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New and improved! Better than before! More effective than the competition! Like nothing you’ve ever experienced before! You have all seen these claims, and they all have one common theme no matter where you are in the world: new product development. In the face of unbelievable odds against success with new products, why do companies continue to try?
The success rate of new products is often reported to be 10% or less, which means that at least 90% of new products fail. A recent report, however, reveals slightly better success rates. Depending on the product category, success rates range from 10% to 20%. That still means that 80% to 90% of new products fail. The success rates are usually assessed during the first three years of a product’s life. In other words, if the new product is still on the market after three years and is generating profits, it is considered to be successful. To be more specific, in the category in which cosmetics falls, it appears that of the approximately 25,000 new consumer food, beverage, beauty and health care products to hit the market each year, only 40% will survive for five years. That is a little better, but it still suggests at least 60% of products in this category will fail.
And the beauty industry is hypercompetitive, especially for a brand owner who does not have much to offer in the way of product differentiation. One such way to gain competitive advantage and exploit a growing market segment is to offer a natural or certified organic product. This segment has been growing dramatically for almost 20 years and is now worth more than $10 billion in the U.S. However, this segment, despite the growing target market and expanding channels of distribution, is becoming cluttered with competition, and consolidation has narrowed the important players to a dozen or so. What is a new product developer focusing on this segment to do?
There are certainly no guarantees of success, but it may come as a surprise to some people that marketing is actually a science, and attention to the basic concepts will at least ensure you do not make some of the reckless, fatal errors careless marketers often make when they ignore the principles of product development. Let’s review the most important aspects.