New products are vital for companies’ growth. Increased competition from other companies, changing consumer behaviour, advancements in technology, ensuring the freshness of product offerings, diversifying risk, etc., are some of the reasons new products need to be launched.  In environments where market dynamics are rapidly changing, a company is considered healthy and growing only if at least 25%-30% of its overall sales are generated by new products.(1) This is expected to be significantly higher for companies that deal with lifestyle or technology products. So, firms put a lot of effort into understanding the market and continuously develop new products. However, according to research by Clayton Christensen, Harvard Business School Professor and renowned author, more than 30,000 new products are introduced into the market every year, and 95% of them fail.(2)  <figure class="image"><img style="aspect-ratio:4000/3086;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//image_1778066681.png" width="4000" height="3086"></figure>What is often not realised is that the success of any new product depends not only on its ideation and development stages, but also on how it is launched in the market. Even a revolutionary product can fail. 75% of consumer-packaged goods and retail products fail to reach the minimum sales expectations after the <a target="_blank" rel="noopener noreferrer" href="https://www.vectorconsulting.in/en/research-and-publication/counterpoint/podcasts/how-to-ensure-a-successful-product-launch/">launch</a>. And products that start strong may also struggle to sustain success.  This article examines the challenges companies face while launching a new product and the tactics needed to ensure that company’s new products have the best chance of succeeding and sustaining in the market.    <h2>New Product Launch: The challenges</h2>While there could be numerous reasons for products to fail (e.g., legal issues, socio-cultural mismatch, products falling short of claims, etc.), the major cause of failure for otherwise acceptable new products tends to be associated with scaling up or rolling out.  So, if we did a post-mortem of a typical failed product, you are likely to see the following issues:<ol><li>Lack of visibility on the shelves at retail counters: The newly launched product is not getting the right placements (both in terms of quantity and outlet type), or even after securing the required placements, it is not achieving the desired visibility. (Note: Products are usually launched with considerable fanfare, accompanied by ATL/BTL activities to support them. But even if these succeed in catching the customer’s attention, in most cases, these customers will not go beyond their regular, known outlets to try to buy this product.)</li><li>Customers could not get the product in many places: Even though the product could be placed in relevant retail outlets and made visible, it became unavailable very soon, and the vast majority of customers never got the chance to even see it (let alone buy it).</li><li>Delay in addressing market feedback: There were pockets of customers providing feedback on the new product/processes that, if addressed, could have prevented the product’s demise. However, the company could not act on this in time.</li><li>Customers lacked sufficient product information: Customers did not get a chance to understand how to use the product (a new product category) or its latest features. This led to a loss of consumer interest.   </li></ol>These indicate that if you don’t scale your supply chain quickly, become available consistently, course-correct where needed, and grab customer loyalty, your product is toast. Further, your competition may launch its own version and walk away with the market. But how can we ensure that these issues don’t happen during/after launch? To identify a solution, we must first understand the nature of New Product Launches (NPLs) in greater detail.  <h2>The real issue</h2>The most important characteristic of NPLs is that the consumer’s response to the new product is uncertain. Even though the product may have undergone market research, reality is the only true test of consumers’ willingness to adopt a new product, and there is no trend data available to predict potential sales. <figure class="image"><img style="aspect-ratio:4000/2760;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//image_1778066722.png" width="4000" height="2760"></figure>Because of this, companies are in a perpetual dilemma when it comes to launching a new product: ‘Do they take a cautious approach and launch the product in a select few territories, or do they adopt the big bang strategy and launch it across all their points of sale (POSs)?’. Both have pros and cons. A smaller launch allows companies to test the trend in demand. Moreover, incorporating any changes to the product or processes without affecting the brand’s reputation is easier if the initial launch is limited. However, a big bang launch means companies can enjoy the first-mover advantage in all geographies and increase sales opportunities before the competition gets a hint.  However, very often, this choice is taken out of the hands of companies. Delays in <a target="_blank" rel="noopener noreferrer" href="https://www.vectorconsulting.in/en/solution-frameworks/research-and-development/">New Product Development</a> and the threat of missing the appropriate launch window (such as the start of a season or a festival) put pressure to launch the product when it is ready across as many territories as possible. The risks of this are easily imaginable, though. The larger the scale of the launch, the greater the uncertainty about demand. The sales team also has to be proportionately larger to accommodate this scale of launch. With very little time to provide proper training to the sales team, the product’s USP is not effectively communicated to potential consumers. Moreover, there is very little focus on responding to consumer feedback. And, in this rush, the supply chain has also not been equipped to respond to demand fluctuations. This increases the possibility of product shortages in some areas where it is selling well (even though it is available in excess in other parts of the supply chain). Patchy availability of the products eventually puts off consumers. This leads to poor product adoption and the company discards the product as unpopular.  Product failures create a vicious loop for companies, as products fail more often than not, there is greater pressure to develop new products to ensure the company’s growth! So, finding a way to address these challenges and improve the typical hit ratio of product launches is imperative. <figure class="image"><img style="aspect-ratio:3982/3385;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//image_1778066754.png" width="3982" height="3385"></figure><h2>Direction of solution</h2>Reducing the extent of demand uncertainty during an NPL will help improve its effectiveness. The best way to reduce uncertainty and have better control over the supply chain/sales team readiness is to launch new products in a phased manner, i.e., stagger the roll-out across territories/POS.  <h5>Ensuring the effectiveness of NPLs</h5>Staggering the rollout across territories/POS helps companies take the required steps to ensure the effectiveness of NPLs: <ol style="list-style-type:decimal;"><li>Reduces demand uncertainty by testing the product: For this, the territories and POS should be selected in such a manner that there is adequate representation; this will allow the company to check whether the product is working in those areas before a full roll-out. Care also has to be taken to ensure that the product is displayed well (by defining the percentage of capital and space for the new product) and that it is continuously available at the POS.</li><li>Align the supply chain in line with expected demand: This is because when the roll-out is phased out:<ol style="list-style-type:lower-latin;"><li>Manufacturing capacity can be ramped up slowly and aligned with demand.</li><li>The distribution channel can ensure adequate stocks for display and repeat sales, particularly in areas with higher sales volumes.</li><li>There is now the possibility to ensure buffer capacity to manage any sudden spike in demand.</li></ol></li><li>Provide adequate training: With this approach challenges and overheads related to training will also come down. A relatively smaller sales team to be trained before launch can enhance the quality of the training, leading to improved adherence to your sales strategy and communication guidelines.</li><li>Capacity to analyse and respond to the feedback: In a staggered roll-out, the system has enough capacity to focus on and respond to the feedback provided by the early consumers for both the product and the marketing collaterals. This can help limit exposure to the product’s issues to a small set of customers, thereby preventing a negative perception of the new product among a wider audience. One will also have the agility to resolve these issues promptly, resulting in higher customer satisfaction with the new product. Collecting and responding to information on marketing collateral can help align marketing spends with market requirements. </li></ol> <h2>Next steps</h2>The lessons learned from one roll-out can be applied to the next. And the sales team, which was initially trained on the product, can be utilised to further train other teams in other territories during this scale-up. Thus, the entire sales team will be better trained to communicate the product’s USP/features effectively and help customers adopt the product. Moreover, because the company can promptly incorporate customer feedback into its products and processes, the brand can quickly build customer trust and loyalty.  As more products are launched successfully, the pressure on NPL decreases, and they can work with more focus on a smaller number of new products. This will allow them to launch products promptly, reducing the pressure to take a big-bang approach to NPLs.   <h2>What to expect</h2>Implementing this NPL strategy and a significant improvement in the success ratio of NPLs is virtually guaranteed (at least a 30% increase in the number of hits), and the company can expect a nearly 50% increase in the contribution of new products to overall sales. Once consistent availability of the products across all potential outlets continues to be assured (read our article <a target="_blank" rel="noopener noreferrer" href="https://www.vectorconsulting.in/en/research-and-publication/articles/managing-distribution-chain-is-there-a-better-way-than-gazing-the-crystal-ball/">Managing distribution chain: Is there a better way than crystal ball gazing?</a> to know how to achieve this), the product life of each new product is also expected to improve, accruing more returns for the company.

BA Read More

To thrive in dynamic markets, companies must innovate. Yet, launching new products successfully remains a challenging task. This article explores common pitfalls and strategies for sustainable new product success. Problem: A rapid market-wide launch of new products is essential for quickly capturing market share. However, launches frequently fail due to high demand uncertainty, delays in supply chain alignment, and delayed feedback. Solution: A phased but rapid roll-out strategy addresses these issues by testing demand in select territories, aligning supply chain capacity with trends, improving training for smaller sales teams, and incorporating early feedback to refine the product and marketing efforts. Benefits: This approach reduces product failures, increases launch success rates by 30%, and boosts new product contributions to 30%-50% of sales.

Key Takeaways

According to research, ~95% of new product launches fail. How can companies improve the success rate of their new product launches?

Acing new product launches

Download PDF

Discover essential strategies for successful new product launches. Learn from Vector Consulting Group about mitigating risks and maximizing market adoption for new products.