I read an interesting statistic recently that suggested that most new products and services launched onto the market fail to deliver the expected results and there seems to be a lot of debate as to the reasons why. The failure rate seems to vary depending on whom you speak to. Harvard Professor Clayton Christensen was attributed with saying that the failure rate is very high i.e. 80% – 90% (which he disputes) whereas others think it is closer to 40%. But no matter who you believe one thing is true – launching a new product (or service) is a high-risk strategy. I thought it would be interesting to see if there is any consensus as to the reasons why! My 5 reasons why new products fail looks something like this.
A lack of independent and unbiased research into the market and target audience
One of the characteristics of a successful entrepreneur is that they are determined, let nothing stand in their way and have a unique feel for what the customer wants. Steve Jobs for example, was not a fan of market research. He famously said “You can’t just ask customers what they want then try to give that to them. By the time you get it built, they’ll want something new.” Great entrepreneurs might succeed because they’re passionate and determined to do so and because they don’t take no for an answer, but that’s not without having done their due diligence first!
The product falls short of claims made and suffers bad reviews
Companies often make extravagant claims about their products and consumers lose interest, which is a particular problem in this technological age when one person can spread bad news to thousands. Microsoft reportedly poured no less than $500 million into the launch of Windows Vista for which it had high expectations, with a “Wow Starts Now” advertising campaign.
But the software had so many compatibility and performance problems that even Microsoft’s most loyal customers revolted. Vista was a flop, with Apple heavily criticising it in an ad campaign (“I’m a Mac”), causing many consumers to believe that Vista had significantly more problems than it did.
The product defines a new category and requires substantial consumer education—but they don’t understand it.
Many new products demonstrate classic “Red ocean thinking” and break new ground by offering consumers a different product to the competition. This is a key reason why new products fail as if the consumer doesn’t understand the point of difference or if they don’t understand what makes the product unique, they will simply stay with what they are used to. For its biggest launch since Diet Coke, Coca-Cola identified a potential new market: 20- to 40-year-old men who liked the taste of Coke (but not its calories and carbs) and liked the no-calorie aspect of Diet Coke (but not its taste or feminine image). C2 was introduced in 2004 with a $50 million advertising campaign but failed dismally as their target audience couldn’t see the need for the new product, so they stuck with what they were familar with.
Simple margin rules make bad pricing policy.
Price is the important element of the marketing mix as it’s the only thing that brings in revenue – everything else is a cost. Too often though firms have a plan for all products achieving a hurdle margin or better and while having an overarching margin target might seem wise, it actually causes issues. Firms tend to either underprice some offerings, leaving money on the table, or overprice others and not allowing the money to reach the table in first place. Instead, companies need to understand the value of the benefits their offering delivers to customers compared to alternatives, and then price according to that value.
Weak launch or a poorly executed launch
Most new products require a reasonable degree of promotional support to build brand awareness and to access distribution channels and retailers. A limited launch budget or a poorly executed launch is another reason why new products fail. Combine this with adverse media attention (or negative consumer sentiment on social media) usually related to deficiencies in the product design, price level, or early use problems experienced by consumers and you have a recipe for failure. The launch of the BlackBerry Q10 was a classic – launched too late with no demand for the product. (Who are Blackberry I hear you ask!)
So there you have it, my 5 reasons why new products fail – do you have any others to add? Why not tweet yours to @oxcom_marketing.
This article was written by Tim Lane, a Lead Tutor with the Oxford College of Marketing.
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