Do Business Well

Twelve major reasons why new products fail
Hundreds of new products are launched on to the market every year. Why do some products fail completely, others limp along for a while before being discontinued, and a few become spectacular successes? Many factors can contribute to product failure:

Poor differentiation

A well-differentiated product is perceived by customers as having some desirable characteristic. A poorly differentiated product offers consumers no reason to stop buying what they usually buy.

Inadequate market research

Unless you understand the market for a particular product, for example, its size, growth rate, preferences, price sensitivity, and buying behaviour, it is almost impossible to predict what will happen to a new product after it is launched. It is also very difficult to design a rational marketing strategy without this information.

A poorly planned product launch

Poor planning can lead to a number of unhappy situations including inadequate publicity, distribution problems, underproduction and stock-outs, or cash flow crises. If the firm has limited resources, many of these situations could result in business failure.

A poorly timed product launch

Launching a new product out-of-season or in the middle of a competitor’s new advertising campaign is risky. Poor initial sales may make it impossible to continue supporting the product’s marketing and production costs.

Loss of objectivity by the owner or management Sometimes the owner or management of a company becomes obsessed with an idea and loses the objectivity required to make good decisions. Although enthusiasm is important, it is also important to take a cold, objective look at the product and the way in which it is being marketed. Over-enthusiasm can lead to the glossing-over of major problems, to the detriment of the business.

Lack of congruence between the product and the firm’s image, goals or resources

Sometimes the launch of an exciting new product can adversely affect the firm’s image or its ability to achieve its goals. For example, a company which sells expensive perfumes would be ill-advised to launch a popular aerosol deodorant; the firm’s image of quality and exclusivity may be damaged by its association witha cheap product.

Strong competitors

Even if a product has a differential advantage and is competently marketed, it could fail if powerful competitors react aggressively to its arrival by introducing, for example, price-cutting or heavy promotion. The key is to analyze competitors beforehand, and devise ways of preventing strong retaliation, or shielding a particular product from its effects.

Lack of a marketing orientation

Naturally, it is important to make a product as efficiently and as well as possible. However, a small firm which becomes obsessed with production may neglect fundamental marketing issues. It is crucial to understand your market and to give customers what they want — that is, to have a marketing rather than a production orientation. The production process is only important in so far as it satisfies customers‘ needs which have already been identified. A production orientated business could lead to technically excellent products which nobody wants.

Poor marketing strategy

Each of the four ‘P’s’ of the marketing mix — product, price, promotion and place — is a vital element in an effective marketing strategy. If any element is neglected or insufficiently implemented, the viability of the product will suffer. A strategy which is strong on three of the P’s (for example, a good product which is well promoted and efficiently distributed), may fail due to its weakness in the remaining one (for example, setting too high a price for the product).

Poor margins

In order to make a profit from a low-margin product, high sales volumes must be achieved. A product with a poor margin, therefore, is difficult to launch successfully as a significant volume has to be sold at a very early stage. Low margins also make the new product susceptible to price-cutting from competitors.

Short product life-cycles

Just as people’s lives go through the stages of birth, growth, maturity, decline and death, there is evidence that the sales of many products grow rapidly after the product is introduced, level out after a while, decline, and eventually stop altogether as the product is withdrawn from the market. This is the product’s life-cycle. Fads tend to have very short product life-cycles, while other products have product life-cycles of ten or more years.

The demand for some products is very short-lived. Launching a product which is nearing the end of its life-cycle will probably result in failure. Unfortunately, many of those products with short life- cycles are also those which show spectacular growth soon after their appearance on the market, which makes them appear very attractive to produce and sell.

Failure to test the product on the market

It is a good idea to test the product or a prototype on customers (by selling it through a few outlets), before moving into full-scale production and marketing. This will allow for teething problems to be sorted out before significant resources are committed to producing and selling the product.

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