Why Products Fail

Too many innovative new products don’t succeed in the marketplace because entrepreneurs don’t fully appreciate how finding the right buyer and developing the right User Experience that drives market adoption and purchasing decisions.

About Our Research

This article is motivated by a paradox we experience often in our work: Most product developers, whether they are entrepreneurs or within big companies, are diligent about listening to their customers, yet they make basic mistakes in understanding customer signals – often failing to realize that sometimes customers don’t know what they don’t know. This paradox contrasts two observations that are consistent across our experience: (1) many companies engage customers in the new product development process, but (2) they fail to surface the key factors that would allow them to design and introduce products into a market successfully.

Having first identified the paradox, the article then identifies a resolution: While businesses are diligent in designing great products, they often ignore how customers learn which products are great. As a result, great products fail because customers do not know they are great. This explanation was distilled from a review of academic research studying how customers make purchasing decisions. Fundamental academic research on this topic is deep and interdisciplinary, extending from social psychology to signaling theory (a branch of theoretical economics). Much of the research is technical, and as a result, the findings are poorly understood by executives. The purpose of this article is to summarize this research as well as our experience and findings into key insights that describe how customers recognize that new products are great, and why greatness is often overlooked. The central pillars of this framework are (1) customer search and (2) customer inference. If businesses can understand when customers will search and when they will form inferences, they can better predict when customers will embrace their innovations and when they will ignore them.

We all know, entrepreneurs and even Fortune 500 Companies often fail to successfully commercialize new products or market entrants. Most companies will claim that they listened to the voice of the customer, developed their products with customer input in mind, and yet the products still failed. Unfortunately, this is not a rare occurrence.

There are many reasons for failure but one consistent result is that failed products didn’t fit a well-defined market and did not connect to a real consumer need.

In these instances, the products did not connect to a customer perception of value for customers. Much of our research focuses on why this occurs.

Most companies focus on defined customer needs through surveys that are designed to surface what consumers think they need – their “market pain”. The problem is that consumers often have pain points they do not know about or even understand. Those that do generally come from the market segment we would identify as “early adopters” – that small percentage on the standard bell curve that is comprised of market innovators. In many cases these buyers give a company a false signal that a product will gain traction in a broader market.

Early adopters present another problem for companies. In our experience this group is comprised of two types of early users – those that are influencers and those that are not. Early adopters who cannot be converted into evangelists for your product may also generate a false signal that your product has more potential than it actually does.

Early adopters who are active influencers can be a great asset for sure but they also can create false signals. The entire concept of “Influencer Marketing” can move the focus of your product – and the problem it solves to specific individuals. In essence you are borrowing the credibility of these early users in the hopes that it will cause others to buy.

But who buys next and how do you uncover the market pain for these users? We call the next market segment “Willing Fence Sitters”. These customers are generally neutral or undecided and will wait to see what happens with your early adopter markets. They are open to new ideas but are sometimes unwilling to lend their voice to help guide your development.

On the back side of your bell curve are the Unwilling Fence Sitters. These customers are the skeptics and critics. They are unwilling or, in some cases unable to contribute to the Voice of the Customer because they are unaware of their pain or have entrenched ways of working that might not be perfect but they work. These consumers need powerful reasons to change – they exemplify the VC adage; “to enter an existing market your solution needs to be 10 x as good at 10% the price”.

The Power of Search

To decide if they want to buy your customers need to know what products are available and how their features vary from other available market options. Whether you are an airline choosing which aircraft to purchase, a college graduate choosing your first car, or a parent buying diapers for your infant, there are only two ways you can collect this information: you can search, or you can infer. The inference process uses the indirectly related information that you can search for to guess the information that you cannot easily search for directly. Most companies and entrepreneurs do not think hard enough about how their target customers will decide what to purchase even when they have ample insight into how customers might evaluate new products. Those developing products and services generally focus primarily on “creating value”, without enough regard to whether customers will recognize this value. This is another common trap – a reason products fail – entrepreneurs don’t understand or appreciate the fact that value definitions and therefore the recognition of value are very different across demographics such as age, gender, and socio-economic factors.

Customer Search Processes

For your target customer, the perceived benefit of searching for a better solution may not be the same as the actual benefit, particularly in markets with little recent innovation. This poses a challenge for significant innovations in such markets; customers may not find these innovations because they do not know to look.

Research suggests that there can be a surprising relationship between the amount of prior expertise a consumer has about a product category and the extent to which he or she searches for information before making a purchase decision. As a result, early adopters, or those most aware of new products can be effective market drivers but they can also confuse your customer signals. Conversely, customers with a lot of expertise may not search, because they think they already know what’s best. At the other end of this spectrum are customers who are clueless. They do not search because they do not understand their pain and don’t even know what questions to ask, where to look for the answers, or how to interpret the information when it arrives.

Consumer Inference Processes

When search is incomplete for any reason, customers shift to forming inferences. They use what they have “know” or observed to infer what they don’t know. McDonald’s offers an example of this. The fast-food chain has long emphasized to franchisees the importance of keeping a restaurant’s parking area clean. Why? Customers do not really care about the parking area. What they care about is the cleanliness of the kitchen, and perhaps the bathrooms. But what can customers see when they drive past? They may use the cleanliness of the parking area (what they can see) to infer the cleanliness of the kitchen and bathrooms (what they care about). What is most surprising is that when you ask customers why they did not choose to stop, they often cannot tell you; they just did not feel comfortable stopping at that restaurant. In other words, this is not a conscious thought process; it is operating at the subconscious level, which makes it both pervasive and powerful.

The Role of Your Brand

The most common cues customers use to infer something about your product quality are price and brand. In a business-to-business setting, signaling information about quality is essentially the only role of the brand. Even in consumer markets, this signaling role is hugely important. However, in some consumer markets, brands may signal more than just product quality; consumers can also use brands to signal information about themselves. 

In many circumstances, the more effectively customers can search, the less they will rely on the brand. Moreover, their perceptions of the brand will change quickly as new information comes in. Both factors diminish the importance of the brand. However, in markets where customers cannot search easily and effectively, they are forced to use the brand to make purchasing decisions. The best example of this is buying a car. The choices, features and performance are overwhelming to most consumers. Even though this information is widely available, consumers focus much more on brand preference that the kind of deep research that might alter they decision. This is true for most markets where powerful brands have been built around a tradition for quality and/or price and value.

In general, customers prefer to search. It is usually only when they are unable to search effectively, either because they lack expertise or because the cost is too high, that they rely upon the brand. Second, the role of the brand may vary across customers. A novice computer buyer may lack the expertise to search and be forced to rely upon inference. Most computer buyers have enough expertise to simply engage in search.

The Internet has had a profound impact on the way that customers evaluate many other products, in two ways. First, it has lowered the cost of search by making information more accessible. The initial impact of this change was actually smaller than anticipated in some markets because, when customers shop in physical stores, they do not have ready access to a laptop or desktop computer. It was not until the advent of smartphones that the Internet substantially lowered the cost of search in many markets. Even in the last year digital search platforms like TrueCar have focused jus on getting the “fair price” for the car you want rather than on the features.

The second impact of the Internet has been to broaden the number of product features that are searchable. User-generated content, like product reviews, now mean that customers can search for information about features that were previously unsearchable, such as the quality of a product or the fairness of a service bid or proposal.

In our qualitative research, consumers have told us that the fragmenting of media and the proliferation of products have actually made them reduce the number of brands they consider at the outset. Faced with a plethora of choices and communications, consumers tend to fall back on the limited set of brands that have made it through the wilderness of messages. Brand awareness matters: brands in the initial-consideration set can be up to three times more likely to be purchased eventually than brands that aren’t in it.

Effectively Using the Voice of the Customer

For anyone engaged in innovation and/or product development, the implications are clear: We need to ensure that the products we create have real value for customers AND that customers are able to recognize this value. We recommend that companies focus on three areas.

Ensuring That Customers Discover Your Innovation

If customers do not discover your product, they will not buy your product or increase sales. The following questions can help you assess how likely customers are to discover your innovative new product or service.

First, are customers motivated to search? Do they recognize that they have a need and that there could be a better solution? Are they willing to invest effort to find that solution? If customers do not know a better option is possible, they cannot be motivated to look for it. How much does the solution differ from existing options? If this is the first major innovation in the industry for 20 years, customers are less likely to be searching for new alternatives than if the industry has had a steady stream of major innovations. We have found that the most concrete measure of how motivated customers are to search is the length of their procurement or decision process. In general, the customers that buy most quickly have a market pain that they have identified and where a product has been presented as an effective solution. Of course the size of the purchasing decision and impact of any purchase are also factors. For example, people all spend significantly more time researching an automobile purchase than they do where to have dinner.

Second, are your customers able to search effectively? Traditionally, the litmus test for this question was whether the information was at the top of an internet search (hence all the SEO companies). As long as customers have the expertise to interpret the specifications they find, features on the specification sheet are generally searchable. If the decision is important enough but customers lack expertise, they may still be able to search by turning to expert advisers or reviews from other customers (inferences).

Helping Customers Recognize Innovation

It is clear that developing great products is not enough to ensure commercial success — companies have to develop great products that customers can recognize as great. Fortunately, we now have effective tools and processes for understanding the way that customers collect information and make purchasing decisions. Rather than merely surveying to determine what customers need, we have to seek a deeper understanding about how customers will evaluate which products have value that will satisfy their needs.

Customers need to be motivated to learn about products and also have the expertise to interpret what they learn. When that happens we can expect the search process to play an important role in their decisions – a welcome situation for the most innovative companies because customers are more likely to recognize the value of their innovations. However, when customers are either not sufficiently motivated or not sufficiently informed, then search will give way to inference which makes it less likely that customers will recognize the value of innovations. The implications for companies are clear: Focus product development on the innovations that your customers can recognize and understand the value they get, or find ways to alert them to innovations they may not detect on their own.

Useable works with startups to fund & execute on their ideas. We’re strategists, financial professionals, and coders ourselves. We’ve spent a lot of time figuring out how to make beautiful, functional products, that people adopt and use. We use our keen understanding of User Experience Design in every aspect of our business from product creation to customer acquisition and finding the right channels and partners. We bring over 20 years of Experience-Centered Innovation processes that keep products lean, focused, and on point with users. Through our process, our clients launch products that receive customer validation early in the planning through launch. Investing in this process up front works, and delivers products that win.

The “Useable Design Process” addresses the need to design a great product that connects to a specific customer segment that recognizes its value. We use a “beachhead concept” in customer discovery, looking for the smallest immediately addressable market. In our approach we try to capture >50% of the first target and grow from there rather than trying to build a product that hopes to capture 1% of a huge market. This allows us to refine and direct our message so that the customers with the greatest pain – the ones who buy most quickly are the focus.

Though we work with and fund all types of startups, we’re especially interested in web/mobile applications and IoT. We’ve been focused on solving many of the difficult problems that all companies have with user experience design, brand development, customer acquisition, and the delivery of a valuable experience that makes products "sticky" longer than anyone else. With projects completed for dozens of companies and dozens more already curated through our portfolio management process we can visualize the possibilities of a wide range of web enabled platforms.