Product failure is when a new product is launched but fails to gain sufficient sales and market sales, resulting in a net loss for a firm.
To understand product failure, it is good to look at a few examples of product failure. (Top 20 product failure here)
Some of these examples, give very simple methods to avoid product failure.
Colgate frozen foods – Lesson: Don’t mix brands
Colgate is one of the strongest brands of toothpaste. The simple logo is indelibly associated with brushing your teeth.
Needless to say, when you see the Colgate brand above a frozen meal, it creates great confusion amongst consumers. You don’t want to eat toothpaste for dinner. But, that is the sub-conscious message that stands out from this packaged meal.
Windows Vista – Make sure product works.
Windows has frequently been criticised for being poor quality and having innumerable security flaws. But, Windows XP (the precursor to Vista) was relatively good and stable. Windows Vista was supposed to be an upgrade from XP, but many found the performance was very poor and frustrating. The simple problem with Vista was that it wasn’t good enough. It hadn’t been tested adequately by average consumers in the real world.
Virgin Cola / New Coke (Coca Cola) / Crystal Pepsi – Don’t reinvent the wheel.
- Virgin Cola was introduced to great fanfare as an alternative to the two main established brands. But, it never really succeeded and by 2012, the company who acquired the brand fell into administration and production stopped.
- New Coke. In 1985, Coca Cola were worried about losing out to Pepsi. They changed their formula and taste, stopping the old coca-cola drink. But, it was not popular with customers, who started to boycott the new Coca-Cola upset they couldn’t get the original.
- Crystal Pepsi. This was a new version of Pepsi, which was clear. However, the product didn’t do well. It was neither water nor Coke, and customers didn’t warm to the product. People expect cola to be a certain colour and radical change of a well established brand – rarely works.
General methods to avoid product failure
Testing on sample audience
If you are going to launch a new product, a company should try to test the product on a representative sample of potential customers. If the feedback is positive, the product has a good chance. If sample give negative feedback, it is possible for the company to respond to this or even pull the product.
- The difficulty with sending samples is that it may not represent the real world situation. For example, if customers were sent New Coke, they may give positive feedback. But, when the product is launched for sale this initial testing may have missed the frustration that the original is no longer available.
- In blind tastings Virgin cola and New Coke, may have done well compared to existing brands. But, the Coca-Cola market is not determined by blind tastings – but the strength of brand loyalty to existing labels.
- In testing a product like Windows Vista. It may be tested by software engineers who know how to deal with difficulties or it may be presented in such a way that the developers help promote more positive feedback.
- For companies who develop new products, there is a strong tendency to want to promote it in a good way. People who have developed a product will have a vested interest in seeing their creation do well. Therefore, in sending out samples, they may be able to present it in a more favourable light than in the market place.
- Misses groundswell of opinion. Sometimes, products can be damaged by an unexpected snowballing effect of public opinion. For example, in blind tastings, people may like a product, but once released people could start facebook pages taking the mickey out of Colgate frozen meals. This negative publicity snowballs and the product becomes a laughing stock.
- Unexpected changes in technology. Betamax was the first video recording device introduced in 1974. By some accounts it was better quality than VHS – their main competitor. However, by coming later, VHS was able to make longer devices – 2 hours then 4 hours. This made it much more attractive than Betamax tapes. The problem with Betamax was they failed to cater to film market. Mini Disc (MD) players were also released with the hope that they would bridge the gap between CDs and cassettes. In a way they were technically superior. But, just as the MD were released there was a growth in the sale of combined CD / cassette machines. It proved a technology that was technically good, but people didn’t want to actually buy.
Releasing in a small geographical market
To test the product properly, it could be released in a small geographical area. (a bit like the Poll Tax being tested on Scotland). If the product was successful in one US state, it could be released to the wider area and then other countries. This allows the product to be properly tested in field conditions.
- The first problem is that it would be difficult to limit supply to one state. It would be easier to limit supply to one country.
- However, just because a product does well in one country, doesn’t mean it can translate into other countries. A good example, is Euro Disney. Following the template of the very successful US Disneyland, Euro Disney was a comparative failure, with large losses and debts. Illustrating that the success of a product in one country, cannot easily be translated to other countries, with different cultures and expectations.
The biggest product flops have often been overhyped with companies spending more time on marketing than the product. Sometimes the best is to release products and if they generate a decent response, then promote marketing rather than the other way around. This means that companies wait for positive feedback before introducing big marketing schemes.
- It depends on the market. Some like clothes and fashion, marketing can be offputting to consumers. But, for other markets, heavy advertising is needed to break through the strong brand loyalty.
Learn from other companies products
Companies who come to dominate an industry are not necessarily the first, but early adopters who learnt from the mistakes of other companies. For example, Google wasn’t the first search engine. But, it learned from the mistakes and failures of existing companies (like Yahoo) to offer an improved product. VHS was the second video recorder, but it improved on Betamax.
- It is a difficult balancing act because if you leave it too late, the first companies may gain first mover advantage and you can never catch their market share. For example, Facebook was really the first social network of its kind and no-one has really been able to overturn their dominance.
- There have been many attempts to displace Google, e.g. Microsoft Live Search. But, Google is too well-established and other companies have missed the opportunity.