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11 Reasons New Products Fail

Great products fail all the time. It’s difficult to say precisely how common product failure is. Some popular statistics overestimate that 80% to 95%—the vast majority—of new offerings wind up as failures. While newer research suggests that the number is closer to 40%, the likelihood of product failure still represents a very real risk to fledgling companies. The stakes are high for new startups to launch products that earn enough revenue to sustain the business—but it isn’t an easy feat to achieve.

New products can fail for a variety of reasons—poor product-market fit, unanswered customer needs, or staunch competition, to name a few.

Reason #1: No Product-Market Fit

Achieving product-market fit means you’ve developed a product that offers value to the right market for your business. When you’ve found it, you’ll see signs like:

  • Increased sales
  • Low churn rates
  • Product popularity growing through word of mouth
  • High usage among your core customers

Without product-market fit, you’re unlikely to find much success with your product, no matter how well it works.

I’m sure you remember how Microsoft decided to take on the iPod in 2006. The company launched Zune, which promised to do everything that Apple’s device could do too. Yet, in spite of great promises, Zune failed on the market.

Why did Zune fail? Microsoft was just chasing Apple and created a product that offered no reasons for customers to switch. Microsoft’s marketing campaign fell flat compared to Apple’s, and the Zune’s feature set wasn’t as valuable to users as the iPod’s was. What’s the lesson from this mistake? It’s hard to know how the market will react to a product and marketing messaging, hence why it’s crucial to test these things beforehand.

Targeting the wrong market can lead to problems with fit, as can chasing a market that’s too small to sustain your business. Companies that routinely earn and keep product-market fit do so by adapting their product regularly to fit the changing needs of their market (not the other way around).

Reason #2: Solving the Wrong Problem

Every successful product needs to solve a problem for its users, and, going back to the idea of product-market fit, there need to be enough users with that specific problem. Solving a non-existing or rare problem won’t earn the popularity you need to gain traction in the market.

In 1990, Maxwell House launched Ready to Drink Coffee. The premise behind the product was simple: To create a new, convenient way for customers to enjoy coffee instantly, without having to actually make themselves a cuppa at home. Sounds genius, right?

A customer could buy the product at their local supermarket, bring it home, microwave it, and … voila, their coffee was ready. So why did it flop?They experienced a common problem many business leaders (especially early-stage entrepreneurs) encounter: feeling overly attached to their idea and convinced that there’s no need to change course. In this case, they envisioned a high-tech way to tackle a problem that didn’t need such an intricate, resource-intensive solution.

It turned out that you couldn’t microwave the coffee in its original packaging. Instead, customers had to pour the product from the packaging into a mug before putting it into the microwave … an activity no different than pouring yourself a cup of fresh coffee from the coffeemaker. That’s exactly what customers kept doing, forcing the company to abandon the product.

The solution for this kind of problem is to talk to your customers and target market. You may start out by creating a product that solves a problem you experience—and that’s a great place to begin. However, if you don’t check in with a larger audience, you’ll never know how widespread that problem truly is. Going back to your customers and validating your product decisions during (and even after) the build is the key to creating long-lasting, highly efficient products. Keurig’s continued success is a great example of a company finding an innovative way to solve the same problem Maxwell House tried to address.

Reason #3: Aiming for “Perfect” Instead of “Done”

When you’re launching something new, you have to balance the value you’re trying to deliver against the timeframe needed for your team to develop it. While putting a half-baked product on the market can certainly lead to problems, so can waiting too long to launch. It’s better to spend a month creating and launching an imperfect product that will garner feedback than it is to devote a quarter to perfecting software that may not actually address the problem you want it to.

That was what happened with Google Lively, the search giant’s answer to Second Life. After prolonged product development, Lively finally launched in 2008, just as the recession started to take its toll. As a result, the company pulled the product after just five months to “focus more on our core search, ads and apps business.”

New products (and new businesses) often fail because they spend too much time and resources trying to create something “perfect” instead of going to market with a completed product that can begin earning revenue. By the time that over-engineered product does hit the market, customer needs could have changed, the market segments may have evolved, or the economy could have shifted.

It’s completely normal to feel a little embarrassed when you launch your minimum viable product (MVP)—in fact, if you don’t feel at least a little worried about how your first launch will go, you’ve probably waited too long to release your product.

Reason #4: Not Gathering Regular Feedback from Customers

Customer feedback is the key to developing a product that solves their problems. Without checking in regularly, you’ll never really know if your product is delivering value or not. Even if that initial feedback is negative (which, if you’re working with an MVP, some of it will be), it contains actionable insight into how you can make incremental changes and improve your product over time.

In 1970, AT&T became blinded by its own vision and ignored negative feedback in trials, which led to the failure of the Picturephone. The company’s executives believed that a million units would be in use within 10 years of launch. Instead, after spending years researching and trialing the product, they pulled it off the market in just three years due to a lack of consumer interest. We know now that customers want video calls (we use them every day), so why did Picturephone fail?

As it turns out, users found the equipment too bulky, its controls unfriendly, and the picture too small to view clearly. The price for the service was also too high for most consumers—and these were all things users brought up during the trial phase.

Negative feedback can be difficult to deal with, especially if your company is brand new and you’re trying to make your entrepreneurial dreams a reality. It’s completely natural to want to avoid acting on it—or to avoid collecting it altogether. However, if you don’t ask your customers for their truthful opinions, you’ll never be able to iterate on your product responsively and quickly.

Your best defense against frivolous spending and wasting precious development cycles is proactively gathering feedback and validating every new feature and iteration of your product to better understand which product features add the most value for your end-users.

Reason #5: Iterating too Slowly

Quick updates are another key component of a successful product. The emphasis here is on “quick”—customer needs change fast, and so does the competitive landscape. The only way to keep up is to move in fast iterative software development cycles.

Fast iteration is part of what propelled Slack to its current success (which is a story we’ve discussed before on our blog). What started as an internal communication tool for a video game company was tested and tweaked until it became the uber-popular work tool it is today.

Timing is very important for B2B SaaS companies. In fact, mistiming a launch is a common reason why startups ultimately shut their doors. Your best option is to get comfortable making fast changes (and even get comfortable occasionally breaking things). It’s better to fail fast and learn something actionable than it is to move slowly and never understand why your product failed to gain traction.

Fast iterations will sometimes mean deviating from your initial product roadmap. That’s OK, and it’s quite common for early-stage startups to make big pivots away from their original plan. The key is to prioritize those pivots, which will deliver the most value for your customers.  

If you’re not sure which changes to prioritize, your customers will tell you. Try to use feedback as a guide pointing you toward which iterations offer the most strategic benefit for your product’s overall success.

Building a Product Validation Process

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Reason #6: Using Incorrect Assumptions About Your Customers

It’s not always immediately clear how your customers will use your product—and sometimes, they use it in a way you didn’t intend. If your customers are getting value from your product, that can still be a win, and understanding user habits is the first step toward giving them the experience they want (even if it’s not the one you originally envisioned).

PayPal is a great example of how to pivot once you find out that your assumptions about your customers were wrong. When they initially developed their product, founders Max Levchin and Peter Thiel intended to provide an online banking service. Users came to rely on the service for quick online payments that didn’t require checks or money orders, and PayPal was born.

However, be careful of incorrect assumptions that can create problems if you’re not aware of them. If your customers are relying on your product for an unintended use, it’s only a matter of time until a competitor shows up to offer that functionality more purposefully than your product does. In fact, PayPal has made recent rate changes in response to increased competition in the digital payments space.

In product management, we talk about a concept called the intention-action gap. This gap is the distance between the way a customer would theoretically use a product and the way they’ll actually interact with it under real-world pressure and time constraints. The intention-action gap can be tough to plan around: prospective customers will sometimes assume they would use a product one way during a survey, even if that’s not realistic to their everyday life.

You can understand how your customers use your product by talking with them and, if possible, by watching them interact with it. Usability testing gives you the opportunity to find out exactly how your product is solving problems for your customer base. Short validation tests can also help you determine what your customers are using your product for.

Reason #7: Pricing Your Product Wrong

Products that aren’t priced to fit the market can fail. Customers won’t buy products that are priced too high, but if you set your price too low, you won’t generate enough revenue to sustain your business. It can be difficult to get your pricing strategy right, and many entrepreneurs put too little thought into how they’re going to turn a profit off of their idea. Some venture-funded companies eat through cash quickly because they don’t consider how much it really takes to earn a profit off of their product.

The Apple Newton PDA flopped for a number of reasons. Although some observers cite poor handwriting recognition as a main reason for the product’s failure, the steep $700 price point contributed significantly. That cost was too high for many consumers at the time, and, in the next few years after the Newton came out, cheaper alternatives became available.

The popular freemium model presents another pricing challenge for startups. Convincing customers to open their wallets and switch from a free version of your software to the paid flagship product is sometimes easier said than done. If the free version of your software offers enough perceived value to users, they won’t feel motivated to switch to the premium version. Meanwhile, your business can run out of resources while you’re waiting on free users to convert to paying customers.

If your pricing is getting in the way of your product’s success, it’s time to adjust. You can look to your competitors for an idea of what the market will sustain. Also, keep in mind how much expenses really go into creating your product. There are many strategies for pricing your product, and it’s OK to change course if your current approach isn’t working.

Reason #8: Not Enough Market or Industry Research

Successful products serve the needs of the market and industry. If you’re missing information about your target market or overall industry, it’ll be difficult (maybe impossible) for you to develop a product that fits.

Market research is an essential step to launching a successful new product. In fact, consulting firm McKinsey identified “incorporating market insights” as one of the most important steps for a successful product launch. Understanding who you’re serving is, of course, crucial for creating a valuable product, but it also influences how you position and market your product within your industry.

As a startup, Instagram successfully pivoted thanks to in-depth research into product analytics and user behavior. When it started, Instagram was called Burbn and, among a long list of other features, it allowed iPhone users to check in at different locations and share photos of their exploits. Burbn turned out to be too complicated for users—most people ignored the app’s full feature set and relied solely on its photo-sharing feature.

Instagram’s research into user behavior uncovered an important finding: the social media market was missing a simple photo-sharing app. Thus, Instagram was born.

Instagram’s success would not have been possible if co-founders Kevin Systrom and Mike Krieger didn’t check in with people to find out how they were really using their product. Without that step, they may have remained hyper-focused on offering a feature users didn’t really want or need.

If you constantly talk with your customers, you’ll uncover insights that can help you make sure your product fits the needs of your target market.

Reason #9: Investing in the Wrong Areas of Your Business

When you’re just starting out, it’s common to have a tight budget and limited time to devote to your product. Under those constraints, you need to be extra careful when you decide which areas of your business receive time and money and which ones can wait until later.

You may not need to devote a lot of money to a marketing blitz, for example, if you already have deep industry connections and word-of-mouth buzz. Your budget may be better invested by hiring capable developers and conducting regular customer surveys and interviews to gather their feedback.

In 2007, Joost promised to be the peer-to-peer TV network of the future and seemed off to a flying start. Unfortunately, Joost had various problems with its architecture, player, content library … you name it. Their team wasn’t able to fix those issues, and, as a result, it never took off. Two years after its launch, whatever was left of it was sold to Adconion.

The lesson? Lack of resources and internal support can hinder your efforts to produce a product that satisfies customer needs.

Early-stage startups are often fast-paced and a little unpredictable—as are new product launches. You and your team can lean into that unpredictability by staying malleable and being willing to pivot with little notice. It’s often better to shift course and make a mistake, as long as you do it quickly and learn how to do it better next time.

Reason #10: Problems with Your Competition

B2B SaaS is intensively competitive, and being outcompeted is a common reason that new startups fail—as much as 20% of startups closed because of a crowded marketplace.

It’s possible to pivot even if you’re facing a seemingly insurmountable challenge. Twitter did this quite successfully. Originally known as Odeo, the company had developed a podcasting platform while founders and staff tinkered with what we now know as Twitter on the sidelines. Odeo’s hopes to corner the burgeoning podcasting market were dashed once Apple released podcast support on iTunes. So the company pivoted to offering a micro-blogging social media platform—a segment they still dominate today.

If your market share is challenged by a new product, you have a couple of options on how to respond:

  • Figure out what valuable functionality is missing from the product and add it to yours (but be sure it’s something that customers really want)
  • Determine what users love about your product and focus on pleasing that segment of devoted customers

Whichever path you take, try to be sure you’re innovating and not just copying the competition.

Reason #11: Poor Execution

So many things contribute to new product failure: bad design, poor user experience, sloppy implementation, feature creep, and lack of quality control. Microsoft alone has several examples of how poor execution affected their product’s performance on the market.

Microsoft’s BOB, a UI addition that was intended to make PCs more beginner-friendly, relied on technology most users didn’t possess at the time—and that resulted in the product not functioning properly. The 2007 iteration of their core product, Windows Vista, used so much power that most users found it unusable. Vista also created a plethora of problems when using the Internet, including slow-loading pages and missing graphics. It was a recipe for failure. It’s no surprise that four months after the launch, Microsoft allowed Dell to sell computers with an older version of Windows pre-installed.

It’s tough to learn that your team didn’t execute part of your product strategy successfully, especially when you’ve poured so much time and dedication into your work. However, learning those hard lessons is the first step to iterating and correcting your initial mistakes. Even if your new product launch didn’t achieve the level of success you hoped for, it’s not too late to address the problem and try again. Microsoft learned how to improve on some of the problems with Vista in the later iterations of its OS.

Understand Why Your Product Is Failing

Before you can fix the problem with your product, you need to understand the reason why it failed. If you’re not sure what was behind the initial failure, talk to your customers. Ask them via surveys or one-on-one interviews which aspects of your product fell short of their expectations, and look at your product analytics to find out how users behave.

The approach to fixing the problem will vary depending on what’s behind your failed initial launch. If your product’s functionality is great, for instance, but something is amiss with your user experience, fixing the problem may be as easy as simplifying your user onboarding process.

Your best option is to talk with your customers and prospective users before your new product fails. That will help you identify potential problems early so you can iterate fast and deliver more value than your competitors. Want to learn more? Download our new guide Why Products Fail.

Jared Shaffer

Product Manager