What is a business idea worth?

Businesses have been using online surveys for a while now to measure customer satisfaction and conduct market research. They know that success in business always involves listening to customers. But a few forward-thinking businesses have taken this listening process one step further. They are using online systems to solicit product ideas from both their customers and their staff.

A Different Kind of Questions
Most online surveys ask customers to evaluate a product or service. For example, a hotel might ask, “How would you rate our check-in process in terms of convenience?” A survey intended to solicit news ideas might ask a different kind of question, for example, “How can we improve our check-in process?”

Questions like these are bound to produce many useless answers. Some will be impractical, and some will be just plain silly. But for every hundred unusable responses there might be one or two that could lead to worthwhile new products or improved services.

P&G Asks Customers for Ideas
Procter & Gamble, the world’s largest consumer goods company, takes this approach to customer surveys seriously. P&G has created an online program called Connect + Develop that allows customers and other interested parties to submit ideas about anything related to their business — packaging, design, marketing, engineering, etc.
Businesses take part in the program in hopes of partnering with P&G. Individuals take part because they would like to see new products or because they would like to have a chance to influence a corporate giant. Connect + Develop has generated an impressive variety of product ideas, from new ways to apply Olay skin cream to new shapes for Pringles snack foods (sticks rather than chips).
P&G says that external collaboration plays a key role in nearly 50 percent of its products. A.G. Lafely, chairman and CEO, states, “Our vision is simple. We want P&G to be known as the company that collaborates — inside and out — better than any other company in the world.”
Using Social Media to Solicit Ideas
This interest in asking customers for ideas fits nicely with the growing popularity of social networking sites such as Facebook. When a company creates a page on Facebook, people who are interested in the company’s products become “fans” rather than just customers. The idea behind this distinction is that fans feel a special affinity for a company and its products. They think of themselves almost as partners. This type of relationship makes it more likely that people will feel free to offer suggestions and other comments. And Facebook makes it easy for “fans” and businesses to interact.
But a company does not need to use a social networking site to let customers know that is open to new ideas and eager to receive them. An online portal such as P&G’s Connect + Develop can foster the sort of collaborative spirit that will lead people to think of themselves as partners in the process of innovation. Putting a Dollar Value on Ideas
A new idea many sound promising, but will it actually lead to increased profits? That is the calculation that business managers have to make. In the case of a new product, this calculation can be fairly straightforward. A manager has to estimate two things: what it will cost to implement the innovation and how much the innovation will yield in new sales. If the expected benefits outweigh the costs significantly, a manager will probably give the innovation a green light, then monitor costs and sales figures to see if things turn out as expected.
What about an idea that is expected to increase customer loyalty? The value of such an idea can be easier to estimate than you might think. For example, a medical organization discovered through an online survey that doctors wanted an online portal where they could ask questions and help other physicians. The organization implemented this idea, and it proved to be a huge success. After the portal was launched, member renewal rates increased by ten percent. Each new member brings an average revenue of $1,000 per year. With about 100,000 new members each year, it is reasonable to say that this idea has a value of $100,000.
Marketing strategists have come up with formulas that attempt to place an accurate value on customer loyalty. One interesting approach is to measure the “Lifetime Value of a Customer”. This approach uses revenue and cost figures to calculate the average profit per customer per year. If, for example, the average profit per customer is $36, then an idea that improves customer retention by 1,000 customers a year generates gross profits of $36,000. If the idea cost $10,000 to implement, then it produced net profits of $26,000. The same kind of calculation can be done for ideas that attract new customers.