Existing products of a company are vulnerable to changing consumer needs and tastes, new technologies that enhance the quality, capability and flexibility of products, shortened product life cycles (market saturation happening very quickly) and increased domestic and global competition. Hence new product development is an imperative for organizations. But failure rate of new products is very high. The new product failure rate in packaged goods industry (mostly of line extensions) is estimated to be 80 percent. Clancy and Shulman estimate that similar failure rate occurs in financial services products also. Cooper and Kleinschmidt estimate that about 75% of new products fail at the launch stage itself.
Why do new products fail?
Product and Development related reasons
The product may not have been designed well.
The development cost may have exceeded estimates and the require priced realization may not be feasible in the market.
Marketing related reasons.
Market size may have been overestimated.
A high level executive must have pushed the idea even though market research has given negative findings.
The product may have been overpriced.
Not positioned properly.
Not advertised effectively.
Competitors fought back harder than expected.
What are the success factors in new product development and marketing?
Cooper and Kleinschmidt found that the number one success factor is a unique superior product.
The second factor is a well-defined product concept focused on a specific selected target market.
Madique and Zirger found eight factors.
1. Deeper understanding of the customer needs.
2. Higher performance to cost ratio
3. Early introduction of the product in relation to competitor (early mover advantage)
4. Higher expected contribution margin
5. Higher outlay on advertising.
6. Greater top management support
7. Greater cross-functional teamwork.
Role of marketing is very important to develop a deeper understanding of customer needs, tastes and wants at the point in time.