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Consight Marketing Group

15 Reasons Why New Products Fail

It has been estimated by some industry studies that 70% to 80% of all new product introductions fail (withdrawn from the market or significantly below sales expectations). Although this number is debated (percentages could be as low as 40% to 60% depending on the industry), there can be no argument that there have been numerous product failures. The following describes mistakes made by companies which result in making many new products roadkill.

This following list can be used as a checklist in the N.P.D. (New Product Development) process prior to the product launch, to increase the probability of success.


1. The new product or service does not fit with the customers' perceptions of the core capabilities of the customer. The CEO of a manufacturer of stationary equipment and supplies made a commitment to sell a line of computers from another supplier. After spending million dollars over several years with poor sales results, the company finally pulled the plug due to a lack of sales. Customers had other credible sources to buy computers from.

A chemical manufacturer received a request from a customer to build a chemical plant. They wanted to explore whether it made sense to offer this service to other customers. Other customers said you have to be kidding -- no, they would rather purchase something this complicated from an engineering firm that has a track history of success.

When companies expand from their core products and services, they need to conduct some research with customers and potential customers.When you think of our firm, what do you normally think of? How well does this product or service fit with our core capabilities? Would you seriously consider buying from us? What concerns do you have? Who else would you normally consider?

The picture below is a bike marketed by Smith @ Wesson. When you think of Smith @ Wesson, what do you think of? Do you think of guns or do you think of bicycles? Clearly the brand has extended beyond normal customer perceptions.


2. Lack of basic market understanding. The company has not done any homework on what market segments to sell to, identify the unmet needs and pain points of these segments, determine the competition, and


define a good value proposition. Many times a new product is launched based on discussions with only a few customers, and the answer is wrongly extrapolated to the entire market. Companies believe "we are big/great, people will want our products". Frequent comments from entrepreneurs are "everyone will want one of these, and we only need 1% of that market to be successful."

3. The product is sold to a different buyer in the customer than the current product line. There was a very successful company selling datacom products and services to the IT Manager and CTO (Chief Technology Officer). Their R&D department had developed a unique product for the telecom industry, and wanted to sell it to their installed customer base. This product was purchased by the Telecom manager who did not have a relationship with the company, and had his own current list of approved/preferred vendors. The product soon tanked and was withdrawn from the market.


4. The product is too new to the market. The market does not yet know how to benefit from using the product. Apple introduced Newton as a personal device assistant. But, the market was new to using these devices, and applications were insufficient to bring true value to using the product. Who knows what success Apple would have had if they introduced the product 5 to 10 years later? In fairness, Apple has launched several new markets.

5. Lack of adequate promotion. Companies assume their product will be successful. When is the last time you purchased toothpaste at a grocery store? When you or someone else in your family go to buy toothpaste, there are 50 to 100 different brands, flavors and sizes. You buy what you are familiar with. You either have a brand preference or do not want to spend 5 to 15 minutes agonizing over what product to buy. It is not worth your time. If you are not aware of a product, the brand will not even be considered.


6. No rationale to buy or try the product over a competitor. The new product to the company is a "me-too" product on the market. Or, the company is not promoting the benefits of using the new product. If a company does not promote the benefits, why should the product be purchased? Some people call it a value proposition, others call it a USP (Unique Selling Proposition.) The company says, "People will buy it, it is new. They will trust us. Don't worry. Our salespeople will sell it."


7. Too much risk in trying a new product. There is also the issue of risk both to the company as well as to the individual who recommends a new product to the company. The product might fail and/or harm the company. The person might be criticized or fired. An example is a pharmaceutical company using a manufacturing line for pharmaceuticals, where they have to obtain FDA approval for each component used. If they specify another brand or type of component like a pump, it has to go through re-certification which is both costly, limits short term sales revenue, and possibly changes the quality of the chemical process. Why take the risk?

Another example of risk was a new product being shown to structural engineers to get specified on new commercial and industrial building projects. Growth was very slow, far slower than the company had expected. Research showed that the engineers wanted to see a field test consisting of a decade of freeze thaw cycles, to verify the product actually worked (talk about being risk averse). Companies need to prove both the company credibility (we will be around for the long haul -- we have the technical capabilities and willingness to support you) as well as lowering the perceived risk of using a new product. The product related risk can be mitigated by using independent lab testing, doing pilot tests with large well known highly visible companies, and seeing referrals from people they respect.


8. Pricing is not aligned with consumer expectations. Products launch at a significant price point over other the competition, and over what the consumer thinks is reasonable. Instead of designing a product for a specific price point, pricing is calculated after all the expensive features


have been included. There is not a big enough market for this high priced of a product.

9. The correct set of features are not included. The product lacks the necessary features that the customer segment viewed as critical. Or, engineers design products with minimal direction from marketing and sales, and load all the features they "think" the customers want. Products can be so complex that users have a difficult time using the equipment. They also repair the product more often and repairs are more difficult. Pictured below is a very complicated toaster which failed in the market.


10. Poor product quality. The bugs are not worked out, or the product actually breaks. The company races to get the product out so the earnings for the quarter will be significantly higher. The problem is that once there are significant quality issues, customers and prospects tend to walk away from the product and not make any repeat purchases. "I was burned once." The news is even worse for the company, because many of these unhappy customers will spread the bad news to others in the industry. They become brand assassins destroying the equity and image of your brand.

Think of the recent phones and tablets from a supplier that caught flames because of a defective battery. The customer did not blame the component supplier; they blamed the OEM. The product was finally withdrawn from the market.

11. Not understand the capabilities of the installer: When a product is incorrectly installed, the customer will blame both the contractor and the brand. An example is when single ply rubber roofing came out decades


ago, a company distributed their product to several contractors in a metropolitan area. The problem was that they never adequately trained roofing contractors on how to install the product correctly. This installation process was much different that installing built up roofing. Roofs started to leak, and building owners and tenants were loudly complaining. Sales dropped as articles appeared in several trade magazines criticizing the product.

The company was able to fix these problems at great expense. They then rescinded the contractor agreements and made them contingent on the installer going through an in-depth certification course. Each installer, not just the company, had to be certified.

Another roofing example. A manufacturer came out with a high-end line of architectural shingles for residential homes that had gradient color shading. The colors were absolutely gorgeous. The problem is that when the roofers installed these shingles, they had to spend 10% to 15% more installation time to ensure the shading looked right from the street level. The contractor had a lot of historical data on how much labor it took to shingle a certain size roof. If the contractor factored this in when bidding, they could lose the job since labor was about half of the installed cost. If they used these materials after they won the job, the company would have to pay the contractors more than budgeted which


would reduce the amount of profit made for the job. The company discontinued the product.

12. The product requires a significant change in consumer behavior to use. There was a tire company who launched a line of radial tires. They promoted longer wear and better gas mileage. The company assumed that the owner of the vehicle would check the tire pressure every week or every month. After all, "this is what the company's engineers did with their own car tires". The reality was that the vast majority of owners did not do this frequency of checking tire pressure, which resulted in tires being under inflated and separation of treads. Sales drastically declined even before a government ordered a massive recall.

13. The sales organization's needs are ignored. Most companies launch a new product or service and tell the sales force to concentrate on selling it ("make your quotas"). Compensation is used to emphasize selling a lot of these new products. A company may not spend enough time training the sales force on the features, uses and benefits of the new product. Or, the sales force may not be qualified to sell this product.


An example of an unqualified sales force was a client selling a line of electrical products to facility managers of commercial and industrial facilities. Management desired to have the sales reps offer consultative services (energy audits), since the margins were significantly higher than those of the commodity products being sold. The problem was that it was impossible to train enough commodity product sellers who is used to asking for an order, to become analytical consultants; the skill sets required are far too different. In this case, the client actually needed to utilize a separate sales force of energy consultants.

14. The compensation is not tied to the sales cycle. There was a lighting company who used manufacturer reps to call on specifiers (architects and electrical engineers). They came up with a new electronic product, and offered the reps 10% commission on each of these products sold. The problem was that there was an 18 to 24 month sales cycle between the specification being written and the commercial project being completed. The reps were motivated by personal income and decided it was a better investment of their time and ROI, to spend their selling time on products that had a much shorter sales cycle. This resulted in very few electronic products being sold.


The company finally adjusted their philosophy and began paying the reps based on the number of specifications written. Specifications increased greatly, and increases in sales eventually occurred. Without this change in compensation, the product would have died.

15. Distributor/wholesaler needs are not taken into account. Many distributors have tens of thousands of sku's (stock keeping units). The aim of the distributor is to service the account, deliver the product, and turn their inventory. They emphasize selling their primary product line, for example conduit in an electrical wholesaler. They ask, "do you need anything else?" but, they don't try to sell every product in their catalog. When a company has a new product that requires extra selling support, the product usually dies on the vine. A company needs to supplement this effort with their own technical sales force. A manufacturer of health respirators uses their own technical sales force to assess the needs of factory workers and recommend the right product for that application.

In order to maximize market share in a region, a company may choose to sell a technical product through multiple distributors. Distributors


quickly learn that it does not pay to educate and train a potential customer, as thye could shop for the best price and then purchase the product from another distributor. The distributor not only loses the sale, (which greatly upsets them), but spends time that is not compensated.

Summary. What ties the above together is a lack of customer input. A company decides to use a company-centric planning approach rather than using a customer-centric planning approach. Companies need to get critical insight from customers, potential customers, influencers, channels and all the stakeholders that purchase, specify, use or influence the product. This is basic, some would call Marketing 101. Some companies are reluctant to utilize the necessary insight in the new product development process as it is an extra cost, it slows down the process, or there is a mistaken belief that "we" know the market better


than anyone else. A rule in carpentry comes to mind, "measure twice, cut once."

We wish you much success in your new product and service initiatives.

If you would like to discuss assistance with launching new products or services, or any other marketing issues related to the business-to-business marketing, please contact the author at 847.800.1685 or email at: [email protected]. Please visit our website www.consightmarketinggroup.com for additional white papers and access to our blog.

Providing consulting and voice of the customer insight for companies serving b2b markets -- leading to more actionable strategies.

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