In the big book of product failures, there are a few examples that stand out as so colossal you have to wonder what the company was thinking. There's nothing like negative gross profit margins to run a company's day. Still, others seem to have just been a case of bad timing, bad marketing and bad luck. Below we'll look at six reasons why products fail, and the products that prove it.
- TimingIn some cases, a luxury product that's been in planning stages for years is set to launch just as a major recession is starting. This was the case with the Ford Edsel. The Edsel has become synonymous with failure, and it is well known as a marketing catastrophe, but the 1958 recession certainly played a large part in its undoing.
Sometimes a product is just "ahead of its time," and the market for it just doesn't exist, like the precursor to popular PDA devices, the Apple Newton MessagePad. This kinda-clunky PDA had a few shortcomings - most famously, its inability to live up to the claim of understanding handwriting - but more than that was its release at a time when paying $700US for a PDA seemed absurd.
Today, if there was a PDA that came out and revolutionized the industry, $700 would seem like a bargain. (The time will come when you'll be the one explaining these obsolete technologies. Learn more in Technology Your Kids (Or Grandkids) Will Laugh At.)
- Not Living Up To The HypeThere's nothing worse than when the public feels like they're being tricked. This happens when something has hyped-up marketing, but the product is pretty ho-hum. It's another reason why the Edsel failed, as Ford had positioned it as a cutting-edge new automobile, but the public saw it as more of the same for a higher cost. This poor positioning cost Ford $350 million, a huge sum in 1959.
McDonald's also fell prey to this with the release of the Arch Deluxe menu in the '90s. No one was fooled when Mickey-D's claimed to have moved into the fine dining racket just by slapping a tomato on top of a burger. McDonald's reportedly spent $100 million on advertising the failed line. For another example, don't forget the Windows Vista saga.
- Prohibitively Strong BrandingA strong brand can be a blessing and a curse. Consumers trusted Colgate for toothpaste, but it didn't make sense when that name was put on the Colgate Kitchen Entrees. Connecting the taste of food and toothpaste was off-putting for the consumer. With the McDonald's Arch Deluxe fiasco, McDonald's name was too strong as a value burger joint for anyone to take the "dining for adults" line seriously.
- Fixing What Ain't BrokenCompanies that are already successful sometimes try to improve themselves but end up scaring off their already loyal consumers. This is best illustrated in what is known as one of the worst product failures in history: "New Coke." In 1985, Coca-Cola was doing fairly well, but was worried about losing more market share to Pepsi. There was a $4 million market research project stating that Coke drinkers would prefer the new taste, but when it came down to it, they still wanted the original.
Crystal Pepsi is another good example. Making a clear cola did not entice non-cola drinkers - it just confused Pepsi's branding.
- Cross Contamination - Mixing Two Successful Products Into One Big FailureIt seems counterintuitive that combining two successful products or companies can somehow bring about disaster, but it happens. Just think of the combo of peanut butter and jam in one bottle or Kellogg's disastrous milk-with-cereal packaging campaign Cereal Mates.
Another example is the recently failed merger: AOL Time Warner. Though the AOL Time Warner debacle had a lot to do with management, timing and meshing of company culture, it goes to show that taking two successful things and combining them can lead to unmitigated disaster.
- Not Making The Right Business PartnersSony's Betamax and Toshiba's HD DVD are perfect examples of this. Betamax was widely regarded as being superior to VHS, but its higher cost meant it wasn't picked up by the big distributors, which led to its downfall.
HD DVD was like the VHS of the DVD battle, because it cost less than Blu-Ray and held less information, except that HD DVD lost. Certain studios (Fox, Sony, Walt Disney), Sony's Playstation 3 and retailers like Wal-Mart and Best Buy all sided with Blu-Ray, leaving Toshiba's HD DVD at a disadvantage because it had less available titles and sales outlets. Like Betamax, this caused a chain reaction where fewer films were released for the less-available format, and Toshiba eventually stopped producing HD DVD players in mid-2008.
Toshiba's loss from HD DVD is thought to be near $1 billion. (As technology advances, some industries become obsolete. Follow the trends that will affect jobs, investments and your purchases in 4 Industry-Changing Tech Trends.)
The Bottom LineSometimes there's no accounting for the failure of a product. Even if the product is better than competitors, has strong market research and a huge advertising campaign, it can still fail. A look at the above reasons shows that failure has many faces and is often unpredictable.