The low success of new products in the marketplace has been attributed to many factors, yet key among them is the belief that companies do not adequately understand and address consumer wants and needs. Some have begun to blame this failure on outdated tools.
While we agree that many of the tools currently in place are outdated, the problem is more complex, involving not only tools, but the way we work and the way we think. In this article, we will explore three of the reasons that new product development is often unsuccessful:
- Business unit silos that prevent good business development
- Failure to understand that we are moving into a "relationship economy” and out of a "demand economy"
- Use of rote tools rather than critical thinking
Business unit silos prevent good business development
Consumer goods companies are generally divided into units that are responsible for different areas of a product’s development and therefore its success (the term product includes the primary package and the contents that are consumed).
Marketing, supported by Marketing Research, generally has the overall responsibility for conceiving (concept development) and marshaling a product from idea to market. As its research arm, Marketing Research has the responsibility of supporting Marketing in developing and testing concepts. In some organizations Marketing Research is also responsible for conducting consumer testing on products to determine whether they will meet project goals.
R&D is responsible for developing the product and may or may not have a consumer research group supporting it.
Most often, Marketing decides on a new concept and then turns the project over to R&D to develop the “right product.” Generally the concept, the messaging and the product are not developed cross-functionally, because different units are responsible for each. The assumption in this scenario is that Marketing, with the help of Marketing Research, adequately understands what consumers are looking for in products – from the specific product features through to the emotional valence (positive or negative emotions).
In fact, often they do not understand how consumers interact with product and the attributes that consumers want/don’t want. Thus, the most commonly practiced concept testing is not up to the task of defining winning product ideas.
The failure rate of products that make it to the market has been quoted to be as high as 80-plus percent to as low as 40 percent or less.
When consumers rate interest in a concept, they often do so based on the underlying benefit that the concept conveys, not the specific product attributes shown. Therefore, when products are developed to match concept attributes, those products often miss the mark, in that they do not deliver on the benefits promised.
Another fault of typical concept testing is that “close-in” concepts, which are familiar, typically score higher than those product ideas that are newer (less familiar, too unique). Therefore, concepts chosen for development are often less innovative and more typical of those already on the market.
After the concept has been chosen by Marketing it is often assumed that the R&D organization will know how to develop a product that will exactly match the concept and will be compelling to consumers. Because the product and concept are not developed together, and the organizations do not act as a fluid team (conducting work together), a frequent outcome is a product that either does not live up to the concept, or a concept that does not adequately describe the benefits/limitations of the product.
Packaging development is typically divorced from product development. While evaluation of the packaging “look” is often conducted by Marketing, the package form is often dictated by machinery capability or supply chain requirements (cost), and is rarely optimized for consumer satisfaction. Often, the “whole package” ends up disappointing the consumer because the packaging doesn’t support the product; e.g., packaging that doesn’t function properly (shreds when opened, juice boxes that squirt all over, blister packs that are impossible to open, etc.).
Most R&D or Marketing Research organizations do not have individuals who are competent in the discipline of consumer products research, a specialization in which practitioners are trained to help the organization understand the critical product attributes, link these to the overarching and compelling concept and then help in the development of the product or package to meet consumer expectations. Nor do Marketing Research and R&D work together to develop the right messaging about the product as it evolves through development. Instead they rely on the belief that if each individual organization does its job correctly, the end product will deliver.
Working together does not mean simply having an assigned team, where members of the team meet at intervals and communicate results. In that case, the work is still being conducted separately, and the members of the team are not conducting the work together – they are still working separately. Working in silos, instead of as a team, is not only inefficient, it leads to many of the market failures we see today.
Though the whole cross-functional “team” concept has been floated for more than 10 years, in practice, silos continue to be the norm. It is rare to find the company that implements a collaborative, iterative approach to get to “perfect.”
Failure to understand that we are moving out of a “demand economy” and into a "relationship economy"
All too often, companies rely on the mistaken idea that all they have to do is develop a product that appeals to a group of consumers, put that product on the market and success will be assured. While all companies mouth the importance of consumers, and the importance of customer service, few truly deliver.