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Why 95 per cent of new product launches fail miserably

Posted by Perceptive Customer Insights Team - 02 June, 2016

It is astonishing how many product launches actually fail. Lots of savvy businesses today still don't properly implement segmenting before creating their marketing plan.

Why do so many product launches fail?

In fact, a study conducted by Harvard Business claimed that in the US, 95 per cent of 30,000 new product launches failed because of poor market segmentation.Even though these figures are from the USA, they can be seen to be representative of a worldwide marketing trend.

To add to the mix of segmentation strategies and trends that have arisen throughout the years, a less traditional line of thinking has emerged from Harvard Business School (HBS). According to HBS professor Clayton Christensen, the problem in many cases is that businesses are using an ineffective market segmentation mechanism.


Related content: Understanding your audience


Consumers don't conform to standard segments

At the planning stage of new product development, businesses often start by segmenting their markets and positioning their merchandise accordingly.

At this stage, companies divide the market into product categories, such as function or price, or divide the customer base into different demographics, such as age, gender, education, or income level. Pretty basic so far.

However, in real life consumers usually don't go about their shopping by conforming to specific segments. Life happens and life’s messy, so rather, consumers take life as it comes. And, when they’re faced with a challenge or a job that needs doing, they get a product that “does the job”. Simple.

Therefore, Christensen argues that companies start segmenting their markets according to "jobs-to-be-done”. Not only the traditional segmentation model.

In a telling quote, Christensen says: “The fact that you're 18 to 35 years old with a college degree does not cause you to buy a product”. Perhaps the purchase is correlated with the decision, but it isn’t caused by it.


What can you do about it?

Businesses really need to understand what causes people to buy a product, not what elements are associated with it.

The research recognised that the mechanism behind a purchase is, 'Oh, I've got a job to get done.' This mechanism is effective in allowing a company to build products that people want to buy.

When you look at your product based on its “job-to-be-done”, based on the customers’ perspective, it makes you dig deep and really enter the world of your customer, be a part of their day and question why she does what she does. If you see things from simply a product function (defines by your employees or internal stakeholders primarily), you’re only seeing a part of the picture.

In light of this, why aren't more companies designing their products based on this line of thinking? Some of the issue is that when companies are planning for future products, this usually means analysing existing (or past) data, which oftentimes is based on customer demographics or product category. This is data that is relatively easy to acquire. If you all of a sudden want to get data about “doing a job”, it’s a tad bit harder. Therefore, businesses hire consultants to make sense of it all and analyse the market and define any appropriate segments. And to ensure the insights derived from the data are actionable enough to feed into, or even develop, the business strategy.


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Topics: Customer Insights

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