Understanding the High Failure Rate of New Product Launches and How to Overcome It
- Lean Transformation Consultancy
- Jan 11
- 5 min read
Launching a new product is a risky endeavor. Despite careful planning and research, many new products fail to meet expectations. According to a Nielsen report, over 85% of new consumer packaged goods do not succeed in the market. This high failure rate is a challenge that companies of all sizes face. Understanding why so many products fail and learning how to avoid common pitfalls can help businesses improve their chances of success.
Why New Products Fail
Many factors contribute to the failure of new products. Some of the most common reasons include:
Poor market research
Companies sometimes launch products without fully understanding customer needs or market demand. This leads to products that do not solve real problems or appeal to the target audience.
Weak product differentiation
If a product does not offer clear advantages over existing alternatives, customers have little reason to switch or try it.
Pricing issues
Setting the wrong price can deter buyers. A price that is too high may limit sales, while a price that is too low can hurt profitability.
Ineffective marketing and distribution
Even a great product needs strong marketing and easy availability. Without these, potential customers may never learn about the product or find it in stores.
Poor timing
Launching a product too early or too late can affect its success. Market trends, seasonality, and competitor actions all influence timing.
Product quality problems
If the product does not meet customer expectations for quality or performance, it will struggle to gain repeat buyers.
Challenges in Measuring Product Failure
Defining failure can be complex. For some companies, a product is deemed a failure if it fails to achieve sales targets, while others might assess failure based on profitability or market share. Furthermore, some products are discontinued before they even launch due to internal decisions, which differs from the issue of post-launch failure.
A product failure generally indicates that the product was introduced to the market but did not achieve sufficient sales or profit to offset expenses. This leads to financial losses and can harm the company's reputation.
Examples of Product Failures
Even major companies have faced product failures. For instance:
Google Glass
Despite high expectations, Google Glass failed to gain widespread adoption due to privacy concerns, high price, and unclear use cases.
New Coke
Coca-Cola’s attempt to change its classic formula in the 1980s met with strong consumer backlash, forcing the company to revert to the original recipe.
Amazon Fire Phone
Amazon’s smartphone struggled due to limited app availability and lack of differentiation from competitors.
In the March 2022, incidents of electric two-wheelers catching fire were reported in Pune, Vellore, Tiruchirappalli, and Chennai, resulting in loss of market share by the leaders.
These examples show that even well-resourced companies can misjudge market needs or execution.
How to Improve New Product Success Rates?
Creating new products is vital for any organization as it impacts the company's competitive advantage. The choices made in this process affect the product's quality, durability, reliability, costs, sales volume, and brand value, which in turn influence the company's overall brand reputation. However, numerous companies encounter difficulties in executing new product development efficiently. Products and services often fail to meet customer expectations, with cost overruns and delays being common issues. Late and costly engineering changes, particularly after a product launch, can ultimately cause its market failure.
Developing a new product is more complex than it appears; it focuses on acquiring practical knowledge. It requires deliberate creativity to enhance customer value while reducing production expenses. Increased value boosts market demand, and a lower cost structure enables companies to offer competitive prices, ensuring adequate revenue and profits. The process starts with essential questions: Who are the customers? What value should we provide? What price will make the product competitive? What is our target cost? What actions must each department take to achieve the goal? What new knowledge is being generated, and how can we apply it? What capabilities must be developed? What attractive features should the product include, and are they superior to those of competitors?
"An attractive, high-quality product paired with a challenging target cost encourages creativity and stimulates the development of new knowledge."
We live in a highly competitive world with constant technological disruptions and a shifting geopolitical landscape. This makes new product development crucial for businesses and nations alike. Timely and efficient product development is not just important; it’s essential for survival and growth. Yet, many companies rely on outdated, cumbersome, and ineffective processes, while others excel at reverse engineering. Organizations often juggle numerous projects, frequently shifting priorities, leading to delays. Products are rushed to market, with design changes made only after analyzing customer complaints and warranty issues. The same mistakes are repeated, and sometimes efforts are wasted rediscovering the wheel.
Enhancing the new product development process requires incorporating both explicit and implicit customer needs. Despite this, only a handful of companies employ "Quality Function Deployment" to effectively evaluate these needs, and the Kano Model is seldom used to pinpoint appealing quality features that distinguish products. These methods allow development teams to interact with target customers and tackle their actual challenges. The obstacles in product development are continually changing due to the globalization of markets and competition, the dispersion of engineering and design talent, the involvement of more organizational units in development efforts, and the transformation of work practices by advancements in information and communication technologies.
An integrated new product development process requires cross-functional teams. The marketing chain, product design and development, assembly and manufacturing, and the supply chain must collaborate to produce a successful product. As integration increases, so does the demand for information. New Product Development teams should collect data by gathering customer feedback, benchmarking product performance from the customer's perspective, performing technical comparisons with competitors, and obtaining inputs from sales, service, assembly, manufacturing, and the supply chain. The most significant influence on product design occurs in the early development stages, making it essential to front-load the process. Techniques such as capturing the voice of the customer, creating a House of Quality, and applying the Kano Model assist teams in developing products that delight customers. A successful product not only attracts customers but also garners attention from competitors, who may replicate its features. To maintain a competitive edge, competitive intelligence is crucial.
Top organizations are consistently under pressure to introduce new products and services to maintain a competitive edge. Conventional design methods often hastily choose one solution and refine it until it meets the goals. However, beginning with an incorrect solution can result in prolonged iterations and a suboptimal result. On the other hand, "set-based concurrent engineering" (SBCE) examines a broad array of potential solutions from the outset, progressively narrowing down the choices to arrive at the final design. By exploring a wide range of options early and discarding weaker ones, the likelihood of discovering the best or a better solution is increased.
In the SBCE process, developers utilize trade-off curves and design guidelines to establish feasible design sets. They investigate various alternatives and discard those that are inferior or impractical. Beginning with design targets, specifications and tolerances are allowed to emerge through analysis and testing. Final design decisions and specifications are delayed until the team has sufficient information to make informed choices. This method promotes substantial organizational learning, saving time and money compared to point-based engineering systems, which frequently result in false starts, rework, failed projects, and limited learning.
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