Why New Products Fail - Part 1

The majority of new technology products fail.

The failure rate may vary by industry sector but generally it’s between 75% and 90%.

Here we take on the top reasons why new technology products fail to meet their revenue and profit expectations. Perhaps failure can be put down to bad luck and poor timing in some small part but mostly it has to do with strategic business and marketing planning, the price-value relationship, and execution in marketing, product development, launch and sales.

Top Ten Reasons

1. Target market is not defined correctly

“Selecting which customers and markets to serve is undoubtedly the first and most important decision a company has to take. This decision drives everything else a company does.” According to McKinsey, “choosing the right markets creates more value than having superior products or sales capabilities.”

In short, market place selection drives everything from product functions right through to sales promotions. Businesses need to target a set of customers so that they can decide what technology attributes to build in new product development. Until you know who your customers are and what they value most, you don’t know what you must build into your new product (and what you can afford to leave out).

2. Product is poorly positioned

This is very closely linked to our first point. Here the marketer needs to answer the question, “What makes our product better than the competitive options available in the mind of our customer?” Answering the question requires an in-depth understanding of the value proposition for the product, competitive solutions and most importantly, the customer’s perspective. It doesn’t matter if the product addresses a “significant competitive challenge”, what matters are what the customer sees, feels and believes.

The most serious failure in positioning is a misfit between the needs (that include wants, desires, interests and demands) of the target customer and the benefits conferred by the product. It’s not always black and white either. The customer may recognise the significance of the benefit but nevertheless consider it to be of less value to them. The root cause of poor positioning is usually an inadequate understanding of the target customers, their needs and values and their existing options to satisfy their demands. There is always competition and even where no directly comparable product exists there is an alternative to using your product.

If your product is not properly positioned, then not only will your marketing messages miss their mark, but more than likely the market and your competitors will position your product for you.

3. Product benefits are not understood (or valued) by the customer

The problem is obvious but how many times have you heard technology executives exclaim, “The customer just doesn’t get it!”

What this point says is that the marketer may not truly understand the values of the target customer or the relative importance of those benefits. It may be, for example, that your new technology product delivers substantial energy savings, savings so great that the product pays for itself in the first year. Nevertheless where energy cost benefits aren’t high on the customer agenda, they will fail to engage their interest. Before announcing benefits to the market, it may be a worthwhile exercise to work through, not just the benefits, but also the business case with a small sample of target customers to determine their ranking of priorities and what’s important to them.

It may be that they really don’t get it. If they’ve lived without the benefit of some revolutionary new product then it’s quite likely that they’ve found their own ways of working around whatever issue or problem you believe your product solves. Here benefits may matter less than outcomes. Benefits and results connect to rationality that is not usually a primary buying motivation. Outcomes focus not on product benefits but on the positive effects they might have on the buyer’s working life and what the product might mean to them.

4. Product doesn’t address important customer needs

Perhaps these first four points stem from a single problem: The root cause of many product failures comes from an inadequate understanding of target markets and customers.

Building market and customer understanding is not an add-on activity that happens after new product development. It precedes and guides product development to assure the relevance of the new product and drive maximum market take up. It’s not always possible to work this way round and we’ll take time out to discuss this issue in a moment.

Technology businesses always aim to create products that address customer needs but products can also miss the mark because they fail to consider a key customer operational need. For example, if you’re in IT then you’re bound to have heard of software that had been developed to run on certain platforms that proved incompatible with the standards deployed within target markets or hardware innovations where there were interoperability issues between incompatible platforms.

Intermission

Let’s cluster around the coffee machine and have a chat. Target markets and customers - their interests, values and their needs should be considered at the point of product conception before any development has taken place. But if you work in IT and telecoms as we do, it’s a very rare opportunity as new technology will usually have been developed elsewhere in the world and designed for sale globally. Very little changes and you still have to do the groundwork in targeting before product launch.

Different national markets support different levels of technology. They are at different levels of technology development and maturity. There are economic, local and cultural differences to be addressed too. The same work needs to be done. Paris, France is very different to Paris, Texas and the road to French markets is littered with the corpses of US companies who had believed that this local market operated in the same way as any other. It’s possible that local needs might require product adaptation too. That’s another good reason to do the work before launch rather than afterwards. It’s not just about targeting either; there are a whole host of factors that need to be addressed when moving across different national markets including pricing and channels.

Okay, that’s enough coffee…back to work!

5. Internal business functions are unaligned

Product development is necessarily a cross-functional activity. What we see continually, however, is wrangling about who should own the product development process. Should it be product management, R&D, engineering or marketing? The answer is that they all have some responsibility for some part of new product development (NPD) in different ways, in different degrees and at different times.

The final decision on what products are developed or not, lies with the senior management team or board since these decisions, more than anything else, affect the future success of the business. Good new product ideas can come from anywhere in an organisation and the healthiest corporations are those where anyone can put forward their ideas for product development and improvement.

Of late, we’ve noticed a dumbing down of marketing. No one other than marketers themselves is responsible. Marketing, we are told, “should get involved with product development early” so that they can make ready messaging, websites, launch and other sales collateral. That’s not marketing, that’s promotions or marketing communications, which is one small tactical aspect of marketing.

It’s the responsibility of marketers to provide the senior team with the information or evidence they need on which to base their product development decisions. Marketing needs to verify and validate the product market proposal to determine whether there is a real opportunity worth pursuing. It’s marketing that needs to establish the answers to critical questions about what, where, to whom, why, how, at what price and via what channels products can be sold, Marketing needs to take into account the competition, their likely responses to the development, product differentiation and product-to-market positioning. If marketers do not undertake these activities, who does? Our sense is that often no one does and decisions are based on the power of the personality and seniority of those putting the new development ideas forward. Or that it’s all patched together on the fly. Methodical in-depth market analysis may not be that exciting or charismatic but it’s the big stuff that informs business objectives and the art of the possible.

Marketing needs to be strategically and functionally aligned to the business objectives of an organisation. It also needs to be pro-active in opportunity development. Further it needs to work in concert across all commercial disciplines to gain their input to these key activities.

There needs to be clarity of what responsibilities fall where in the new product development process since any lack of alignment between business-critical functions will more than likely result in product failure.

In Part 2, we’ll look at more reasons why products fail to meet their product and revenue targets.