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Why New Products Fail
By Jim Doucette and Paul Thompson, Managing Directors

jim-doucette-3

Bio photo: Paul ThompsonWhy do 75% of new products fail to meet $7.5 million in revenue during the first year of availability and less that one half of 1% never meet a $100 million dollar threshold?

One of the common threads through most new product failures is the lack of understanding of the true competitive frame of the product. The competitive frame defines where new items will source their volume relative to the other products in the marketplace and how incremental they will be, based on the associated benefits. Said another way: When the product is introduced, what existing products will consumers stop using when they start to use your new product?  Even for the most spectacular new brand launches, consumers were meeting their needs with other products before the new brands were introduced.

At the early ideation stages, the reason-for-being often seems so clear. You have found a concept that consumers love because it fulfills their unmet needs. But on the way to developing the concept into a new product, two fundamental questions were never asked:  

  • What current behaviors will my new product replace?
  • Why will consumers switch to my new product?

According to a recent survey, nearly one-third of consumers are going to the doctor less in order to save money. This could present a big opportunity for over-the-counter medicine manufacturers to develop self-treatment solutions. If you develop a concept for a new product positioned against the benefit of preventing a visit to the doctor, what is the precise behavior that your new product will replace? Will consumers use your new product in place of existing OTC medicines?  Or will they now treat an ailment that otherwise might have gone untreated? Will they use your new remedy in place of the medicine they anticipate the doctor would have prescribed?

Knowing exactly what current behaviors the consumer will replace is a critical, fundamental element of success.

 

The Hammer Looking for the Nail

Let's suppose that the product development team invents a new technology that addresses an unmet need. But the proposition fails because it is not grounded in benefits the consumer wants or understands. For example, the introduction of calcium-enriched orange juice in the 1980s seemed to address a key barrier to broader orange juice consumption. However, consumers who sought the benefit of calcium in the morning were (and still are) accustomed to drinking milk while also drinking orange juice. Even the benefits of superior calcium absorption from the type of calcium used in the new orange juice (Fruit Cal) were not enough to overcome consumers' desire for "natural" calcium from milk. Calcium-enriched orange juice still exists today, but the segment's volume is far smaller than once envisioned, as its primary competitive frame is other orange juices, not milk.

Fruit Cal is but one example of the legions of excellent technologies that have failed because the product's consumer benefit and the competitive frame were not well understood. Febreze is an example of a product that had great technology behind it, but failed to find success until its most recent re-positioning of its odor removal technology as "a breath of fresh air" in a broad range of air care products. The key point is to get the consumer promise and the product's technical performance working together.  Just having great technology is almost never enough.

 

Carefully Sneak it Out

Say you have a great product. Consumer concept testing has told you the benefit is relevant and the reasons-to-believe resonate with consumers. And, of course, your product's competitive frame is well-defined.  All of the elements of new product success are in-place.

Then the product launches and the spending on advertising and equity-building consumer promotion is woefully low. Product awareness and trial are well below forecasted levels and soon the product is viewed internally as a failure.

We've seen this syndrome happen far too many times. We recently witnessed a snack product launched in the U.S. that had been very successful in another country. The product brought a differentiated taste experience to its category in a benefit area that is primary to the category.  The concept was sound and the product delivered on the promise. The manufacturer launched the product with virtually little to no dollars in advertising and consumer promotion. Not surprisingly, the product did not meet expectations. The nadir for us was seeing this delicious, premium-positioned and priced product on an end cap in a gas station convenience store in a "2-for-1" sale.

Here is an obvious lesson that needs to be reiterated: If you believe in the new product, you have to spend to tell consumers your product's story.

Related to the "carefully sneak it out" problem is the "fire and fall back" issue. This happens when volume and share thresholds are not met in year one, so spending is reduced to fund the next big idea. Typically, new products continue to build trial in year two after launch. Failure to maintain adequate advertising in year two usually means you are inhibiting the product's potential. When equity-building spending is prematurely reduced, the Sales organization often has to prop up declining velocities to maintain the new product's shelf presence. This increases price-based promotional spending and serves to subsidize the product's every day price in order to drive volume.

Now your new product, which was founded on the premise of bringing a relevant new benefit to the market, is often bought on price and the entire proposition is watered down. Further, if you have multiple brands in the category, you are now likely cannibalizing sales from better moving items within the portfolio. This "death spiral" effect stems from inadequately supporting the new product.

 

Marketing and Sales Not on Same Page

Too often, the Marketing launch team and the Sales organization are not aligned on objectives and the right tactics for the new product. Clearly identifying where new products will compete and how they will source volume is a valuable part of the new product sell-in and must be communicated to the Sales force. In addition, the Sales force needs to be armed with specifics in these areas:

  • Where to place the products on the shelf for critical adjacencies
  • Which less-incremental brands and SKUs should be targeted as replacements for new items
  • How incremental the new products will be to category

The competitive frame understanding will give Sales much higher odds for success with retailers and avoid a "one-in-one-out" mentality for new item placement. Providing Sales with long-term spending plans for new products based on attainable retail distribution targets and sound retail pricing ensures that they are not the last line of defense to protect unsupported product innovation.

 

Right Path Forward

New products are the keys to success for many organizations and the focus of much of the effort within company. For example, 3M has achieved volume and profit growth well above industry norms for many years by having the 30% Rule which states that business unit revenue must come from products introduced in the last four years. Many firms have sought to emulate the 3M model of new product-driven growth.

But other firms have taken a different approach – with far different results. One result  is flavored water for pampered pets called Thirsty Cat! and Thirsty Dog! Were they snacks?  Were they replacements for the water in your pet's bowls, thus fulfilling an unmet (and presumably unarticulated!) need?

Another poorly-conceived product is Gerber Singles, a jarred food for single young adults. What exactly was Creamed Beef in a jar meant to replace in the adult consumers' diet?

How can your new product avoid becoming one of these examples? Why do some new products succeed?

Transforming the new product development process begins by developing strategically grounded new products. Initiate the process with an integrated view of the consumer landscape which answers several key questions:

  • How do consumers behave now and why?
  • What benefits are consumers seeking when choosing among a competitive set of products at a given occasion?
  • What attributes are critical to achieving the benefit?
  • How satisfied are consumers with their current options?
  • Where are consumers heading?

With the consumer landscape in place, you will now have the foundation to create a relevant new product.  As your new product heads to the launch phase, follow these key steps to ensure success:

  • Understand the competitive frame for your new product and precisely identify the sources of volume
  • Clearly articulate the consumer benefits in the product's positioning
  • Determine the optimal spending levels on equity-building vehicles and commit to these spending levels in the first two years of launch
  • Ensure Marketing and Sales are well-aligned on objectives and key tacticsIdentify the right items to replace on shelf (both yours and competitors)

New products are the lifeblood of any successful organization. Strategically grounding your new product ideas in consumer behavior is the right first step to ensuring success in this critical endeavor. Finally, developing a new product pipeline that has clearly defined revenue and profit hurdles with commitments to spending support for Year One and beyond will ensure against low value line extensions that rob organizational focus and resources. 

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