What are new products? Also discuss “new product failure” or why new products fail.

Identifying an opportunity in the market and realising that it can serve the buyers better than the already existing offerings in the market gives direction for new product development. For example, a need of having a device that can give access to the internet on a large screen which is not bulky and simple resulted in the emergence of iPads and Tablets. After identifying the needs and wants of the target customers, an organisation is better prepared to create a new product for the target market. It is the job of the marketers to study and collect as much information as possible and work closely with the research and development team to create a new product. If an organisation fails to tap the existing opportunity, competitors will take advantage and create that product.

New product development can be done by two ways. First, by producing the product within the organisation, and secondly, by outsourcing and signing contract with other independent firms to manufacture the product.

Products in which benefits are not perceived by target customers tend to fail in the market. Studies show that new products launched in market fail at an alarming rate. There could be several reasons for failure, like over estimation of market size, incorrect positioning, incorrect marketing mix strategy, incorrect estimate of production cost, better and low price offering by the competitor, etc. Most of the product ideas are variations in existing products. New products can mean original products, product improvements, product modifications and new brands that a firm develops through its own R & D team.
One CEO of a fortune 500 company said that organisations should strive to make their own products obsolete to ensure their new product is way ahead of rival organisations and meets the ever increasing expectations of the customers.

Booz, Allen, and Hamilton in New Product Management for the 1980s (1982, p.9.) conducted a major study of 700 companies and listed six categories in terms of their newness, both to the company and the customers in the market place. These categories are –

1) Addition to existing product lines – new products that supplement a company’s established product line (new flavours, change in package sizes, etc.).

2) Improvements/ Revisions to existing products – new products that provide improved performance or greater perceived value and replace existing products (a new model of a motor car).

3) New product lines – new products that allow a company to enter an established market for the first time.

4) Cost reductions – new products that provide similar performance at lower cost (a water purifier at a lower cost than the one already in the market from the organisation).

5) New-to-the-world products – new products that create an entirely new market (launch of iPads, DVDs)

6) Repositionings – existing products that are targeted to new markets or market segments (Audi launching its successful European automobile models in Indian markets
Replacing old products with new ones is essential for the growth of the organisation.
Product failure –

There are number of reasons that change consumer preferences. Lifestyle, age, and preferences seldom stay constant. Shorter product life cycles, increasing costs, government policies, threat from rival organisations, technological changes affect the success of a new product in the market. New products are considered the most risky of the decisions that a management takes. Some factors that pose major risk for new products success are –

1) High time span between research on new product and its introduction in the market. By the time it reaches the market, consumer preferences get changed and more advanced substitute product is already a hit in the market.

2) Research data from the market has flaws or is inadequate. Mostly psychographic variables in the market are most difficult to assess.

3) Product defects also result in negative perception of the product. For example, new software launch by Apple for its smartphones had issues and the company had to release updates to correct the same.

4) Different features of a new product appeal to different markets. The same product cannot be launched in a different market unless the preferences of the consumers are the same. For example, Fast food chains, like McDonald’s modify their offerings basis the cultural and other factors of the regions they operate in.

5) The new product is incorrectly positioned in the market.

6) Products also fail if the management fails to create a proper balance among the 4Ps of marketing. For example, keeping the price too high or too low has its own advantages and disadvantages.

7) Insufficient distribution channels to support the promotion activities.

8) New technology that reduces the total cost of production. If organisations don’t tap this opportunity, the competitor firm will.

9) Lack of coordination between different departments within the organisation. This hampers the flow of ideas and proper feedback received from the market. This eventually affects various marketing strategies – budgeting, failure to assess competition, increased costs, incorrect timing of introduction through proper distribution channels.

10) Products also fail if the new product doesn’t offers a unique advantage as compared to other brands.

11) Customers should be aware about the advantages of the new product. New products mostly fail if they are not supported by effective communication strategy.