Are your new products failing and you don’t know why?
We conducted a survey of several Puget Sound companies asking them which area of their business caused them the greatest concern. The issue rated the highest was the failure to introduce successful new products. When asking these companies to explain why they see this issue as their greatest challenge, the responses were as diverse as the companies themselves. Most attributed a portion of the problem to the recession, yet many couldn’t help noticing that other companies in their industry were introducing new products with some degree of success. If a company is experiencing this issue, there are probably multiple reasons why.
Here are five common reasons why new products fail:
1. Lack of market knowledge- Whether a company is new or established in a market, a common mistake is underestimating the impact of market change. Markets change for a variety of reasons, and if a company does not stay connected with their market, they may begin operating under obsolete assumptions. This leads to poor performance and often enterprise failure. A few examples of market change are as follows:
- Lower customer demand- Customers are not interested in the product or service. Three levels of consumer demand are based on the customer’s needs, wants and desires. Depending on how the customer views the importance of the product will determine if they are going to change their buying pattern. Companies that do not know how their customers view the company’s product will probably not be conscious of the reasons for the customer demand drop-off.Recessionary times tend to impact those products that customers view as wants or desires. These are usually products that entertain or follow trends, and are purchased with discretionary income (electronics, trend clothing, high-end cars, etc.). Needs are those products that are more commodity items and are thought to be indispensible (food and personal items, telephone service, public transportation, etc.).
- A change in customer preference- Customers are migrating to other products. Customer buying decisions can change for several reasons. These reasons can be due to product differences, technology developments, advertising and brand influences, regulatory requirements, and perceived value increases. Knowledge of current and upcoming market changes is critical to any company’s ability to respond and sustain operations.
- A change in sales and distribution methods-Customers want to purchase their products in a different way. The Internet has changed the buying habits of much of the world’s economy. How has it impacted your products in your market? Brick-n-mortar stores are still strong points-of-sale for products if they provide a positive buying experience. Most business-to-business and retail organizations have added Internet stores to sell their products in addition to their brick-n-mortar stores. Wholesalers and distributors are expanding and contracting in many markets, depending on the product type. If the company’s strategy is not to have a large sales force to distribute your product, then the Internet, wholesalers and distributors may be helpful. However, the wholesale/distribution route may not be the best approach if your company wants strict control over the sales and service process, and a strong relationship with your end customers.It all comes down to how the customer wants to buy your product.
2. Lack of product differentiation-The customer cannot see the value of the product being introduced. This lack of differentiation can be between your competitor’s and/or your own product. If you’re releasing a new version of an existing product, how are the two products different? Why would a customer purchase a new version, if the older product still provides value? How different is your new product when compared to the competitor’s? Differences that are valued by the customer will influence their buying decision. Look at your product’s quality and performance from the customer’s perspective.
- Quality-How does the product hold up in comparison to previous products or the competition? Consider how durable, flexible and adaptable the product or service appears to your customer base.
- Performance- How does the product perform? Take into consideration speed, usability, features, functions and how well it does what it is supposed to do.
3. Lack of brand recognition-The customer does not identify the new product with your company or prior products. Companies that are not concerned about creating brand awareness are making a critical error. It is important to balance brand recognition with the cost of creating the brand. Brands evolve over time as the customer’s perceived value from the purchase of products or company services increases. The objective is to have customers identify the purchase of your product and/or company with their most positive buying experiences just by seeing the brand (name, logo, motto, song, etc.).
4. Lack of customer support-The customer cannot get the level of support they want. A company that is only focused on the sales side of their product or service may fail to build strong customer relationships resulting in a loss of customer loyalty. Without loyalty, there is nothing to keep the customer from switching to your competition without notice. A company that is focused on developing a long term sustainable operation knows that it is imperative to develop strong relationships with their customers. This is accomplished by offering effective sales and customer support. Except for on-line Internet sales, the front line customer care effort should come from the sales force, even after the sale is closed. Customer care organizations, departments and services can help satisfy the customers when there are issues that must be resolved, but the sales person who closed the sale should still be involved. We all know it costs more to get a new customer than it does to save one. New products that are launched without a customer support effort in place are destined for problems.
5. Lack of product development process- Many new products never get to market because the company does not have a product development process. Product development should be viewed as a process, and not an ad hoc event. The process starts with an idea. The more innovative the organization the more ideas. The idea gets tested as to viability in the market. Market viability means that the company knows their customers and their buying habits. The idea gets a development assessment. The company must then determine how practical it is to create the product out of the idea. The idea then gets a value test (i.e. what is the value to the company (revenues/profits, market share, etc.) and to the customer (performance, quality, price, availability, etc.). If the idea passes all tests and assessments, then a project is chartered, prioritized and funded. A company without a process for product development is taking a significant risk of having the new product effort terminated before reaching the market.