The average percentage of new product failures is quite staggering. Those percentages run as high as 97% of product ideas that never successfully enter the market! The biggest shortcoming in new product introductions is the people who developed the new product did not fully understand their target market, the problem they were trying to solve for their customers and what value they would deliver.
Fewer than 10% of all new products produce enough return on the company’s investment to survive past the third year. There are numerous reasons why this happens, but the fact is that it has an enormous impact on the company’s revenue, overhead and market position. According to Matthew Keegan of Demand Media: “Bringing a new product to market requires extensive research and preparation, but only one of four products in the development pipeline ever makes it to the consumers. Of these, one in three fails at launch.”
There are a lot of reasons why new product launches fail and from an article written by MPS called: Why do products fail? The writer states that: “Managers become too ego involved with pet products and overestimates their chance of success. Of the many factors that influence product success or failure, the most common one is competence, i.e., management’s failure to understand consumer needs and wants. Perhaps managers are not so much failing to understand consumer needs as failing to see just how many consumers have this need.” They go on to say “New products that do not fulfill consumer needs or wants will fail. Since product managers usually have profit and loss responsibility for new product introductions, they are ego involved. If the product is a pet project, they have even more ego involvement. In this way, the product is personalized. So managers are almost always too ego involved with their products, almost always overestimate demand and almost always have products fail more than succeed. About 85% of new consumer packaged goods fail.”
From the research I conducted, it’s not that organizations don’t conduct the right research before they develop a product, but it’s more about how that research is interpreted, especially if the development team feels like they know what the market needs better than the market itself. In a current LinkedIn Sales Enablement Leader Exchange Discussion Thread by Tamara Schenk about the inability to communicate value messages, my good friend Mike Kunkle had this to say about sometimes creating products before they were asked for: “Here’s the other side, though… to my knowledge, no one ever asked for an automobile, an intermittent windshield wiper blade, or an iPhone. There are times when insights and innovations do change the game and offer value propositions that customers might not be able to articulate on their own.” Mike is right, but it happens so rarely that we all know it when companies introduce products that were going to change the world, but didn’t, like Ford’s Edsel, New Coke and the Segway, to name a few.
Clearly, one of the reasons why new product launches fail is the lack of execution in the product launch. What I mean by that is that the product has been vetted, the need identified and proven, but when it is ready for launch, product development and sales are disconnected when it comes to establishing the value proposition for the customer. What often happens is that product development thinks that what the product does is so obvious that they don’t concentrate on developing the value message. They also don’t bring in those customers that they think will use it ahead of time and ask them if this is something that they would buy and if so, why. So, if your company is experiencing a high failure rate when it comes to new product launches, then what you want to do is make sure that before the product is created, you survey your sales people and customers to see if this is something they feel the market wants needs and will buy. Then, when it is developed and ready to launch, you spend more time on educating your sales people about the value it will provide their customers, so they clearly understand it and can explain it rather than what the product actually does. Customers buy outcomes, they don’t buy products. At least that’s the way I see it, what say you?