Why do products fail? Even some of the most brilliant minds in the product industry face this question. The heart of the matter lies in understanding what went wrong. In this comprehensive exploration, we will delve into the concept of product failure and identify the seven primary reasons behind it.
Understanding Product Failure
Product failure is not always a catastrophic event where a product is withdrawn from the market, leading to a company’s demise. Most often, it’s a partial or soft failure. It means falling short of the outcomes set for the product, often measured by Objectives & Key Results (OKRs). These objectives can encompass more than financial goals, such as establishing a competitive edge or creating upsell opportunities for other products.
The Importance of Clearly Defined Objectives
One critical factor contributing to product failure is the lack of well-defined objectives. Without a clear definition of what success looks like, it becomes challenging to achieve it, and often, you might not even realize that your product is failing. Here are some strategic objectives to consider:
- Financial Objectives: Including top-line revenue, profit, gross margin percentage, cost of goods sold, and cost of sales.
- Development Objectives: Covering cost, time to market, reducing technical debt, increasing stability, and reducing bugs.
- Buyer Adoption Objectives: Focusing on units sold, repeat customers, and adoption within target market segments.
- User Adoption Objectives: Measuring usage of features, reduction in support calls, ease of use, and satisfaction metrics.
- Competition Objectives: Addressing feature gaps, increased market share, and creating differentiation.
The 7 Common Reasons for Product Failure
Now, let’s explore the seven primary reasons that contribute to why products fail.
1. Product Doesn’t Solve the Right Problems
Lack of Customer Research
Product Management is often likened to Inbound Marketing, where understanding the “needs” of potential customers is crucial. These needs can be existing problems or new aspirations. It’s not enough to identify these needs; each one must be quantified and prioritized based on customer demand and urgency.
Preventing this Pitfall: Use Market Research
To avoid building a solution in search of a problem, employ market research techniques, including observation and empathy interviews. This will help you uncover the details you might not be aware of.
2. Picking the Wrong Market
Selecting the wrong market, or more specifically, the wrong market segment, is a common reason for product failure. Before choosing a market segment, assess its potential by considering factors like market size, your company’s ability to serve it, competitive viability, demand for your product solution, and more.
Preventing this Pitfall: Satisfy Customer Needs
To ensure you don’t pick the wrong market, make sure your product can meet customer needs, and that there are enough willing customers to make your product profitable. Conduct thorough market research to support your go-to-market strategy.
3. Product is Too Expensive or Provides Poor Value to Customers
Price can significantly impact a product’s success. The value proposition, defined as the ratio of benefits to price, is crucial. If your product is too expensive and doesn’t provide adequate value, it can fail. Competitive price pressure and budget constraints are other factors to consider.
Preventing this Pitfall: Develop Comprehensive Pricing Strategies
Develop pricing strategies that include predefined price adjustments to stimulate demand and close significant deals. This can include volume discounts, seasonal discounts, and adjustments against specific competitors.
4. Flawed Business Case
A need and a product solution are essential, but if the business model doesn’t work, your product will fail. Consider the product’s cost to build, non-recurring product development costs, and recurring marketing and sales costs.
Preventing this Pitfall: Collaborate with Financial Specialists
Work closely with financial specialists to ensure the business model is viable. This involves assessing costs, margins, and ROI. Forecast with the right assumptions and consider both top-down and bottom-up forecasts based on market data and your company’s constraints.
5. Product is Not Good Enough/Poor Execution
Understanding Different Customer Expectations
Building a subpar product, with limited functionality, competitive gaps, performance issues, or technical problems, can lead to poor adoption rates. Understand that customer expectations vary throughout the Product Lifecycle, and early adopters may be more tolerant of shortcomings.
6. Delayed Market Entry
Timing is crucial. Getting the right product to the right market at the right time is essential for success. Rushing a product to market that’s not ready can be disastrous. Use a Beta Program to assess whole product readiness.
7. Poor Marketing Plan
Move Candidates Through the Funnel
Effective outbound marketing is vital for moving candidates through the buying cycle. A poor marketing plan, inadequate budget, or flawed execution can lead to product failure.
Preventing this Pitfall: Monitor Conversion Rates
Monitor the effectiveness of marketing initiatives and ensure they drive customers through the sales funnel. Constantly experiment and adjust the marketing mix to optimize results.