Why New Products Fail - Part 2

The story so far…(You can read Part 1 here)

75% - 90% of new products fail. It’s not just that they fall short of revenue and profit expectations; most don’t ever reach break-even or recover their development costs.

The Top Ten Reasons

In Part 1 we looked at five reasons why new products flounder. Inevitably, four of these reasons related to the customer – to customer values and needs, product benefits, targeting and positioning.

Here we’ll take a look at another five reasons. These are our choices based on recent experience in the B2B technology marketplace. B2C is a little different although it shares many of the same issues. We would welcome your ideas on other major reasons why products fail to gain sales and market traction. Do please leave a comment and let’s compile the definitive list of “what to avoid in technology NPD” together.

Let’s go!

6. Me too, less cost, so what?

In a nutshell, a common reason for product failure is the lack of competitive differentiation or advantage. Given competitiveness is the main issue here; it’s ironic that often the vendor will have developed the new product with their eye fixed firmly on their competitors. It’s the same old, same old story. The product specification has been enhanced regardless of what the customer wants. The vendor had believed that the addition of new “bells and whistles” made for a superior product. But the fact is, the bells and whistles offer little other than more engineering complexity and higher build costs. Then to cap it all, the vendor has lowered the price. The entire sales team had been telling product / marketing / management that they were losing deals as the product was priced too high. So finance approved a price cut in the expectation that sales volume and market share increased. But nothing happened. Nothing at all. Sales continued to plummet like a lead balloon. Profits came under pressure from higher build costs. The product is tired, vanilla and no different from anyone else’s. The vendor claims superior build quality, lower maintenance and decreased TCO. So what? Everyone is saying the same thing. Where there’s no compelling value proposition for customers and no reason for them to buy, they don’t.

So what’s the problem? There probably isn’t a single problem here; it’s more likely that there’s a whole constellation of issues some of which may be cultural. A standard marketing exhortation might be that the new product should be “differentiated, unique and deliver superior-to-competitor performance.” That still sounds a little too competitor focused to us. There are innovative, low-risk ways of growing demand while breaking away from the competition too. A lot of the cause may simply be about the failure of the business to build the “right stuff” into their new product development processes – that the product development process itself leads inevitably to the same weary old product that lacks a compelling value proposition or any real market differentiation. There might be pressure from the sales force or a pervasive aversion to the risk of doing something different where the “devil you know” is simply an over-abundance of yet more extensions, modifications and product tweaks. Often it’s a leadership issue, particularly a marketing leadership or marketing credibility issue that’s at the root cause of this problem. Whatever, it can be a difficult one to crack without a fresh perspective or outside help.

7. The market is too small

As an informed and intelligent observer pointed out on our last post: Estimating market size is very tough! It involves a whole host of assumptions and a significant dose of forecast risk. And, while it is possible to make reasonable estimates, it is the nature of entrepreneurs and innovators to be optimistic. After all, a positive outlook is essential to overcoming the obstacles inherent in creating and launching a new product.

Then there’s how to ride the hype cycle, where timing and process might be everything. The risks include adopting a new technology too early because the hopes and expectations (hype) are high, giving up too soon or else adopting too late since the business has been frightened off making the new technology investment when it hits the “trough of disillusionment.”

Even where we approach a new market innovation with healthy caution and scepticism, we can still get it badly wrong. Even when we test the product concept, assess purchase interest, clearly identify the target market and then apply rigorous, critical thinking and experienced judgment, the market may still be smaller than we believe.

We could probably write a book on this subject and many others have. The approach that we favour is well set out in Geoff Moore’s, slightly dated classic “Crossing the Chasm” and Fenn and Raskino’s work, “Mastering the Hype Cycle” mixed up with a heavy dose of pragmatism and a strong, differentiated benefits-led methodology.

It’s a very tricky problem, where part of the solution may be to acknowledge real mistakes when they arise and move on quickly to minimise financial risk, taking care to avoid the inevitable downside of hype that’s disillusionment.

8. The product is incomplete – too much customisation and ancillaries are required

Recognise this one? We most certainly do. Many is the time that we’ve sat opposite a business leader listening to the rhetoric about how what’s truly on offer is infinite flexibility combined with customisation to reflect each customer’s specific demands. The reality may be that there is no product at all; that the level of customisation or bespoke work is so great that it becomes a project not a product purchase with high risks of cost, misinterpretation of requirements, implementation failure and never being able to deliver against customer expectations.

We acknowledge that there is often a real need for ancillary and value added services in the implementation of a complex technology product; a package of product-related services designed to optimise product benefits and its productive use. That’s an entirely different matter - careful customer assessment is still required to ensure that these services adequately address their business and implementation needs.

9. Marketing issues

And there are so many! Usually they have the same root causes – Lack of coordinated, qualified marketing resource; lack of adequate and aligned strategic and tactical marketing processes; budgetary and cost constraints; underinvestment in marketing and sales; inadequate or inappropriate prioritisation of marketing activities and the sales / marketing disconnect. Those are our top six but the list is endless.

It would be wrong to blame the business, since frequently the base cause of the problem is the marketers themselves. There are no real guarantees in marketing, no scientific certainty and sometimes it may seem “hit and miss” but one thing is for sure: Without good marketing there are a whole lot more misses than hits - more failures than successes. Markets are not rational objects. They can be unpredictable, fast changing, even chaotic. In our view that’s a reason for more effective marketing rather than less marketing investment.

10. Product costs or total costs of ownership (TCO) are out of line with perceived customer benefits

This one can spell the death knell for many products. The business may think its product has a real “killer benefit” but if the customer doesn’t share that view the game may be over.

The business may be able to reduce the price and maintain an adequate level of profitability, re-position the product or uncover new or even proselytise existing benefits in a way that convinces the market they are significant. The best way to avoid this trap in the first place is to test whether marketing can construct a solid value proposition that the target markets and customers believe and accept.

That’s the end of our list for the moment. We’d love to hear what’s on yours.