In the rapid and unpredictable market of today, when facing customers' ever-changing needs and expectations, a business able to quickly adapt to changes and deliver relevant products is one having a better chance of surviving. As such, the speed at which a business can get their products to customers is actually becoming a key indicator of both short and long-term success.
In this article, you will get to know the concept of time to market and its importance regarding a product’s first release, an excellent initial step on the path to a successful digital product launch.
So first, what is Time to Market?
Time to market (TTM), also known as Speed to Market (STM) is defined as the length of time from the conception of a product until its release to the market. In simpler words, it is the time from idea to first release. This covers the generation of the idea for the product; its entire design process; development, and launch on the market.
Why is Time to Market important for a digital product?
There are many reasons as to why TTM is so crucial to your business, meaning there are a lot of benefits one can gain from having a low TTM. A classic study published by Booz & Company (1) has shown that early market entrants enjoy clear advantages in terms of market share, revenue and sales growth. Other than that, lower development cost is also considered to be another major benefit.
The most primary motivating factor to reduce time-to-market is that it is fundamental to competitive advantage and that competitive advantages can really do wonders for your product launch:
- An early-to-market product has the advantage of facing less initial competition. As a result, quick release gives businesses more time to build market share before their products become commodities. According to a (2) Research by Green Hills Software, while the first entrant of a new market niche usually holds up to 70 percent market share, the followers can expect nothing more than 20 percent.
- Besides getting ahead of the competition with the first-cover advantage, the companies that pioneer could also have better market responsiveness reacting quickly to the market’s shift.
- By entering the market at a rapid rate, you can attract a larger customer base and thus gain customer loyalty before your competitors do. This will pay off in long-term gains as new companies enter the market.
Increased Sales and Profit
To understand how changes in TTM lead to higher revenue and profit, we have to look at the figure demonstrating typical product lifecycle in the 2018 report about product launch cost (3):
As shown by the figure, regarding the sales volume, early product introduction benefits a lot from longer sales life and longer market share compared to late one. The longer market share, as discussed above, is one of the first-comer advantages while a longer sales life means increased revenue capability overall for your product. This is because the sooner you get your product or service onto the market and meet market needs, the quicker you can start bringing in revenues.
Companies, therefore, suffer financially when they don’t meet their time to market targets. In “The Effect of Product Introduction Delays on Operating Performance,” (4) Vinod Singhal and Kevin Hendricks analyzed the financial performance of over 450 companies that experienced product launch and found that product introduction delays have a statistically significant negative effect on profitability. A classic McKinsey & Co study (5) reports that a product that is six months late to market, earns 33% less profit over five years on average.
According to Singhal, in a fast-paced competitive industry, customers are not willing to wait for your product and would choose to buy your competitor’s product just out of convenience. But convenience in a market ruled by immediacy and an abundance of choice like today’s is what’s actually boosting customer loyalty.
Low development cost
A reduced time to market is often associated with a lower cost of development, studies show. In one study about innovation speed (6), Kessler and Chakrabarti found that getting products to market quickly allows ﬁrms to reduce costs through the experience curve, a concept about the relationship between the production quantity of a company and the cost of production.
Moreover, since a shorter development cycle leads to less rework and fewer man-hours in
development, shorter TTM results in lower cost of development. According to a 2012 study (7), high speed to market places a limit on possible man-hours and overhead (thus costs) in development projects.
At this point, it should be clear that there is a lot to gain by reducing the Time to Market for your product. A reduced TTM with associated benefits including competitive advantages, better profitability and lower cost of development could make all the difference to the success of your product, even in the long run. While there are countless articles answering the question of how to reduce the TTM, the following one is a great place to start.