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Why New Products Fail in the Marketplace

In a chaotic global economy powered by escalating consumer expectations and hyper competition, simply having a great product idea is no longer enough to guarantee success. Instead, companies that seek profitable growth must commit to research-driven product and service innovation to keep up with—or surpass—the competition.

Put simply, companies must continually bring the voice of their customers into their innovation labs, engineering offices, marketing teams and executive boardrooms if they want to guarantee consistent growth.

Even though we’ve seen this claim proven time and time again, it’s always helpful to see empirical evidence from the financial community about the direct correlation between research-driven innovation and long-term growth. Here’s the latest from Savita Subramanian, head of U.S. equity strategy at Merrill Lynch:

"From an equity investor’s perspective, we think that innovation is actually a very important factor to consider when investing in a company, and to that end we looked at the performance of companies that spend on research versus those that don’t. And we found that companies that are actually committed to research and committed to long term growth projects tend to outperform companies that don¹t by, on the margin, a couple of percentage points a year. So this is not an insignificant theme for the equity investor. In fact, we think that equity investors can be rewarded handsomely for finding companies that are on the leading edge of innovation.” 

Companies everywhere launch new products and services every day. Unfortunately, roughly 9 out of 10 fail to meet their minimum expectations after being launched into the market. Why? They skimp on research—or even worse—they skip it entirely. Sound crazy? It’s true, especially among many middle-market companies.

Here’s the good news: when companies follow proven best practices for product/service innovation (such as Stage-Gate®), including the right research at each step along the way to launch, their success rates skyrocket. Consider these performance levels achieved by companies using research-based product innovation:

  • New product success rates are 3 times higher[1]
  • Time to market is 35% faster [2]
  • New products reach profitability targets 77% of the time [3]
  • New product projects are on time and on budget 79% of the time [4]

 The facts clearly support the formula that we all know is simple logic: research-driven innovation leads to superior long term growth, which results in higher shareholder value.


Sources:

[1] Best Practices in Product Innovation authored by Dr. Robert G. Cooper & Dr. Scott J. Edgett with the American Productivity and Quality Center, 2003

[2] Comparative Performance Assessment Study by Dr. Abbie Griffin, 2004

[3] Best Practices in Product Innovation authored by Dr. Robert G. Cooper & Dr. Scott J. Edgett with the American Productivity and Quality Center, 2003

[4] Best Practices in Product Innovation authored by Dr. Robert G. Cooper & Dr. Scott J. Edgett with the American Productivity and Quality Center, 2003 

David W. Wilson
David W. Wilson
David W. Wilson

David Wilson has over 25 years of experience helping leading companies improve their marketing results using digital marketing, direct marketing, database marketing, consumer data, predictive analytics and marketing research.