Why Great New Products Fail

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Even when companies are careful to listen to their customers, many great new products still fail. This is not a rare occurrence. A recent study of almost nine thousand new products that achieved broad distribution at a national retailer revealed that just 40 percent of them were still sold three years later.

Some of these products did not create value for customers and deserved to fail. However, many would have created value if customers had adopted them. But customers could not, or did not, recognize their value.

While most companies focus on customer needs, they do not think hard enough about how customers decide what to purchase. As the author explains, we now have ample insight into how customers evaluate new products. Yet companies generally focus primarily on creating value, without enough regard to whether customers will recognize this value.

To decide what to buy, customers need to know what products are available and how their features vary. Whether you are an airline choosing which aircraft to purchase, a college graduate choosing your first car, or a parent buying diapers for your infant, there are only two ways you can collect this information. You can search, or you can infer. The inference process uses the information you can search for to guess the information that you cannot search for.

Let’s start by discussing the search process. Later, we’ll examine the inference process.

The length and intensity of the search process is a function of:

  • Its cost
  • The importance of the decision
  • The customer’s expertise

For a customer, the perceived benefit of searching for a better solution may not be the same as the actual benefit, particularly in markets with little recent innovation. This poses a challenge for significant innovations in such markets; customers may not find these innovations because they do not know to look. For example, when British shower manufacturer Aqualisa Products Limited developed an innovative new shower system for the U.K. residential market, customers did not initially adopt the product because they were accustomed to the U.K.’s low water pressure, which this product addressed. Customers did not realize that a better shower system was possible and therefore saw no reason to look...

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