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Why New Products Fail?

• Depending on study, up to 80% of new products fail. Reasons can suggest ways of proving problems.

• Too small a target market – must be large enough to be profitable

• Poor product quality/performance – product has to work adequately, meet customer needs– Problem of tradeoffs. Company may

mismanage a tradeoff in benefits. MacLean Deluxe

• Insignificant point of difference – product is not a great improvement on competitive offerings

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Why New Products Fail? (cont’d)

• No protocol – clear statement of target market, its needs, what product would do

• Poor positioning – diet beer vs. light beer

• Inadequate budget – biggest reason small companies fail is inadequate capital

• Inadequate competitive analysis – reaction of current incumbents, products from new entrants

• Blinders (=“Vision”?)– company may have preconception that is never questioned. (Especially for high-tech)

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Why New Products Fail? (cont’d)

• No Access to Market – especially difficult for smaller companies in competitive industries.

• Bad timing – “Better never than late.” relative to competitors, First-movers may have advantage. Relative to customer trends, may not want to be early; too much education required.

• Poor execution of marketing mix – wrong price, wrong distribution, wrong ad campaign. “Bad advertising kills a good product”

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Taxonomy of Types of Innovation

Familiar with Product class Unfamiliar with product class

Known

Product Modifications

Examples:• Extra-strength pain killer•Unscented TIDE•Downsized

Market Modification

Examples:• “Personal copier”•Food processors for home use

Developing

Routine Innovations

Examples:•Digital audio tapes•Fuel injected engines•Product “Alpha”

Radical Innovation

Examples:•Genetically

engineered cancer “cures”•Integrated office systems•Product “Beta”

Market

Tech

nolo

gy

Note: Shaded cells indicate the domain of technological innovation

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A New Product Introduction Model (Robert Cooper)

The model is a series of moves and is set up as a stepwise process to move a new product from the idea stage to market launch

The seven stage game plan

Features of the model:• The game plan is incremental• The plan is designed to manage risk: each step is

progressively more expensive than the one that precedes it, but the various activities are deliberately designed to drive uncertainty down as one moves from left to right-through the model

• Each stage is separated from the one before it by an evaluation or a bail-out point.

Note: The strategy formulation is not presented here because it is “macro” in nature, dealing with the firm’s entire new product program.

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Success Factors

1. A unique superior product. “Superiority” should be defined from the customer’s viewpoint, not the eye of R&D or design departments. Superiority is derived from design, features, attributes, specification and even positioning.

2. A strong market orientation must prevail throughout the entire new product project.

3. Pre-development activities – the homework – are vital. These activities include: preliminary market and technical studies, market research, business analysis, etc.

4. Sharp and early product definition.Including target market definition, concept and benefits, positioning strategy, product failures, attributes (prioritized among “must have” and “would like to have”)This definition is developed with inputs and a signed agreement obtained from functional areas involved (Marketing, R&D, Manufacturing). The definition also serves as a communication tool to all functional areas.

5. Companies that follow a new product game plan incorporate discipline into a process that often is ad hoc and seriously deficient.

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The Seven-Stage Game Plan

Idea

Preliminary Assessment

Concept

Development

Testing

Trial

Launch

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Phases in the Life of a Product (Cont)

Evaluation of a development product should be based on three primary measures:

A. Resource Utilization (including materials, capital equipment, and people’s time.)

B. Design Quality (where the quality of design captures the extent to which it meets the needs of the target market, as well as its actual performance, aesthetics, and cost.

C. Development Cycle Time

Quality of design and the achievement of the best performance possible for each new product is particularly relevant for the high tech firm.