For many years, 3M has achieved volume and profit growth well above industry norms with its thirty percent rule: Thirty percent of business unit revenue must come from products introduced in the last four years. Many firms have sought to emulate the 3M model of new-product driven growth. So, why do 75 percent of new products fail to meet $7.5 million in revenue during the first year of availability and less that one half of one percent ever meet a $100 million dollar threshold? Maybe it’s because too many of the new products looked like these:
Thirsty Dog! Flavored water for pampered pets. Were they snacks? Or were they replacements for the water in your pet’s bowls, thus fulfilling an unmet (and presumably unarticulated!) need?
Gerber Singles. Jarred food for single young adults. What exactly was creamed beef in a jar meant to replace in the adult consumers’ diet?!
Shimmer Floor Wax. The product’s tag line in this hilarious Saturday Night Live parody — it’s a floor wax and it’s a dessert topping for the greatest shine you’ve ever tasted — clearly shows confusion about the product’s true competitive frame!
As blogger John Gruber of Daring Fireball fame put it: “When has a new product been successful when no one knows or understands what they’re supposed to use it for?” He was referring to the demise of Google Wave, but he could have been talking about almost any product that fails.
Why does this happen? Usually it’s a combination of factors, all of which can easily be avoided. Following are a few key pitfalls:
The Best of Intentions. At the early ideation stages, the reason-for-being seems so clear. You have found a concept that consumers love because it fulfills their unmet needs. However, on the way to developing the concept into a new product, two fundamental questions were never asked: What current behaviors will my new product replace? Why will consumers switch to my new product?
One of the common threads through most new product failures is a lack of understanding of the product’s true competitive frame. In other words, when the product is introduced, what existing products will consumers stop using when they start to use your new product? Even for the most spectacular new brand launches — Swiffer and iPhone to name two — consumers were meeting their cleaning and personal communication needs with other products before the brands were introduced.
According to a recent survey, nearly one-third of consumers are going to the doctor less in order to save money. This could present a big opportunity for over-the-counter medicine manufacturers by developing self-treatment solutions. If you develop a concept for a new product positioned against the benefit of preventing a visit to the doctor, what is the precise behavior that your new product will replace?
Will consumers use your new product in place of existing over-the-counter medicines? Or will they now treat an ailment that otherwise might have gone untreated? Or will they use your new remedy in place of the medicine they anticipate the doctor would have prescribed? Knowing exactly which current behaviors the consumer will replace is a critical, fundamental element of success.
Hammers Seeking Nails. The product development team has invented a new technology that addresses an unmet need. But the proposition fails because it is not grounded in benefits the consumer wants or understands. For example, the introduction of calcium-enriched orange juice in the 1980s seemed to address a key barrier to broader orange juice consumption. However, consumers who sought the benefit of calcium in the morning were (and still are) accustomed to drinking milk while also drinking orange juice.
Even the benefits of superior calcium absorption from the type of calcium used in Fruit Cal, the new orange juice, were not enough to overcome consumers’ desire for “natural” calcium from milk. Calcium-enriched orange juice still exists today, but the segment’s volume is far smaller than once envisioned, as its primary competitive frame is other orange juices, not milk.
Fruit Cal is but one example of the legions of excellent technologies that have failed because the product’s consumer benefit and the competitive frame were not well understood. Febreze is an example of a product that had great technology behind it, but failed to find success until its most recent re-positioning of its odor removal technology as “a breath of fresh air” in a broad range of air-care products. The key point is to get the consumer promise and the product’s technical performance working together.
The “Sneak it Out” Syndrome. You have a great product. Consumer concept testing has told you the benefit is relevant and the reasons-to-believe resonate with consumers. And, of course, your product’s competitive frame is well defined. All of the elements of new product success are in place. The product then launches and the spending on advertising and consumer promotion is woefully low. Product awareness and trial are well-below forecasted levels and soon the product is viewed internally as a failure.
We’ve seen this syndrome happen far too many times. Recently, we witnessed a snack product launched in the US that had been very successful in another country. The product brought a differentiated taste experience to its category in a benefit area that is primary to the category. The concept was sound and the product delivered on the promise.
However, the manufacturer launched the product with few to no dollars in advertising and consumer promotion. Not surprisingly, the product did not meet expectations. The nadir was seeing this delicious, premium-positioned and priced product on an end-cap in a gas station convenience store in a “2-for-1” sale. It’s an obvious lesson, but one that needs to be reiterated: If you believe in the new product, you have to spend to tell consumers your product’s story.
Fire and Fall Back. Related to the “carefully sneak it out” problem is the “fire and fall back” issue. This happens when volume and share thresholds are not met in year one, so spending is reduced to fund the next big idea. Typically, new products continue to build trial in year two after launch. Failure to maintain adequate advertising in year two usually means you are inhibiting the product’s potential. When equity-building spending is prematurely reduced, the sales organization often has to prop up declining velocities to maintain the new product’s shelf presence.
This increases price-based promotional spending and serves to subsidize the product’s everyday price to drive volume. Now your new product, which was founded on the premise of bringing a relevant new benefit to the market, is often bought on price and the entire proposition is watered down.
Further, if you have multiple brands in the category, you are now likely cannibalizing sales from better-moving items within the portfolio. This “death spiral” effect stems from inadequately supporting the new product.
Marketing, Sales and Retailer Disconnect. One of the primary causes of new item failure is that the new products being introduced are “me too” line extensions that bring little to no incremental benefit (and volume) to the category.
Typically, the shelf space a retailer dedicates to a category does not increase when a manufacturer introduces a new product line, so space for the new product has to come at the expense of existing items. The retailer has to delete existing category items to find space for the new product line and looks to the manufacturer for recommendations of items to de-list.
It is critical that the manufacturer’s sales team has a clear understanding of the new product’s source of volume and a data-based rationale of the existing items that should be deleted. If this does not happen, the new items may be lower velocity than the items they replace and will actually result in a net volume loss for the manufacturer and lower category volume for the retailer.
To prevent this from happening, it is imperative that the sales organization is involved early in the new product planning process to help solve the tough questions about where the product will compete and from where it will source volume relative to the current portfolio.
Retailers have gotten much more sophisticated about discerning the level of new product support and the product’s incremental benefit to the category. Retailers are also beginning to realize the cost of consumer confusion from proliferation of new products on the shelf.
For example, the big drug chains carried an exhaustive array of over-the-counter medications and put every new product available on the shelf. Now they are realizing that shoppers don’t always value the extensive range of new products and vast category assortments lead to lower buyer conversion rates and higher shopper dissatisfaction.
Authorizing new items used to be viewed as a profit center for retailers, but now they are truly starting to understand the complexity new products can add — not only to the retail shelf but also to their inventory carrying cost and supply chain. Retailers now want a strong consumer-based rationale for any new product introduction.
To address these issues, the marketing launch team and the sales organization need to be aligned on objectives and the right tactics for the new product. In addition, the sales force needs to be armed with specifics in these areas:
• Where are the critical adjacencies for the new product and where should it be placed on the shelf?
• Which less-incremental brands and SKUs should be targeted as replacements for the new items?
• How incremental will the new products be?
Transform New Products
An understanding of the competitive frame will give the sales organization much higher odds for success with retailers and avoid a “one in one out” mentality for new item placement.
How can your new product avoid these pitfalls and become one of the success stories? Transforming the new product development process begins by developing strategically grounded new products. Initiate the process with an integrated view of the consumer landscape, which answers several key questions:
• How do consumers behave now and why?
• What benefits are consumers seeking when choosing among a competitive set of products at a given occasion? What attributes are critical to achieving the benefit?
• How satisfied are consumers with their current options?
• Where are consumers heading?
With the consumer landscape in place, you will now have a foundation to create a relevant new product. As your new product heads to the launch phase, follow these key steps to ensure success:
• Understand the competitive frame for your new product and precisely identify the sources of volume.
• Clearly articulate the consumer benefits in the product’s positioning.
• Determine the optimal spending levels on equity-building vehicles and commit to these spending levels in the first two years of launch.
• Ensure marketing and sales departments are well-aligned on objectives and key tactics.
• Identify the right items to replace on shelf (both yours and competitors).
Providing the sales organization with long-term spending plans for new products based on attainable retail distribution targets and sound retail pricing ensures that they are not the last line of defense to protect unsupported product innovation.
New products are the lifeblood of any successful organization. Strategically grounding your new product ideas in consumer behavior is the first step to ensuring success in this critical endeavor. And, developing a new product pipeline that has clearly defined revenue and profit hurdles with commitments to spending support for year one and beyond will ensure against low-value line extensions that rob organizational focus and resources. 
