Why new products fail
No product point-of-difference
For a new product to win initial trials and then ongoing repeat business, it needs to bring something new to the marketplace. Potential customers need an incentive – such as additional benefits or some form of variety – to be persuaded to try and buy a new product. Without any real point of difference, the new product is likely to fail.
Limited retailer support
Most retailers are pretty happy with their existing merchandising mix and also need to be persuaded that the new product has value for them and their customers. Many new products will fail because they do not obtain the necessary distribution and market coverage to be viable, due to lack of interest from most retailers.
Poor product design
Virtually all products that are put to development and launch sound good on paper. However, during the development phase when final design decisions are made at the product is actually developed and produced, this may not go exactly to plan. The end result is a poorly designed or poor quality product, which is unlikely to generate a large number of repeat sales.
Established customer loyalty in the market
The success of new products will rely upon existing consumers being willing to switch from their current purchases OR entering a market where there are a significant proportion of first-time customers without any established brand loyalty. In many cases, existing customer inertia – the unwillingness to switch brands – will limit the potential success of a new product. Clearly this phenomenon will vary by type of product – for example, many basic supermarket products are bought by consumers who follow simple habitual loyalty and are less likely to switch as a result.
Weak launch or poorly executed launch
Most new products require a reasonable degree of promotional support to build brand awareness and to access distribution channels and retailers. With a limited launch budget or a poorly executed launch, then the success of a new product is less likely.
Adverse media attention
Occasionally a new product may attract adverse media attention, usually related to deficiencies in the product design, price level, or early use problems experienced by consumers. If this occurs, in today’s Internet connected world it becomes difficult to achieve new product success.
Aggressive competitor actions
Virtually all new products are designed to take market share away from established competitors. Therefore, some form of competitor reaction should be expected. In some cases competitors will increase their level of promotion, reduced prices, leverage retail relationships to discourage their partners from supporting a new product from a competitor, or even launch a similar product themselves.
All of these initiatives are designed to protect their market share and try to have the new product to be as unsuccessful as possible.
Poor pricing or cost structure
New products may suffer from a poor pricing and cost structure. Sometimes companies will design products with many features in an attempt to bring something new to the market. As a result, these products are often more costly to produce, but the firm expects the marketplace to have a willingness to pay more for a better product. This may or may not be the case and this product strategy may be quite successful, or be perceived as poor value in the market.
In line with this concern, an expensive development process, along with an expensive launch, may necessitate the need to charge a higher price – which again may or may not be accepted by the marketplace.
Weak supporting brand equity
As we know, new products launched under a strong brand have a greater likelihood of success. This is because the brand has existing customer following and loyalty. These consumers are more likely to trial the new products produced by a brand that they trust and like. Obviously the reverse will apply – weak brands do not have the same degree of customer loyalty or brand awareness, and are therefore less likely to generate strong sales due to their brand support.
Small target market
In today’s marketing world, market segments are fragmenting and a number of companies now pursue niche markets. While niche markets provide a suitable and possibly attractive market if there is no or little competition, they have the danger of being relatively small. Clearly a small target market will generate less sales volume and is less financially viable as a consequence.
No clear market need or perceived product benefits
For new-to-the-world products, they have the extra concern of whether their benefits/features are actually meeting a market need. By their very nature, this classification of new products (brand-new inventions) are something new to the marketplace and provide a different solution to an established need and sometimes a solution to need it does not yet exist in the minds of the consumer.
Therefore, if the company misreads this situation, then their level of sales is likely to be disappointing. This is relatively common with backyard inventors who think that their new invention is the next big thing.
Poor internal marketing
Service companies in particular rely on internal staff – such as retail staff and call center staff and various other customer contact personnel. Usually they are the sales or fulfillment part of the overall launch and marketing process of the new product. Surprisingly, without an internal marketing program to convince the staff members of the benefits of the new product for their customers, many of them will be reluctant to sell, or help switch customers to, the new product.
Existing product cannibalization
A risk associated with a product line extension is that it may simply cannibalize an existing product. So in essence, while the new product may be successful, because it could take significant sales away from an established product the overall new product could be deemed a failure by management. This is because the company has invested time and money into bringing new product to market, yet no additional profitability has been delivered to the bottom line.
However, of course, there are companies who believe in the importance of cannibalizing their own products – primarily as a competitive defensive measure – an example here is 3M.
Weak sales for size of company
When we discuss a product failure, it needs to be considered in conjunction with the overall size of company. For example, take a large company like Coca-Cola. If they were to bring a new product to market, some sort of beverage, and that only generated $1 million per year profit (which is good money for the average company) a company the size of Coca-Cola would deem this new product a failure and would probably look to discontinue it.
Insufficient time for success
Because new product success relies upon consumers being willing to switch and trial new products and then become a repeat and loyal purchaser, there are several steps phases involved in the customer’s journey. This process obviously takes time. Some companies are willing to wait and invest in a new product, whereas others seek and expect almost instant success in the marketplace.