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How common is new product failure and when does it vary?

Authors:
Kirsten Victory at University of South Australia
Kirsten Victory
Magda Nenycz-Thiel at University of South Australia
Magda Nenycz-Thiel
John Dawes at University of South Australia
John Dawes
Arry Tanusondjaja at University of South Australia
Arry Tanusondjaja
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Abstract

This study aims to explore how common new product failure is in consumer packaged goods (CPG) categories and investigate the conditions in which the new product failure rate varies. This study analyzes 83,719 new stock-keeping units (SKUs), which were introduced over 8 years (2002–2009) across 31 CPG categories in the USA. Failure is the permanent cessation of sales, which is measured in consumer panel data. We find that one in four (25%) new SKUs are no longer bought 1 year later—a rate that increases to approximately 40% 2 years post-launch. New SKU failure was more likely for new launches that were introduced into higher revenue categories and by smaller share parent brands. Our findings can be used as a resource to aid marketing practitioners’ understanding regarding how common failure is for new CPGs and when there is greater associated risk.
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How common is new product failure and when does it
vary?
Kirsten Victory
1
&Magda Nenycz-Thiel
1
&John Dawes
1
&Arry Tanusondjaja
1
&
Armando Maria Corsi
1
Accepted: 3 January 2021
#The Author(s), under exclusive licence to Springer Science+Business Media, LLC part of Springer Nature 2021
Abstract
This study aims to explore how common new product failure is in consumer packaged
goods (CPG) categories and investigate the conditions in which the new product failure
rate varies. This study analyzes 83,719 new stock-keeping units (SKUs), which were
introduced over 8 years (2002–2009) across 31 CPG categories in the USA. Failure is
the permanent cessation of sales, which is measured in consumer panel data. We find
that one in four (25%) new SKUs are no longer bought 1 year later—aratethat
increases to approximately 40% 2 years post-launch. New SKU failure was more likely
for new launches that were introduced into higher revenue categories and by smaller
share parent brands. Our findings can be used as a resource to aid marketing practi-
tioners’understanding regarding how common failure is for new CPGs and when there
is greater associated risk.
Keywords New products .New product failure .Benchmarking .Consumer packaged
goods
https://doi.org/10.1007/s11002-021-09555-x
*Kirsten Victory
Kirsten.Victory@MarketingScience.info
Magda Nenycz-Thiel
Magda@MarketingScience.info
John Dawes
John.Dawes@MarketingScience.info
Arry Tanusondjaja
Arry.Tanusondjaja@MarketingScience.info
Armando Maria Corsi
Armando.Corsi@MarketingScience.info
1
Ehrenberg-Bass Institute, University of South Australia, Level 4 Yungondi Building, North
Terrace, Adelaide, SA 5000, Australia
Marketing Letters (2021) 32:17–32
/ Published online: 14 January 2021
Content courtesy of Springer Nature, terms of use apply. Rights reserved.
... A similar rate is also seen in purchasing data for new stock keeping units (SKUs) (e.g. Victory et al., 2021), of which many are from established brands (line extensions). A 40% rate is better than the widely accepted 80%, but this is still a significant risk when it can equate to millions of wasted investment. ...
... Barczak et al., 2009;Cooper et al., 2004;Cooper and Kleinschmidt, 1995;Griffin, 1997;Hultink et al., 1997;Hultink et al., 1998;Hultink et al., 2000;Knudsen et al., 2023;Markham and Lee, 2013;Page, 1993). These studies typically sample new products projects/lines, not single items, making them closer to new brands/subbrands with multiple SKUs grouped together (Victory et al., 2021). ...
... A recent movement has championed the use of observed measures to evaluate new product success (e.g. Salnikova et al., 2019;Victory et al., 2021). Research using observed measures, like survival, tells us how long new products last but it does not tell us how they performed while in the market. ...
Are there generalizable patterns in line extension performance?
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  • Jul 2024
Purpose New product introductions, particularly line extensions (LEs), are common in consumer goods categories. Despite their commonality, the success of LEs are not guaranteed. The purpose of this study is to provide brands that introduce LEs a benchmark about what success to expect. Design/methodology/approach This study investigates the success of 36,994 LEs in each quarter for the first three years after introduction. Four indicators are calculated using consumer panel data to benchmark how long LEs survive (failure rate), how competitive they are in the category (market share) and how they are adopted by category buyers (penetration and repeat buyer rate). Findings Most LEs survive after the first year, but many cease to exist or perform well in the long term. Around 50% of LEs fail a year after launch, but this failure rate halves once seasonal LEs are removed. Failure rates start to approach 80% after three years. Most LEs do not perform better than existing products. Around three in four LEs have a market share or penetration near or below the category norm. Although this percentage decreases the longer after launch, most LEs are still below the category norm. Practical implications These new product success benchmarks provide guidelines to practitioners about what success the “typical” LE will achieve. This research can help guide new product investment decisions because it provides context on what is feasible to achieve. Originality/value Four market success measures are used, a departure from past benchmarking research which uses practitioner evaluation on metrics seldom used in practice. The authors provide guidelines about when and how to measure LE and new product success more broadly.
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... From a market perspective, innovation failure is also conceptualized as an unsuccessful introduction to the market (e.g., Heidenreich and Handrich, 2016;Välinkangas et al., 2009;Victory et al., 2021). While these conceptualizations are useful for understanding innovation failure as unsuccessful attempts to innovate, they do not consider how failure arises within and from the innovation process. ...
... Learning from innovation failure Victory et al., (2021) Permanent cessation of sales for new products one and two years after launch. ...
What fails and when? A process view of innovation failure
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Research on innovation failure has proliferated lately but with little theoretical attention given to the diversity of the concept. Using process theorizing, we present a model and propositions to understand how a firm's anticipation and value toward failure depends on the type of failure (task versus outcome) and the phase (divergent versus convergent) and point (early versus later) 'within' the process that the failure occurs. Using the anticipation-value stances, we then present a typology of four modes of innovation failure that can arise 'from' task and outcomes failure in the innovation process. The four modes (and associated learning response) are unsolicited failures (prevent-alert-eliminate); hazardous failures (predict-modify-mitigate); fortuitous failures (probe-expose-extrapolate); and excursive failures (facilitate-analyze-harness). To help explain the ideas in our process model and typology, we use the well-known IDEO shopping cart innovation project as an illustrative example. Together, these contributions provide contingency oriented insights on how failure varies and journeys within and from the innovation process, which helps researchers and managers to better understand the related causes, effects and learning responses.
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... While it would be difficult to overstate the influence of the 4Ps even today, there were immediately rather obvious problems for the "best marketing mix wins" model. For example, even well-resourced corporations regularly launch carefully researched and consumer-tested new products and brands only to see them fail (Victory et al., 2021). Failure is even common for new product launches that have been judged 'winners' by consumers and industry experts (Victory and Tanusondjaja, 2023). ...
... Furthermore, new launches have often had the opportunity to lie in wait and learn how to create 'superior value' over the options available in the market. Some new launches might have this opportunity, but there are still many new product failures (Victory et al., 2021), including new private label products (Salnikova et al., 2020). Even many new launches voted 'Product of the Year', which are innovative in some way and are consumer-voted successes, end up being withdrawn (Victory and Tanusondjaja, 2023). ...
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... E. Freisinger and I.P. McCarthy and Kraemer, 2016;Välikangas et al., 2009;Victory et al., 2021). While these conceptualizations are useful for understanding innovation failure as unsuccessful attempts to innovate, they do not consider how failure arises within and from the innovation process. ...
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