Why New Products Failand Succeed

New products are failing at a disturbing rate; by one estimate, 80 percent of recently launched products are no longer around.3 Given the high costs—a company can spend $20 million to $50 million to develop and advertise one new product—it is a wonder that companies continue to innovate at all. Yet product failures can serve one useful purpose: Inventors, entrepreneurs, and new-product team leaders can learn valuable lessons about what not to do.

Some of the reasons for new-product failure are: (1) a high-level executive pushes a favorite idea through in spite of negative market research findings; (2) the idea is good, but the market size is overestimated; (3) the product is not well designed;

(4) the product is incorrectly positioned, ineffectively advertised, or overpriced;

(5) development costs are higher than expected; or (6) competitors fight back harder than expected.

What can a company do to develop successful new products? Cooper and Kleinschmidt found that new products with a high product advantage succeed 98 percent of the time, compared to products with a moderate advantage (58 percent success) or minimal advantage (18 percent success).4 Madique and Zirger studied successful product launches in the electronics industry and found greater new-product success when the firm: has a better understanding of customer needs; a higher performance-to-cost ratio; a head-start in introducing the product before competitors; a higher expected contribution margin; a higher budget for promoting and launching the product; more use of cross-functional teamwork; and stronger top-management support.5

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