Why Great New Products Fail

Abstract

A recent study of almost 9,000 new products that achieved broad distribution at a national retailer revealed that just 40% of them were still sold three years later. Companies generally focus primarily on creating value without enough regard to whether customers will recognize this value. For a customer, the perceived benefit of searching for a better solution may not be the same as the actual benefit, particularly in markets with little recent innovation. The most common cues people use to infer product quality are price and brand. In many circumstances, the more effectively customers can search, the less they will rely on the brand. Moreover, their perceptions of the brand will change quickly as new information comes in. Both factors diminish the importance of the brand. However, in markets where customers cannot search easily and effectively, they are forced to use the brand to make purchasing decisions. The role of the brand may vary across product features.