April 20th, 2010

New Product Development’s Uphill Battle

By Neale Martin

The failure rate for new product introductions is a staggering 85%.  This massive percentage has prompted numerous expert theories that lay out convincing explanations for the errors that companies make routinely and repetitively.  Incidentally, these explanations are almost always based on the author’s particular discipline, and each is capable of assembling an impressive set of examples from his field to give the theories weight. But what if the problem behind the high rate of new product failure is not with a company’s new product development process, its research, or its design? What if the problem is with customers?

Bringing new products into the marketplace is like attacking a well-defended medieval castle. However, the massive fortress being attacked is not the dominant position of incumbents but instead the established habits of would-be customers. Thousands of new products drown in the moat of indifference that surrounds consumer behavior and countless more are thrown down from the high walls of unconscious repurchase. Only the few products that surmount these defenses actually battle with competitors’ brands for an opportunity to become the choice (and ultimately the habit) of the customer.

What if customers are hardwired to ignore new products? What if existing customer habits are the reason most products fail? The answer, of course, is the aforementioned 85% new product failure rate. It is my contention that a company’s need to consistently bring successful new products to the marketplace is actively sabotaged by the unconscious mind of the consumer

Habits are automatic behaviors activated by cues in a stable context independent of intentions and goals. This is counterintuitive; the idea that the bulk of our behavior is not connected to our conscious intent seems far outside of our perception of reality. And because habits operate outside our conscious reality, we continuously forget the unconscious side of consumer behavior when we begin thinking about new products. We are motivated by our own desires for profit and career advancement, and so we want to believe the customer wants us to come out with something new. However, for a new product to become successful, consumers must change their behavior, expending significant effort for an unknown benefit.

The reason behavior change is so difficult is because most of what we do is done without conscious intervention.  I call this “autopilot.” We develop our autopilot routines because they make our lives easier. The more complexity in our world, the more we need the shortcuts of our habits to get us through the day. Let’s look at what has to happen in a customer’s mind and environment before a new product can become part of a his or her habitual routine.

First, the product must be designed to address an existing need or create a new opportunity (that our customers will respond to). This is no easy task and success requires both excellent insight research and a terrific design team to translate those insights into a product or service. A lot can go wrong at the early stages where something gets left out or added as an afterthought that completely changes the potential and trajectory of a product.

Once a product is created, the customer must become aware that the product exists. Creating awareness is very difficult because customers are constantly inundated with ads (4,500 per person per day as of 2008). Our minds evolved to relegate irrelevant information to background noise and ignore it, so often ads for new products sit in the dead letter room of the customer’s mind. For a new product to garner sufficient attention to reach conscious awareness requires either millions in advertising dollars or very clever promotions.

But even if a new product is successful and creates awareness, the potential customer is more likely than not going to skip right past it in the store.  Why?  Because most consumer purchase behavior is performed on autopilot, and the conscious intention to try the product is not powerful enough to disrupt the customer’s shopping routine.

Worse yet, even if a customer actually tries a product, likes it, and plans on purchasing it again, they are still more likely to not buy the product again or buy the incumbent product because the cues inherent in the purchase context are initiating prior purchase behaviors contrary to their intention.

In my next entry, I’ll explore some recommendations for bringing new products into the world where we leverage our customers’ habits instead of fighting them.

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