What is product failure?
Product failure is when a product or service introduced into the market doesn’t achieve its intended objectives or fails to meet the performance standards and expectations set by the product team.
This failure can take many shapes and there are degrees of severity, from total market rejection to underperforming sales or user engagement. It’s a significant aspect of product management that requires careful attention and strategy to understand, mitigate, learn from, and ideally prevent altogether.
It’s not quite as bleak as you might have heard though. You might have read online that the failure rate for new startups is around 95%, however, according to a 2013 study of this claim, the real figure is closer to around 35-40%. Even so, that means there’s just over a 1-in-3 chance that your product will fail.
Even the biggest and most successful businesses aren’t immune to product failure. Some of the more notable product failures include:
- Betamax (1975): Developed by Sony, Betamax was an early videocassette recorder format. Despite its superior quality, it lost the market to VHS due to shorter recording times, higher product costs, and a less aggressive licensing strategy.
- E.T. The Extra-Terrestrial (Video Game) (1982) – Despite being attached to one of Stephen Spielburg’s most loved films, the tie-in game was made in just four weeks, and was so bad that it sold less than half of the 5 million cartridges that Atari made for its release.
- New co*ke (1985): Coca-Cola introduced a new formula for its iconic drink, aiming to compete more effectively with Pepsi. The change was met with widespread consumer backlash, leading the company to quickly revert to the original formula, rebranded as “Coca-Cola Classic.” See also Crystal Pepsi in 1992.
- Segway (2001): Hyped as a revolutionary personal transportation device, the Segway failed to gain widespread adoption due to its high cost, regulatory restrictions, and somewhat impractical nature for everyday use.
- Google Glass (2013): Google’s augmented reality glasses failed to gain mainstream acceptance due to privacy concerns, limited functionality, and its high cost.
How do products fail?
Product failure isn’t just about poor sales; there are many ways a product can miss its mark. These can include:
- Lack of adoption: The product does not gain sufficient traction with the target audience. This could be due to a lack of awareness, understanding, or perceived value among your potential users.
- Customer dissatisfaction: Your product might meet some basic needs but fail to delight customers or meet their expectations, leading to poor reviews, negative word-of-mouth, or a high churn rate.
- Technical shortcomings: The product might have bugs, performance issues, or lack features that are critical to user satisfaction or functionality.
- Financial underperformance: The product doesn’t generate the expected revenue or leads to a loss, considering the amount invested in development, marketing, and distribution.
- Strategic misalignment: Sometimes, a product might be technically sound and even liked by users, but it doesn’t align with the broader strategic goals of the organization or fails to adapt to market shifts, making it a failure in a strategic sense.
Recognizing these failure points can help you to create better products in the future, adjust your strategies, and help with successfully pivoting and iterating on your original product concept. It’s also worth remembering that what might be deemed a failure in one context could be seen as merely a minor setback or even a learning opportunity in another.
That’s why a more nuanced understanding of product failure can really help with effective product management, enabling Product Managers to proactively address potential issues and pivot their teams as necessary to align with market needs and organizational goals.
What are the reasons for product failure?
Understanding the web of factors that lead to product failure can help you to avoid it. Here are some of the most common reasons why products fail:
Market misalignment
A product needs to solve a real problem that people have or fulfill a need for its target audience. Misalignment occurs when there’s a misunderstanding or misinterpretation of what the market needs, or when the market evolves away from what the product currently offers. It also happens when the target audience is not clearly defined or understood, leading to a product that doesn’t resonate.
Inadequate research
Proper market and user research are central to understanding what your potential customers want or need. If you’re not spending enough time understanding customer pain points, or you’re neglecting competitor analysis and ignoring market trends, you’re not going to know how to make your customers happy. That’ll lead to a product that’s out of touch with the current reality of the market and your customers’ expectations.
Scope creep
This is when your product’s requirements or features keep expanding beyond the original goals without proper control or alignment with your product vision and objectives. It often leads to bloated products that are difficult to use, over budget, and slow to adapt. Scope creep can dilute the focus and impact of your product, and make it more likely to fail.
Poor execution
Even with a great idea and rock-solid research, poorly executing the design, development, or go-to-market strategy of a product can lead to failure. This could be down to a lack of technical ability, low-quality production values, ineffective marketing, or poor customer support. Poor execution can tarnish your product’s reputation and lead to its failure even if the concept is great.
Competition and market saturation
Entering an intensely competitive or saturated market without a clear advantage or something that makes you special can easily lead to product failure. You’re likely to struggle to gain potent customers’ attention and market share if you’re not standing out from the crowd, or offering superior value compared to your more established competitors.
Product failure due to economic and external factors
Sometimes external events like economic downturns, regulatory changes, or shifts in consumer behavior can lead to product failure. Unfair as it is, these failures are often beyond the control of the product team, but you still have to try to anticipate and plan for them as best you can.
Incorrect pricing
Setting the right price is always a delicate balance. If your price is too high, it could easily deter potential buyers. if it’s too low, you risk undervaluing your product or not covering your production and marketing costs. Getting your pricing wrong can spell the death knell of an otherwise excellent product.
Ignoring customer feedback
Continuous improvement is a key aspect of good product management. Ignoring your customer feedback and failing to iterate based on your understanding of your user experience and your customers’ pain points can lead to your product’s stagnation and decline. You’ll need to evolve as your customer needs and expectations do to remain relevant and successful.
Lack of clear value proposition
Your product needs a clear and compelling value proposition. If your potential customers don’t understand or believe in the value your product provides, they won’t want to buy or use it. A weak or unclear value proposition can lead to product failure as it struggles to attract and retain enough of the right users.
Organizational misalignment
Sometimes internal factors such as lack of support from leadership, insufficient resources, or a lack of communication between departments can lead to product failure. Ensuring that everyone in the organization is aligned and committed to the product’s success can make all the difference.
By understanding these common causes of product failure, Product Managers and their teams can take proactive steps to avoid the potential pitfalls. You’ll need to commit to continuously learning and adapting, and keep a keen focus on market needs, user feedback, and the quality of your execution throughout the product lifecycle.
What is the impact of product failure?
Product failure can have far-reaching consequences that extend beyond just the product team or the organization. The more significant impacts of product failure include:
Financial loss
Perhaps the most immediate and obvious impact of product failure is financial loss. This includes the sunk cost of development, production, marketing, and distribution. For products that make it to market, there may also be costs associated with unsold inventory, returns, or recalls. Financial repercussions might also extend to future projects, as resources may become more limited.
Brand reputation damage and loss of customer loyalty
A failed product can significantly tarnish your brand and reputation. Customers and the market at large may question the quality and reliability of your offerings. This skepticism can quickly extend beyond the failed product to affect your other current or future products under the same brand.
Customers who have had a negative experience with a failed product might lose trust in the company. This can lead to a loss of customer loyalty and difficulty attracting new customers. Repairing brand reputation and regaining customer trust can be a challenging and lengthy process, requiring significant investment and effort.
Lower morale and higher turnover
Product failure can lead to decreased morale and motivation within the team, particularly if they’ve invested significant time and effort into the product. This can be exacerbated if the failure leads to layoffs or a perceived lack of job security. Over time, this might result in higher turnover rates, loss of valuable talent, and difficulties in attracting new talent.
Opportunity costs
When a product fails, there’s also the consideration of what else could have been achieved with the resources (time, money, talent) spent on that product. These opportunity costs can be significant, as they represent missed opportunities for other potentially successful products or innovations.
Legal and regulatory repercussions
In some cases, particularly if the product failure involves safety issues or breaches of regulation, there might be legal consequences. This can include lawsuits, fines, or other regulatory actions, which can be costly and further damage the company’s reputation.
Strategic setback
A failed product can be a significant strategic setback for a company. It might delay or derail other projects or strategic initiatives, particularly if significant resources need to be redirected to address the failure.
Stifling innovation
In a risk-averse response to product failure, companies might become more conservative, potentially stifling innovation and creativity. This can lead to a lack of competitive edge and missed opportunities in the market.
Understanding these impacts underscores the importance of effectively managing and learning from product failures. While not all product failures can be avoided, a proactive approach to risk management, continuous learning, and adaptation can mitigate these impacts and guide better decision-making for future product development.
How to prevent product failure?
Preventing product failure requires a proactive, strategic approach throughout the entire product lifecycle. Here are some strategies and practices that will help you mitigate the risk of product failure:
Focus on problems to solve rather than output
Focusing on problems to solve and aiming for outcomes rather than outputs is a critical strategy for avoiding product failure. This approach emphasizes understanding and addressing the real and underlying problems faced by your users, rather than merely pushing out features, products, or services for the sake of pushing them out.
When you’re concentrating on outcomes, you align your work with the actual needs and desires of the market, ensuring that every effort made contributes to a meaningful impact on your customers’ life or work.
Conduct thorough market research
Understand your market, audience, and competition deeply. Conduct qualitative and quantitative research to validate the need for your product and to identify the specific problems it should solve. Stay updated with market trends and changes in consumer behavior.
Have a clear value proposition
Define a clear and compelling value proposition. Ensure that it communicates the unique benefits and differentiators of your product. The value proposition should resonate with your target audience and be reflected consistently across all aspects of the product and marketing.
Aim for user-centric design and development
Involve users early and often in the product development process. Utilize user feedback, usability testing, and other user research methods to ensure that the product meets real user needs and expectations. Adopt an approach to design problem-solving that keeps your user experience at the forefront.
Implement Agile and iterative processes
Implement Agile development methodologies that allow for flexibility and rapid iteration based on feedback and changing conditions. Use adaptable frameworks like the Now-Next-Later roadmap to organize and communicate your efforts. This approach helps in making continuous improvements and adapting to market needs more swiftly.
Invest in Quality Assurance and testing
Rigorous Quality Assurance and testing processes help to ensure that your product meets quality standards and is free of critical bugs or issues. Consider various testing methods, including automated testing, beta testing, and stress testing.
Strategically price your product
Develop a pricing strategy that reflects the value of the product, considers market conditions, and aligns with your business goals. Consider various pricing models and perform price testing if possible.
Strong Go-to-Market Strategy
Plan and execute a strong go-to-market strategy that includes effective marketing, sales, and distribution plans. Ensure that your product launch is well-timed and that you have the necessary support and resources to sustain momentum post-launch.
Continuously learn and adapt
Foster a culture of continuous learning and encourage feedback from all stakeholders. Regularly review and analyze product performance, market trends, and customer feedback to identify areas for improvement.
Risk management
Identify potential risks early in the process and develop mitigation strategies. Regularly review and update your risk management plans as the project progresses and as new risks emerge.
Collaboration and communication
Encourage open communication and collaboration within the team and with external stakeholders. Cross-functional collaboration helps in aligning different perspectives and expertise towards the common goal of a successful product.
Utilizing technology and tools
Adopt the latest tools and technologies like ProdPad that can facilitate efficient product development, project management, customer relationship management, and data analysis. These tools can help in better decision-making and in streamlining various processes.
By integrating these strategies into the product development and management process, teams can significantly reduce the risk of product failure. It’s important to note that while not all product failures can be prevented, a proactive and strategic approach can help you minimize the impact and learn valuable lessons for future efforts.
Looking for a tool to help you embrace collaboration, encourage strategic alignment, and keep customer-focused? Why not give ProdPad a try for yourself in our live sandbox, and see how it can help you get the most from your product development lifecycle?
How to learn from product failure?
Learning from product failure is crucial for growth and innovation. To do so you just need to keep these three things in mind; conduct retrospectives to iterate and improve going forward, implement feedback loops, and develop a culture of learning. Let’s take a closer look at each of these elements:
Conducting retrospectives: These can be used to analyze what went wrong, what could have been done differently, and how to prevent similar failures in the future. Remember, not all products are going to be successful. It’s not about how hard the failure is but about learning from why it happened, so you can avoid the same mistake in the future.
Establish a learning culture: Foster a culture that encourages learning from failure rather than punishing it, as innovation often involves taking risks. As someone smart once said, fail it until you nail it!
Feedback loops: Implement feedback loops to gather input from customers and internal stakeholders continuously. Feedback loops are an important part of the continual learning process, however, if you’re not sure how to implement an effective feedback process, you can read our guide here.
Acknowledging and addressing product failures is an essential part of every Product Manager’s journey toward consistently delivering successful and impactful products. By learning from your failures and adapting your strategies accordingly, you can increase your chances of achieving long-term success, an innovative team, and an engaged and enthusiastic customer base.
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