Why are new products and services rejected?

We keep being told to innovate as that is the way to keep ahead of competitors and, indeed, for Australia to be successful in the World. It is the mantra for the 21st Century. However, customers and clients do not seem to always reward our efforts at providing new products and services for them, unless the innovation has reduced the price to them.

So, unseen innovation in methods of production and processes seems to pay off more reliably. Many products, like cars, and services, like air travel, that we buy and which have until recently fuelled Australia’s consumer spending are cheaper now in real terms than they were ten or more years ago, thanks to unseen innovation in production and systems management. This is the domain of operations and systems managers not marketing. Marketing people are expected to help come up with new products and services to help expand the customer base and drive up sales and revenues. How can they do this, and market research help them, without producing things that fail in the market?

The causes of failure
There are many, many reasons why something new might fail in the market. However, market researchers are often asked to only check out that the positive reasons for acceptance are present in the market and/or in a group of respondents. Marketing and other responsible managers in a business do not want to be told any negatives about their new product project. I know of a new version of a standard food product that was ‘tested’ on potential consumers by checking that they understood and liked all the positive factors or benefits. The product when launched promptly failed. Subsequent market research that was allowed to be a bit more inquisitive discovered that the food was actually more difficult to cook and many people did not cook it properly and so did not like it. You might say that the original testing was inadequate but it was the company managers’ mind-set that was inadequate.

It sounds negative but a list of all the reasons why something might fail needs to be generated and these need to be systematically and objectively checked out. That is one way to avoid nasty surprises.

What makes this hard is that the more radical, or new to the world, the new product or service is the more difficult it is to research potential consumers’ views and likely behaviour. AT& T commissioned the most prestigious management consultants in the world to do a study for them in 1984 to estimate the market for mobile phones – still very much a novelty – by the year 2000. They were subsequently told, after great expense, that the market would be less than a million worldwide! AT&T decided not to go into the mobile phone market because of this and so missed out on reaping Nokia’s success. 

Another problem is that in some categories, like food and drugs, it is hard to prove that something will do you good and much easier to find indications that it might do you harm. Where people are inherently suspicious of the ‘new’ any suggested negative information just confirms their natural inclination to initially reject supposed innovations. There is then a bandwagon effect where it is sometimes fashionable to oppose adoption as we see with GM foods.

Where we provide goods or services to other organisations a truism is that: it is great customers who commercialise innovations. There are books written that praise the fortitude of inventors and entrepreneurs but the unsung heroes of the commercialisation of new technologies and ideas are the first customers who had vision on how to harness them for profit. So, one of many  reasons why  innovations for companies fail is that no one sought out the right lead-user and helped them get enthused.

What to do about it
Apart from engaging insightful market researchers and giving them the remit to find the possible negatives as well as the positives,  helpful techniques have been advocated by Chakravorti[1]. His two insights are:

  1. Imagine that your new product has been accepted in the market and you have gained the level of sales or market share you wanted. Now ask: what conditions and factors would have to be present in the market for this to be the case?
    You then examine your present circumstances and work out: how can we put in place what is necessary to get those conditions. 
  2. Many new products and services rely on, or require, a network of   other ‘players’ in the market in order for it to be fully made available. This network, or sometimes supply chain, have to all switch to supplying or supporting your new thing. The problem is they each say to themselves: “Unless others switch to this new thing it is not worth us switching”, particularly if they have to buy new equipment, so nobody switches. Meanwhile potential customers or consumers tell market researchers that they like this new thing and want to buy it but can’t get hold of it.

So, you have to know the necessary supportive network and get them to switch to supporting your new product; this can be no easy task. Chakravorti says that markets are in equilibrium and actually have reasons for resisting change – most systems like stability.