Sunday, May 24, 2009

When New-Product Development Marketing Plans #Fail

John Steinbeck's book Of Mice and Men's title is taken from Robert Burns's poem, To a Mouse, which are often quoted as: "The best-laid plans of mice and men/often go awry."

Companies that fail to innovate and develop new products put their businesses at risk. There are many examples of companies that failed to adapt to changing customer needs and tastes, new technologies, shortened product life cycles, and increased competition. New-product development does not come without its risks and for most companies there are hits and misses. While some companies shy away from risk Amazon makes gutsy bets in new-product development.

Amazon has been working on a digital strategy for the better part of a decade. Those who closely monitor the company tend to agree that their digital music and movie download product launches have been a disaster. One person who worked closely on their Auction product told me that the company typically attempts to erase mistakes from everyone's mind and move on to the next big idea.

In 1999 it launched Amazon Auctions in an attempt to take on e-Bay thinking its loyal customers would immediately adapt to auctions and small businesses would flock to its site. The product never gained traction and ultimately failed.

In 2003 Amazon was so bold as to take on Google's dominant position in the search market with A9, which offered among other features, Search Inside The Book, which let users search for a book by character names or even obscure phrases. In characteristic Amazon style it was an aggressive move, but one that turned out to be foolish.

I've focused on Amazon's failures, but with their repeated upside earnings surprises and strong sales growth, it is clear that failures do not outbalance the company's overall success -- and its not likely to stop taking risks anytime soon.

There are many factors that lead to product failures including ignoring negative market research findings, overestimation of market size, poor design, weak positioning or pricing, development cost overruns, competitive response, and lack of consumer adoption. Let's take a look at the factors influencing the adoption process. Adopters of new products have been observed to move through five stages:
  1. Awareness
  2. Interest
  3. Evaluation
  4. Trial
  5. Adoption
The product marketer must facilitate consumer movement through those five stages and also influence the following characteristics of the adoption process:
  • Differences in individual readiness to try new products
  • The effect of personal influence
  • Differing adoption rates
  • Variance in organizations' readiness to try new products
Everett Rogers, author of Diffusion of Innovations, recommends that innovating companies should research the demographic, psychographic and media characteristics of innovators and early adopters and direct marketing communications specifically to them. He claims that earlier adopters tend to be younger in age, have higher social statues, and a more favorable financial position.

Personal influence is the effect one person has on another's attitude or purchase probability. Its most important in the evaluation and consideration strategy of the adoption process than it is in later stages. It has more influence on the late adopter than early ones and is also more important in risky situations.

In attempting to reach influencers in today's fragmented media marketplace I recommend marketers consider all channels, but if budgets are limited then social media and word of mouth marketing can be utilized most effectively. Facebook, MySpace, Twitter, Digg, and LinkedIn are not created equal and managers should undertake a thorough analysis of their audiences to determine which properties will allow them to reach their target customers and influencers.

Rate of adoption is influenced by relative advantage to existing products or services, compatibility, complexity, ease of trial, and the degree to which a marketer can translate the new product features into clearly understood benefits. Organizations also will adopt innovations at different rates depending upon their leaders openness to change and other factors including pressure exerted by its administration.

Source: Philip Kotler, Marketing Management; Fortune, May 2009; Greg Linden, April 2006.

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