Launching a new product is a high risk investment and it is hard to pin down an accurate figure of how many newly launched products fail to succeed in terms of sales. Research states that around 75% of newly launched consumer packaged goods fail to earn even $7.5 million during their first year on sale.
Whatever the actual figure, there are a number of recurring reasons why new product launches fail in this competitive market. Here is a list of five reasons for failure so businesses know what to avoid in future.
1 – Not understanding the needs and wants of the target market
When inspiration strikes and there’s have a fantastic idea for a new product, companies are determined to get it to market and not let much stand in its way. However, it is important to remember to take a step back at a few key points within the business timeline and ask ‘is my product still satisfying the needs of those it is designed for?’.
Understanding the needs and wants of the target market is crucial. Without this, there wouldn’t be a market for the product. A lack of independent and unbiased research could be the difference between a success and failure of a product launch.
2 – Targeting the wrong market
Companies should be wary of the market they are entering and determine if it is already saturated with similar products or has strong existing market leaders. It is important to make sure that the product offers something valuable but also unique to consumers. Businesses want to be able to provide a solution to a problem they hadn’t really thought of before. This allows the company to really differentiate itself from competitors and stand out.
Take Zune for example. In 2006, Microsoft launched their music service Zune in direct competition with Apple’s iPlayer with high hopes in their product. However according to MarketWatch after 2 years on sale, Zune still only had under 5% of the market share within the sector.
Although they received positive reviews for their product, Zune’s success fell short in comparison to Apple’s. This was because Zune did not offer anything new or different to make the consumer want to consider the switch. Hence, the company was just not able to crack the market.
3 – The product falls short of claims
Bad design, poor user experience and insufficient quality control are some reasons why consumers may be disappointed when a business launches its product. Making significant claims about what is being offered and failing to live up to consumers’ expectations during launch can result in bad reviews. This leads to many other potential customers losing interest which can then affect the business overall.
Consider Nintendo: Although the company is hugely successful, it did have its slip ups in new product launches. In 1995, the company launched it’s ‘Virtual Boy’ product, a virtual reality headset game device that flopped due to low resolution images and gameplay that didn’t suit the device. According to Digital Spy the company had forecast over 3 million sales of the console but only managed to sell 350,000 units. Nintendo was not able to deliver on their promises which negatively impacted its sales.
4 – The company can’t support fast growth
Predicting how fast a product is going to take off (if at all) is difficult for every company. So it is easy to be unprepared if businesses receive an influx of unexpected orders. That is why it is important to have a backup plan in place for such an event. This ensures that the company has the capability to manufacture and deliver goods to a high standard on time. One thing customers don’t like is ordering a new product but then being told there’s a delay.
Failure to deliver on orders can cause businesses to lose sales, lose customers and gain negative publicity. Not something that companies want from a product launch.
5 – The product defines a new category but customers don’t understand it
In the FMCG sector, new product categories are constantly being identified as new trends emerge and consumer behaviour changes. So when trying to launch an innovative product to a new target audience that has been identified, it is important to inform them of the needs they have for the new product. If customers do not understand why they need the product, then they most certainly will not buy it.
For example, Coca Cola launched C2 in 2004 which was a new low calorie version of the original Coke. This product was aimed at a potential new market of men between 20 and 40 years old who didn’t like the feminine image of the existing Diet Coke. Unfortunately, C2 just did not resonate with customers and hence failed to sell.
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