More than a century ago, Ralph Waldo Emerson is reported to have said, “If a man can write a better book, preach a better sermon, or make a better mousetrap than his neighbor, though he build his house in the woods, the world will make a beaten path to his door.” If only marketing innovations were that simple.
In today’s hypercompetitive marketplace, companies that successfully introduce new products are more likely to flourish than those that don’t. Businesses spend billions of dollars making better “mousetraps” only to find consumers roundly rejecting them. Studies show that new products fail at the stunning rate of between 40% and 90%, depending on the category, and the odds haven’t changed much in the past 25 years. In the U.S. packaged goods industry, for instance, companies introduce 30,000 products every year, but 70% to 90% of them don’t stay on store shelves for more than 12 months. Most innovative products—those that create new product categories or revolutionize old ones—are also unsuccessful. According to one study, 47% of first movers have failed, meaning that approximately half the companies that pioneered new product categories later pulled out of those businesses.
Consider three high-profile innovations whose performances have fallen far short of expectations:
• Webvan spent more than $1 billion to create an online grocery business, only to declare bankruptcy in July 2001 after failing to attract as many customers as it thought it would.
• In spite of gaining the support of Apple’s Steve Jobs, Amazon’s Jeff Bezos, and many high-profile investors, Segway sold a mere 6,000 scooters in the 18 months after its launch—a far cry from the 50,000 to 100,000 units projected.
• Although TiVo’s digital video recorder (DVR) has garnered rave reviews since the late 1990s from both industry experts and product adopters, the company had amassed $600 million in operating losses by 2005 because demand trailed expectations.
After the fact, experts and novices alike tend to dismiss unsuccessful innovations as bad ideas that were destined to fail. But surely that’s too simple an explanation. If these innovations are so misguided, why isn’t it obvious before the fact? Webvan was backed by seasoned retailers, executives, and investment bankers, but it was nonetheless a spectacular failure. While the Segway and TiVo stories have yet to play out fully, both company executives and industry analysts were far more optimistic about those innovations than they should have been.
Why do consumers fail to buy innovative products even when they offer distinct improvements over existing ones? Why do companies invariably have more faith in new products than is warranted? Few would question the objective advantages of many innovations over existing alternatives, but that’s often not enough for them to succeed. To understand why new products fail to live up to companies’ expectations, we must delve into the psychology of behavior change. This article presents a behavioral framework that explains why so many products fail and outlines some actions that companies can take to improve their chances of success.
