirrors, which is fun. Later they'll probe the parents' reactions, too.

In the process of finding out whether a market exists for any given toy, the biggies regularly spend as much as $250,000 for research on an item. Sometimes they can get by more cheaply, but if they think they need it, they'll spend the top dollar just to be sure. They could lose many times that much if they make a million of the toy and wind up selling only a hundred thousand.

At another of the giants in the toy industry, they sort of back into the question of desirability. The first stage in development of a new idea there is to look at some segment of the toy business and select a price level for a new toy to be marketed in that segment. A typical starting point, according to a vice president, might be a suggestion from the marketing department saying, "We need for year after next a twenty-dollar doll with lots of 'action' features." (Note that lead time. If you try to sell your idea to a giant company, you'll learn that "next Christmas" is at least two years off.)

In other words, they look for holds in the toy market and seek to fill them with products. Work doesn't begin until the need for some specific type of toy is established. The idea people keep current on new materials and novel mechanisms, and at weekly conferences they attempt to fit these new things into ideas that fill the current product need. At these meetings, the marketing people play a very important part. Even before a new toy is beyond the hand-waving, sketch-making stage, the marketing experts are working out the TV-promotion possibilities, the advertising and packaging ideas, and other related possibilities of the toy.

As you can see, marketing is the name of the game. And it seems to work.

JUST LIKE THE PROS

It's worth pointing out at this stage that you can do some of the same sort of testing. Almost all market research is aimed at finding out to whom the product appeals, how appealing it is, and whether or not the price is right. No matter how sophisticated the techniques used to find the answers, the questions are usually variations on those same themes. Those are all questions you can ask, too.

There are several ways you can ask the questions. For one, you might simply do a short questionnaire requiring only yes/no or one-word answers, then buttonhole people at a shopping center and ask them your questions.

You might want to do an "in-depth interview" kind of study where you get a group of people together and steer the discussion into areas you're interested in. (This is more difficult, since you'll want to tape record and transcribe the whole discussion so you can analyze it all later.) Needless to say, you want your panel to be unbiased strangers, not friends who'll tell you what you want to hear. There are even a ouple of variations on this "in-depth" research: (1) you might have a picture or a sample of the product for them to discuss, or (2) you might simply get the discussion rolling on the general market your product fits into, without showing or bringing up a specific product.

The advantage of the "in-depth" reserach over the questionnaire study is that you can turn up problems you didn't think of and learn product advantages you hadn't thought about. The disacdvantage is that this is a highly subjective kind of study, and unless you're pretty well-grounded in market research, you could jump to some unjustified conclusion. If you use it, take the comments at face falue and don't try to read more into them than that.

IF IN DOUBT, TEST

The questionnaire study is much simpler and less likely to mislead you. Here's an example of the kind of questionnaire you might use:

1. Do you like the product?
2. Do you think that price is about correct?
3. What feature do you likemost about it?
4. What feature do you like least about it?
5. Any comments?

You'll also need to know who it is you're talking to. You don't care about names and addresses, of course. And people are more likely to answer your questions if they feel they are anonymous. But you do need to know some basic information about them so you'll want to ask these questions:

1. Age (check one) __18-24 __25-39 __40-65 __over 65

2. Income (check one) __$20,000 to $40,000 __$40,000 to $60,000 __Over $60,000

3. Education (check one) __8 years or less __9 to 12 years __13 to 16 years __more than 16 years

4. __Male or __female

5. Other questions pertinent to your product, such as marital status, whether or not the respondent has children, and so forth.

Keep the questionnaire short. The shorter it is, the more willing people are to answer your questions and the more interviews you can complete in a given time. Avoid questions that require long, narrative answers. Ideally, you'll have a sample of the product on hand. Otherwise, you'll have to make do with a picture of it. And if you have a sample, be prepared to replace it from time to time after it is dropped or broken by all the handling.

Get as many interviews as you can because that cuts down on the amount of error introduced by a couple of nontypical responses. And be sure you hit more than one location when you are doing your research. (If you do all of it at one shopping center, or even at a couple of places in the same general part of town, you could build in unnecessary bias in your sample. You could wind up with a heavy sample of well-educated, wealthy respondents, for instance. Or the opposite.)

Your specific product may dictate special variations on the questions, of course. But you'll have to work that out on your own. Just remember that the object of the research is to give you insights into how well received your product is likely to be. It may take some time and effort and involve a certain amount of expense, but it could pay off handsome dividends if it uncovers some problems you didn't know about.

If you're systematic about your interview and keep careful records of the answers, you could have a valuable sales tool to use later on when you try to sell your idea to some manufacturer or when you try to raise some financial backing. Careful research, properly handled, can be very, very impressive. Especially to investors.