Why Product Fail

7/25/2019 Why Product Fail

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WHY PRODUCT FAIL?

SUBJECT

PRODUCT MANAGEMENT

INTRODUCTION

Once a company has carefully segmented the market, chosen its target customers,identifying their needs and determined its market positioning, it is better able to developnew products. Marketer play a key role in the new product process , by identifying andevaluating new product ideas and working with R & D and others in every stage ofdevelopment.

New product development shapes the companys future. New product launch is a very

comple!, time consuming and is financially a big issue for any company. "here ise!pectation from every new product launched to have high sales, to have good margins,to capture market share and thus become market leader. "hese are the e!pectationshowever the real picture may be not so good or as e!pected. Many a time the productsintroduce are flops and thus results in loss. "his loss may be in terms of monetary as lotof money is involved in launching a new product. #t also results in loss in terms of image.

Only $% of new products survive for more than one year. '( % failure rate does littleto promote the current efficiency of company marketing. "he reasons some business failto innovate is not that they shy away from ideas) it is that they engage in hopelesslyromantic one*at great cost in men + women and money. n idea must meet rigorous tests

of practicality if it is to be capable of making a business successful in the future.ource- Dr. eter Drucker, /arvard 0usiness Review, 1''2.

product can fail on any of the stages of roduct 3ife 4ycle #. e. #ntroduction atage,5rowth tage, Maturity tage, Decline tage. "he understanding of a products life cycle,can help a company to understand and reali6e when it is to introduce and withdraw aproduct from a market, its position in the market is compared to competitors, and theproducts success or failure.


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roduct failures can serve one useful purpose- #nvestors, entrepreneurs and new productteam leaders can learn valuable lessons about what not to do.

The Four Stage o! the Pro"u#t L$!e C%#&e


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'() I*tro"u#t$o* Stage

7 "he initial stage of a products life cycle8its first appearance in themarketplace8when sales start at 6ero and profits are negative

7 9hy new products fail+ La#, o! reour#e- ,*o.&e"ge- a*" /ar,et$*g ,$&& to

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'2) Gro.th Stage

7 "he stage of a products life cycle when sales rise rapidly and profits reacha peak and then start to decline

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'5) Matur$t% Stage

7 "he stage of a products life cycle when the sales curve peaks and starts todecline and profits continue to fall

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7 trategic ob:ectives for maturity stage+ Ge*erate #ah !&o.

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'8) De#&$*e Stage

7 "he stage of a products life cycle when sales fall rapidly

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Wh% So/e Pro"u#t Fa$& a*" Other Su##ee"

; Reasons for roduct


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WHY PRODUCTS FAIL?

#t could be any reason for the product failure. #t is not one particular reason) it could be acombination of both reasons. #t is up to company and for the product managers to find outthe e!act reason for the failure. "here can be several reasons for a product failure like-*

1. MAR9ET RESEARCH:7Market research needs a lot of investment and effortstherefore sometimes companies skip this part or do little research and launch theproduct. /ere, the mistake has been done. 9ithout a proper research, the launchof a product could not be successful.

E;AMPLE: 7Real =alue 4ompany is a successful name in fire e!tinguishersmarket. "he company launched a new product 7 =acuum proof bo!es thinking that itwould be success but it was not going to happen because #ndian consumers neverwanted this. "his all was done due to lack of market research.

(. WRONG POSITIONING:* ositioning is a critical aspect of a product andwhen it is done properly, it becomes a disaster. roduct positioning strategies aredeveloped to hit the brain of a consumer towards an idea but when this idea cannot be digested by the consumer, it becomes indigestible which ultimately lead

to failure.

E;AMPLE: 7Maruti =ersa is an e!cellent e!ample for wrong positioning. t thetime of its launch, it was promoted as a comfortable personal car. mitabh 0achhanand bhishek 0achhan told us about the benefit of "win .4. and the comforts ofthe seats but #ndian consumers were not able to understand it as a personal car andthey were confused that is why now company is promoting a family car.


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>. WRONG PRICING STRATEGY-*rice is the main factor for the success offailure of any product in the #ndian market. #ndian market is very price sensitivethat is why this factor remains in the top of the mind of the marketers. "he ideaof the marketer will fail if the consumer is not able to buy it.

E;AMPLE: 7/ero /onda ?ari6ma is a good e!ample of over pricing. @arlier itwas priced more than Rs. $A,AAA thats why sales were not picking up and it wasassumed as a failure in the market. /ero /onda reali6ed the mistake and reduced theprice by 1A,AAA directly. #t is a big amount for a Mobike to reduce.

2. I*u!!$#$e*t Pro/ot$o*: 7 romotion is one of the main components for aproduct success. Bntil and unless people will not know about it or they are notable to connect it then also product could be a failure.

E;AMPLE:


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E;AMPLE: 7?elloggs 4ornflakes. 9hen the concept of cornflakes wasintroduced by this company, it didnt like by the many people because we #ndianswere not used to have cornflakes at the time of breakfast. "hats why ?elloggs4ornflakes failed initially.

"he introduction of a new product or service remains stressful for anyone involved in theprocess. @verything needs to be well orchestrated and coordinated. 1,$ECproducts introduced in (AA( representing a cumulative investment of F(>> billion. Gustover half of these products failed before they were two years old. ll other things beingeHual, this implies overF1AA billion per year spent on new products that fail. roducts thatachieve both commercial and economic success are rare. "he development of newroduct is labour intensive and is a highly studied and comple! activity in the corporateworld. 3aunching a new product means coordinating marketing, sales, manufacturing,organi6ational design, consumer research and human resources, among other functions. #t

is also preparing for t he worst Icontingency planningJ in case something goes wrongIproduct recall, production interruption, product transportation and delivery failures etc.J"he ability to target the right customers the right way is a challenge and the comple!nature of the process is one of the reasons why so many companies lose touch with thereality of what consumers want and misspend huge sums of money on products that fail.@conomically, two necessary conditions must be met for a new product to succeed. "hefirst is that the product must deliver a better value*to*price ratio to targeted consumersthan the competition. "his can be achieved either by providing more benefits for a givenprice than the competition or by providing the same benefits as the competition at a lowerprice. "he second condition reHuires that the company deliver the product at a cost thatwill provide a positive return on the capital invested. "o achieve this, cost advantagesmust be achieved in one or several areas of the business such as manufacturing,marketing or sales. Despite the large number of talented and Hualified scientists,engineers, marketers that most organi6ations employ, many of the products beingdesigned and introduced do not have the value or are not perceived by customers the waythe company had anticipated they would be. "hey therefore fall short of delivering theanticipated profits. o why, with all of this effort and know*how do so many newproducts failK 4ould it be because companies tend to overestimate their commercialsuccess Isales and market shareJ and underestimate the underlying economic cost Iwillthe product actually earn any profit above the cost of capitalKJ.

#n most cases product failures happen because of one or more of the following reasons-

(


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potential must therefore be accurate to make the company generate enough economicreturn Ireturn in e!cess of cost of capitalJ. @ven if a product or service is welldesigned and meets the needs of its target customers, if the segment itself is too smalland does not have enough customers, failure is around the corner.

2< Poor I"e*t$!$#at$o* o! Nee" a*" Wea, Pro"u#t Po$t$o*$*g

New products can also fail simply because companies misunderstand or ignore customerneeds, attitudes and behaviors. ome might argue that the products were right and that thetarget market was wrong or improperly identified- misconception or misunderstandingcustomer needs, attitudes or behaviors is fairly common and leads to weak product andservice positioning. 9hat is the reasonK Organi6ations are sometimes reluctant to take thenecessary steps, to find out what their customers need and behaviors are Iit is after allmoney spent up*frontJ."hey place insufficient emphasis on understanding customerdemographics, sychographics and their implications. #n other words companies have

insufficient knowledge of who their potential clients are, what makes them what they are,what their customers think and how they behave. 9hat is not invested upfront couldcome back and cost valuable dollars later.

5< Co/0et$*g =a&ue7to7Pr$#e Rat$o

common mistake Ibesides failing to communicate with customers through advertising,R, promotion, etc.J, occurs when companies introduce a new product that does not offera better value*to*price ratio compared to the competition. 4onsumers are usually guidedby the notion that what they are acHuiring or paying for is worth something and haveattached a sub:ective value*to*price ratio to it. 0oth the perceived value and the benefits

are compared to similar items available on the market. t that point products+services areranked in the consumers mind in order of preference. @!treme ratios are eliminated Ihighprice*low perceived value ratiosJ and a pool of most favored items gets selected andanaly6ed. 3ater, a final purchase decision is made. 4ompanies need to be very aware ofthis phenomenon because too often consumer attitude is confused with consumerbehavior. 4onsumer attitude towards product is essentially driven by its features whereasconsumer purchase behavior is driven by value*to*price ratio or LLwhat do # get for mymoney. consumers positive attitude towards a product or service may result inpositive word of mouth but not necessarily in sales. poorly crafted pricing strategy canin turn deliver disappointing results.

8< E#o*o/$# Cot

"he last reason new products fail is that companys underestimate the new productdevelopment and launching costs involved. successful new product must deliver abetter value*to*price ratio to the customer and must do so profitably. =alue*based pricingmust be introduced and managed because the value that is created dictates consumerprices. #n the early 1''As 5eneral Motors introduced the aturn car line and ignored this


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principle. #t is a classic e!ample of accompany that delivered value for its consumers butnot for its shareholders.

Co//o* Reao* !or Pro"u#t Fa$&ure

#n addition to a faulty concept or product design, some of the most common reasons forproduct failures typically fall into one or more of these categories-

/igh level e!ecutive push of an idea that does not fit the targeted market.

Overestimated market si6e.

#ncorrectly positioned product.

#neffective promotion, including packaging message, which may have used

misleading or confusing marketing message about the product, its features, or itsuse.

Not understanding the target market segment and the branding process that would

provide the most value for that segment.

#ncorrectly priced8too high and too low.

@!cessive research and+or product development costs.

Bnderestimating or not correctly understanding competitive activity or retaliatory

response.

oor timing of distribution.

Misleading market research that did not accurately reflect the actual consumers

behavior for the targeted segment.

4onducted marketing research and ignored those findings.

?ey channel partners were not involved, informed, or both.

3ower than anticipated margins.


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Reao* Wh% a Great Pro"u#t Lau*#h Ca* Fa$& a*" Ho. To A1o$" It

#ts reported that EA% of all new product launches fail in the first year. "he Huestion is,why do some succeed when others failK /aving seen both sides of the product launchpicture, here are a few pitfalls to watch out for-

(< The /ar,et "oe *ot >*ee" %our o!!er$*g%.


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Co*u/er 3u% 0ro"u#t the%1e &ear*e" to trut< Your

trut $ .hat the reta$&er are a!ter< But- o/et$/e !or

1ar$ou reao*- 0ro"u#t ut "o*t .or,< A*" o/e o!

the/ e*" u0 $* the !a$&e" 0ro"u#t /ueu/. Factor three:advertising. s if the consumer wasnt confused enough, ?elloggscomplicated matters further with the advertising campaign for 4ereal Mates. "he"= ads featured young kids helping themselves to the product, while their parentslay snoring contentedly in bed. /owever, the packaging of the product was farfrom child*friendly, and if they left their kids to help themselves, the parentswould have probably been crying Ior at least getting crossJ over spilt milk.

2. Factor four:the taste. @ven when picked up from a refrigerator, the product wasoften consumed at work or away from home. #n other words, when the milk waswarm and tasted terrible.

C. Factor five: the price. Retailing at way over a dollar, 4ereal Mates wasconsidered too e!pensive by many consumers.

"hese factors, working in con:unction, caused the 4ereal Mates brand to fail. nd so,after two years on the shelves Ior in refrigeratorsJ, ?elloggs pulled the plug on theproduct. /owever, there may be one more reason why 4ereal Mates failed to spark arevolution in breakfast habits. s a convenience food, it simply wasnt convenientenough.


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simplest breakfast. 5etting out the door is eHually challenging for the 2 percent offamilies in which both parents work. More mericans than ever simply skip breakfast,according to new data from ND 5roup, an eating*habits researcher. Leople wish theycould :ust get breakfast in:ected into them on the run, says 5erald 4elente, editor of the"rends Gournal, a marketing*industry newsletter.

4ereal Mates may have enabled people to take their cereal with them, but they still had topour the milk over it, and spend valuable time eating the cereal with a small spoon. s?eith Naughton concluded in the article above, 0reakfast Mates Lfailed to catch onbecause it was impossible to eat while driving.

#ndeed, where ?elloggs has had success in the convenience food market it is withbreakfast bars such as Nutri*grain. Bnlike 4ereal Mates, these bars can be consumed inseconds, and on the move. Moreover, they dont involve warm milk.

Leo* !ro/ 9e&&ogg6 Cerea& Mate

4onsumers dont like warm milk on their cereal.

Dont mi! your messages. On the one hand, 4ereal Mates was an Leat anywhere

product. On the other, ?elloggs was implying it needed to be stored in arefrigerator.

ell the brand in the right place. 4ereal Mates was, essentially, a cereal rather than

a milk product. 4onsumers would have therefore e!pected to see it on the shelvesne!t to the other cereal products.

0e the best in at least one thing. s a cereal product 4ereal Mates failed because

there were tastier and eHually healthy alternatives. s a convenience product itfailed because breakfast bars proved to be a faster, more fle!ible option.

Dont price too high. 4onsumers did not e!pect to pay as much as they did for a

four ounce bo! of cereal.

/indus, vegetarians sue McDonaldSs over frying process claim by McDonaldSs that its famous


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class*action suit filed yesterday in ?ing 4ounty uperior 4ourt contends McDonaldSsintentionally failed to publicly disclose its continued use of beef tallow in the IfrenchfryJ cooking process under the guise of Snatural flavor.S

"his is pretty outrageous behavior, said attorney /arish 0harti, who filed the suit.

/indus and vegetarians all over the world feel shocked and betrayed by McDonaldSsdeception and ultimate greed.

/indus regard the cow as a sacred animal, and as a general rule do not eat beef.

Officials at McDonaldSs headHuarters in Oak ark, #ll., could not be reached for commentyesterday.

"here are three named plaintiffs in the suit- two /indus who live in 3ynnwood andeattle, respectively) and a non*/indu vegetarian from eattle. 0harti said he wants theclass to include the estimated 1 million /indus and 1C million vegetarians who live in the

Bnited tates.

0harti is relying in part on a recent e*mail from a McDonaldSs official to a concerned/indu man that appears to confirm that beef e!tract is in the fries.


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restaurant, and some radical /indu groups called for the fast*food chain to leave thecountry.

McDonaldSs said almost immediately that it didnSt use beef or pork products in its


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brands in this segment. ll ma:or brands have a naturals e!tension some of them havefailed miserably.

=icco had huge potential because of its e!cellent Huality, brand recall and moreimportantly the ingredient "urmeric. #t should have owned "urmeric factor. Now we

see lot of local manufacturers selling turmeric powder to women to be used as a cosmetic."hat was a market that =icco should have concentrated. with a new fragrance and shape, ithas not e!cited the market so far. "he new positioning is Margo skin clear skin. "hebrand had a following in , "amilnadu and 9est 0engal Iam not sure about its presentstatusJ. "he single mistake the brand made was to miss the new generation. #t failed toattract the young users.

9ith 3ifebouy herbal variant and other established brands taking in the neem content


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away from Margo, this brand needs a hell lot of money to re:uvenate itself. May be a highdecibel big celebrity endorsement may help this brand Itry ishwarya for a changeJ. 4anit change its avatar and fight lifebuoy in the health platformK

"his is a brand that failed to change with the customer or changed very late.

CONCLUSION

4ompanies that fail to develop new products are putting themselves at great risk."heir e!isting products are vulnerable to changing customer needs and tastes, new

technologies, shortened product life cycles and increased domestic and foreigncompetition. t the same time, new product development is risky. New productscontinue to fail at a disturbing rate and the reasons may vary.

4ompanies need to give more time on the new product development so that they donot have to face failure and then they try to correct their mistakes. "here are onlyfew things which need to consider before the launch of any product. Research anddevelopment, innovative ideas, new technology, better marketing strategy, properdistribution channels and respect towards the need of the consumer can make aproduct successful./ere, the need is to make product successful at the very first go rather to try out

another time. "his helps the company to save money, gaining trust among theemployees and consumers and last of all, increase the confidence to launch morenew products which will serve the customer better.


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REFERENCES

www.marketingprofs.com+ea+HstTHuestion.aspKHst#DU$'(2 * 22k

blog.e!periencecurve.com+archives+ killing*your*brand*is*difficult*

e!pensive*and*a*pr*nightmare*so*murder*it * >Ck

ries.typepad.com+riesTblog+ * $E

www.6illions.org+


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Why Product Fail

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