Why 75% of new products are doomed to fail?

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Luck is often not on the side of the company that has decided to launch a new product or service. Studies show that between 65% and 75% of new proposals are far from successful. Crowdholding solves this by connecting the crowd with businesses in the initial stages of product research & development. 

Losses from such statistics are HUGE:. In the US alone in 2010, they amounted to $260 billion, according to Professor Rob Adams (Rob Adams) from the University of Texas. However, these figures should not scare you, when you know the four major pitfalls you can evade to avoid failure.

1. Shock therapy, which does not help too complex productс

If the product is too many "bells and whistles", it would seem quite complex. It is quite possible that customers will not want to use the new functions or to pay for them. It is worth remembering that the functional complexity increases the cost of goods, and the price, as a result, can rise up to heaven.

Recall Fire Phone smartphone that the company introduced the Amazon in 2014. As the largest online retailer, Amazon has increased their annual income to $100 billion over 20 years (which is 30% more than the figures of the world's largest retailer Walmart). Amazon successfully sells a bundle of products, such as the Amazon Kindle e-book reader, etc.

Only the Fire Phone was not included in their number. Assuming that this product has to compete with the most advanced offerings, developers have stuffed it with completely unnecessary features. One of them - "dynamic perspective": Pseudo-3D, allowing different content to be visible on the screen depending on the angle of view. However, this effect did not impress consumers as the associated increased battery consumption is clearly a disappointment. Another fly in the ointment is the very limited application ecosystem. If the Fire Phone offer was initially priced at $199 with a service contract or $649 without a contract, in October 2014 the price quickly dropped to 99 cents (!) For the version with the contract AT&T and $450 without a contract. But even this move did not save the smartphone complete fiasco.

A set of many other products also failed in the market. This occurs most often in cases where the development team pays attention only to their offspring and forgets about the clients. To avoid this error, you need to remember the careful segmentation of the customer base (and forget about the traditional demographic targeting).

Crowdholding connects the customers with businesses, allowing companies to pay attention to what version of the product can be offered to different groups of customers, whether each group is willing to pay for it and what are the expectations of consumers. 

2. Minimalism, which is not justified: low expectations

The second error is based on the fact that products are created by developers who do not understand how to value their proposals. When it turns out that the product has been underestimated, and customers are willing to pay for it more.

In 2003 the company presented a new Playmobil toy - a “Noah's Ark” (Noah's Ark play). The toy was sold out in two months. At that time it was possible to buy the game on Ebay for 33% more than the original price tag.

Another example of this error was the luxury SUV Audi Q7, launched in 2006 at the price of €55 000. The Audi was planning to sell 70,000 units, but in the first year, the demand was about 80 000. The demand curve clearly indicates that the vehicle must have been priced at €58 000, which would have brought in an additional income of €210 million.

In addition to the obvious signs like a deficit of goods, what are ways to learn that you have fallen into this trap? Think about it, if only one sales team could easily fulfill the plan for the implementation of a new product. You can experiment with the price and it is quite possible you will get additional income, which was hiding behind this error.

3. Hidden Treasures: products that can not be started

This is the case when products are inspired by the brilliant ideas which are of value to the target audience but are not recognized by senior management. This is often resulting from insufficient communication between the company and customers. Crowdholding does not allow companies to overlook products wanted by the crowd. By connecting the public with companies to co-create, businesses will no longer miss out on such opportunities. 

One of the most famous "treasures" concealed by Kodak. In the distant 1970s, a young engineer Steven Sasson (Steven Sasson) invented the original technology underlying the digital camera. However, Kodak «hatched" this discovery for 21 years, as a result, lost a significant market share. Meanwhile, today the digital camera is in every smartphone, and the company declared bankruptcy.

Hidden treasures are found in today's business almost as often as the first two errors. Top management is blocking them, because of being afraid to lose reputation or not understand the market potential.

There are several conditions that help to discover hidden treasures. This occurs most often during the changes and reorganization of the company. For example, when adjusting the business model, the transition from offline to online sales, from analog to digital products or from hardware to software. It is necessary to consider every opportunity which came to light during these changes. Otherwise, your "treasure" will be presented by competitors.

4. Walking Dead

In science fiction, those who have already died and then came back to life are called zombies. However, these creatures live in the world of business. Zombies - those products that "died" after entering the market or have been released already dead. This is a response to a question that no one asks or a wrong answer to the actual question.

Segway as a form of personal transport - one of the most famous zombie products. In the first year (2001) have been sold far less than the 50,000 units sold (this figure predicted by its inventor). Segway though is an attractive way to travel on the sidewalk, but its price is too high - from $ 3000 to $ 7000.

Google Glass is also an example of a zombie product. The headset is made in the form of conventional glasses, it was intended to be a smartphone in a new guise. The product appeared on the market in 2012, worth $1500 and answered a question, which none of the customers asked. In 2015, Google announced the end of sales of the gadget.

Sometimes companies and innovators are so focused on their designs that create a new reality, not taking into account the laws of the market. Zombie-products appear in cases where developers overestimate their attractiveness for customers and segment the customer base. If they take into account the opinion of customers and their (un) willingness to pay for the product at the beginning of the development process, it could be time to correct course, to change the price or even give up the idea before you invest a lot of time and resources into it. That is exactly what Crowdholding is doing by connecting the crowd and businesses at the initial stages of product research & development. 

How to avoid mistakes?

The most important aspect in the development of a new product is to discuss pricing policy involving target customers long before the moment when the team begins to prepare technical plans. These discussions must focus on the precise definition of the functions that customers really care about, and the price they are willing to pay.

Ironically, 80% of companies do not include such discussion in its business practices in the early stages of product development. It was found out during a survey conducted in 2014, involving 1,600 companies in more than 40 countries around the world. In fact, they are just developing a product, releasing it to the market, while the price is adhered to the end of the process, unaware if it is worth the effort and whether customers will pay. These companies are looking to monetize an idea without any real evidence that this is possible. This is the best recipe for failure, and this is the reason for the failure of two-thirds of new products. 

Have you got something to add to our story? We, at Crowdholding, are happy to hear your feedback. Learn about Crowdholding in 1 minute by watching our Youtube video



Crowdholding

Crowdholding connects the crowd with entrepreneurs, allowing you to give feedback and ideas for a future share.



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