The Top Ten Reasons New Products Fail
October 1, 2006
Introducing new products successfully requires:
A defined process that is followed almost slavishly
Sufficient expertise and resources
However talking about process, expertise and patience is boring to everyone except engineers (and people who introduce new products successfully).
So, with apologies to David Letterman, let’s show what happens when you try to introduce new products any other way. Here are the top 10 reasons new products fail.
10. “I know, gang, let’s put on a show”
See if this sounds familiar. Someone comes up with an idea, and it is implemented by an ad hoc team with money found in a slush fund. The whole (lack of) process is like what Judy Garland and Mickey Rooney used to do in all those Andy Hardy movies where they staged a complete Broadway show in about five minutes.
What works in reel life is far less likely to work in real life.
Even if you are successful, if you go about creating new products on an ad hoc basis you’ll end up recreating the wheel over and over again. Every time someone will have to figure out a way to come up with the idea, determine how to test it, solve how to distribute it, etc. That is just a waste of time, energy and resources.
And without denigrating the Judy Garlands and Mickey Rooneys in your organization, the notion that anybody’s judgment about what could be a winning new product—versus having a firm process to follow in order to find what the marketplace wants—doesn’t make a lot of sense (and rarely works—outside the movies). Everyone has an opinion, but not every opinion is right. Worse, if the new product idea is based on a whim, it is far more likely that the person who came up with it will change it on a whim. “I know I said we’ve been going down this path, but now [that we have spent a lot of money and are only half way done] I feel we should change course.”
Save the “let’s put on a show/create a new product” approach for summer stock.
9. Science Run-A-Muck
The problem here is that companies use their R&D capabilities to come up with unique products, instead of making customer need their starting point. In other words they begin with what they are good at—and what they think they can create—as opposed to what the customer wants.
There is a common perception that R&D has their finger on the pulse of where product development investment should be made and that is rarely the case. If you ask the people who make luggage what frequent flyers are most concerned about they will tell you it is durability, and style. It turns out what they want is ease in packing and unpacking and mobility.
The reason you get cell phones that can do everything but open a bottle of wine—they are filled with features no one can figure out—is because R&D drove the innovation process.
We’re not demeaning R&D. But what should drive the innovation process is fulfilling what customers say is an unmet need, not what we can come up in the lab. Having R&D shape the portfolio of new product investment is misguided.
8. The Lemming Effect
This could also be called “parity productitis.” The thinking goes like this: “The competition has just introduced an X, so we need to have an X, too.” That’s just silly, if all you are offering is a me-too product, you can only gain market share by cutting price, and who wants to go that route?
Yes, your new product strategy needs to take what the competition is doing into account. But you don’t want to introduce the same thing. You need to find a gap in what they’re doing and then address it. That’s how you’ll have a competitively differentiated product or service to offer—providing that it a) taps into a strong consumer need, and b) is something you can excel at delivering. Creating and combining “a” and “b” is what makes for a competitively well-positioned new product.
7. The Blind Leading the Blind
This is trend-hopping. I am hugely in favor of understanding what is going on around you—whether it be social trends, or values or lifestyles. Changes in those areas are a great place to start probing customers about unmet needs which could lead to successful new products.
But there are practitioners out there who preach that all you have to do is just identify a trend and hop on the train. The problem is, more often than not, you’ll get a bad seat. The trend will be almost over by the time you get your product or service out there and you will get little return on your investment.
An example would be opening another high-end steakhouse right now, or starting another poker television show, or being the tenth company to come out with a mp3 player like the iPod. There’s no question those are hot areas, but at some point the trend is played out.
You want to spot trends—but before you try to capitalize on them you need to make sure the trend has legs. You don’t want to be jumping on something that can only support one product addressing the need. You can’t use the fact that something is a hot as the single criteria alone for launching a product.
6. The Market is Too Small
For a new product to be successful you need to have enough people buy it. It sounds ridiculously obvious, doesn’t it? But you would be amazed at the number of companies that design a product for too small a market.
Let’s just talk about the U.S. market for a moment. There are roughly 105 million households in America, and I don’t know of any product that is used in every one. So by definition, you’re going after some subset of American households.
And as the new product idea move through their development process, the target market narrows.
Let’s use an example. Suppose a marketer says the real target for his expensive, new product is households that have over $55,000 in annual income. Well, that’s only 50% of the households. So you just went from having the potential of selling your product to 105 million homes to half that.
Undaunted, the marketer then says, , “well, it’s really only for the adults in America, and not really for older people. So, I only want to sell to those 18 to 65.” That costs him another third of the market. There are about 280 million people in America. He has eliminated half of them by requiring a household above $55,000 a year. And he has ruled out another 46 million people of the 140 million who were left by limiting his audience to those between 18 and 65. So instead of total universe of 280 million people to sell to, our marketer is left with 94 million.
Then he says, “well, I want these people to have an active lifestyle and being generous we could say that one-third of the 94 million qualify. It is not that high, but hey, I am an optimistic guy.” So now his potential market is 31 million people.
Now of those 31 million people, not everyone is going to want it. Heck, if he is lucky, he might get 50% to try it. So now he is down to 15.5 million people. And of those that tried it, only 50% say they would buy it again. So now he is down to a potential market of about seven million people and it turns out he doesn’t have enough potential customers to pay for the development of the product, the advertising, and so on.
But instead of recognizing this, in this situation come up with a crazy definition of who the market should be: It’s for everyone 18 and over and then we wonder why a product that was actually designed for a narrow target didn’t sell well.
5. The Unknown Buyer
This is where companies imagine a potential customer who is just about impossible to find. They’ll say their product is for people that are insecure about the way they take care of their house; they have three kids or more, and they have a need for status in the community. There’s no way to identify those people in the market, to buy media against them, to send direct mail to them, to know which types of stores they prefer. You’ll never know how to reach them with your communications effort.
4. Dartboard Product Design
There is almost never sufficient thought given to what the total package—packaging, size, quality—should look like, when it comes to new products.
Let’s say you are introducing a new paper towel. How many sheets should be in a roll? 500? 1,000? 2,000? How absorbent should you make it? (You can make it suck up water like a sponge if you want.) How do you price it? Do you package it in cellophane or something sexier or more upscale?
Let’s say there are four key components—price; packaging, size, and product characteristics—that could effect how well it sells. Each one of them had three or four options (500 sheets, 750, 1,000, 1500?). In terms of what the end product could look like, that is four to the fourth power. You have 256 possible variations to choose from. So there’s 256 different ways you could execute the product.
And the predominant technique used to choose among them is what we refer to as dartboard. People sit around a conference table with some pizza and soft drinks and say, well, let’s go with 500 sheets, super-high absorbency, and middle-of-the-road packaging. They make a judgment just about at random. What’s the probability they’ve chosen right? By definition, it is one out of 256. That’s very low.
Maybe you’ll give them some credit for their experience and say that their choices aren’t totally random. But even if you do, and say they have increased their odds to 1:128, the dartboard method is not the best way of introducing new products.
3. Wishful Thinking
This is a variation of what we just talked about. Here companies go about developing a product with absolutely no real clue about whether there is a market. During the Internet era, for example, every company said there are 105 million households in America, and if we can get just get them to try what we have, we’d have a business worth $3 billion.
This explains in part why new products fail. There is over-optimistic forecasting, the assumption is that a large percentage of your target market will buy.
A highly successful new product opportunity is revealed when half of your target market—and you have made that target market as precise as you can—says “I’ll try it.” Only half. And a really well executed product, one that delivers against the promise that attracted those people to try, is one that has 60% saying “I’d buy it again.”
Do the math! If you get 60% of half of your target market as customers, you’re down to 30% of the universe you are targeting—and that is a fantastic introduction.
The human tendency is to think that because what we have is such a good idea, the vast majority of people will buy our products. The vast majority of people don’t. The moral: You should be doing sales forecasts during every stage of the process of developing the product, instead of just hoping for the best.
2. Build It and They Will Come
Of course the model you should be following in developing a new product is to find a market—a product or service customers say they are willing to pay for—and then set out to develop it.
But the sad fact is this not what happens. The reality is that it is like that scene in A Field of Dreams where the Kevin Costner character stood in that field in Iowa and God whispered to him, “build it and they will come.” The belief is that if I build this product right, people will buy it.
That approach is pure marketing arrogance, because the notion that you can build something without talking to anybody—because you know your business best—is just misguided and invariably leads to new product failures.
Ted Levitt, the legendary Harvard Business School professor, said marketing is having what people want, and selling is getting rid of what you have. And selling is what we want to avoid. When you don’t have a market for your product, you are forced to sell.
New products aren’t bloodhounds that go find markets. They must be addressing an unmet need.
1. Ready, Fire, Aim
Tom Peters and Bob Waterman perpetrated one of the biggest crimes ever against corporate America when they told them do a little homework, get the product in the marketplace and make corrections based on market feedback, a concept they called ready, fire, aim.
There is a large body of literature that being a second mover can be even more powerful than a first mover. You don’t have to be first.
Speed to market is a killer concept in the negative sense. It kills new products.
You don’t want to make your mistakes in public. You want to minimize the amount of expenditures you make to learn. To launch a product before it is ready with a $40 million campaign is just idiocy.
The problem is it isn’t seen as idiocy. It’s seen as one of the costs of doing business. And that’s what’s sad. People who do this should not be seen as bold. They should be seen as bad marketers.
"New Products: The Next Big Marketing Revolution." Robert S. Shulman. New York: ANA, 2006.