One of the questions we field regularly from CEOs is “How much should it cost, as a percent of revenue, to launch a product, successfully?”
The question, itself, is completely legitimate. It’s imperative for anyone who brings a new product or service to market to have a predetermined “point of no return” – even if you willingly ignore that marker, when you actually hit it.
But… That number can hardly be expressed as a percent of sales, irrespective of several circumstances, including your experience and position in the target market, the particular vertical you intend to penetrate, the level of competition you will face, the time anticipated for this product to flow through the adoption curve, the length of time you can reasonably expect your window of opportunity to remain open, and many more factors than we can address in this blog post.
So, to return to the original metaphor, we suggest it might be useful to think about launching a product or a company in the same terms we use to launch a satellite. Obtaining orbit is relatively simple, as long as you have the right trajectory, a suitable method of propulsion and sufficient fuel. And with this metaphor, it becomes clear that the problem with the “percent of revenue” dilemma is that it only takes into account one of the three variables, fuel.
Applying the rocket metaphor, the trajectory of the product or company being launched becomes a function of the product’s Brand Promise. This is, essentially, the guiding principle that determines the rocket’s course.
The method of propulsion becomes the promotion plan. And, like varying rocket designs, the particular media we select can be can be more – or less – efficient than their alternatives.
So, if the aim of the rocket (its Brand Promise) is ideal, and the efficiency of the engine (promotion plan) is optimal, then the amount of fuel will be relatively small. The less accurate your Brand Promise (trajectory) or the less efficient your communication channels (method of propulsion), the more fuel you will need to burn to reach orbit. And in this context, the answer to the riddle becomes clear: The amount of revenue you will need to launch is directly related to the product’s brand promise and your promotion plan.
Of course, with a real launch, there are other factors to consider, such as wind and friction… And with the launch of a company or a product, there will be market changes (wind), and competition (friction), and so on…
But the underlying principles remain the same.