Each year, roughly 80 percent of new products entering the market fail. How can this number be so high? And what can you do to prevent failure?
At SMS Research Advisors, we work with multiple clients developing new products or services in a variety of industries. More often than not, our clients come to us and ask specific questions, such as:
- Who is my ideal audience and how do I connect with them?
- What features should I include?
- How much can I charge for this product?
- How many units will I sell?
- What is my projected profit?
These are all valuable questions, but we frequently find clients making assumptions that can cause their new product or service to flop, such as:
- The problem your product or service solves actually exists.
- The product or service solves that problem well.
- The product or service is compelling enough to drive customers to switch from their current brand or service provider.
By making these assumptions, there are three major traps a new product or service can fall into: demand failure, market failure, and product or service failure.
Demand failure occurs when potential buyers like the product or service, but already have an acceptable solution for their problem. They are also unwilling to take on the hassle of switching brands or providers.
We often see demand failure in markets where there is a high cost of switching brands or service providers. This can be for health care systems, banking/financial services, tech, or in markets that are highly saturated with acceptable competitors.
For example, a health care client wanted to establish a line of branded vitamins and supplements – a new market for them. To explore this opportunity, the client conducted research to determine if there would be sufficient demand for their product. The results from the research indicated that the brand would need to invest significant marketing resources to adequately differentiate from competitors and establish credibility to consumers.
Market failure occurs when the product or service aims to solve a problem that doesn’t exist.
A medical device company was looking to acquire a manufacturer of carts to transport sensitive instruments within a health care facility. The problem it was trying to solve was to conveniently maintain sterility and safety of the instruments. While the cart was seen as providing this solution, facilities did not view the transportation of these devices as a risk—the instruments remained sterile in pouches without a cart. The company moved forward and product sales were low. It invested heavily in marketing and promoting this unneeded product.
Product or service failure occurs when the new product or service does not solve the problem or causes additional problems. Typically, we see product failure result from poor design or manufacturing but can also happen when a company does not fully understand customer expectations. A product or service failure can cause customers to lose trust in your brand. Remember the Samsung Galaxy Note 7?
Market opportunity research is a methodology can help you ask the right questions to mitigate risk and identify potential failures before they happen. By examining the context surrounding the proposed product/service, we are able to more accurately predict market success.
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