09 August, 2015

Are there harbingers of failure in every market?

Melbourne Herald Sun, Thursday August 6, 2015

I’ve always had a leaning to orphans. I’m not alone in this - you may even recognise yourself here (or swear you are the exact opposite) - but I hate buying things just because everybody else does. For example I still drive my old Mazda Eunos. Is there anyone else still drives that marvellous car? I’m sure you could count them on your fingers and toes. But I love it and cling on even as the age becomes increasingly obvious.

But then I’m not one of those who queue for days for the latest Apple. I don’t even possess an iPhone or an iPad.

But I find there’s a whole marketing category that shares my oddness. They seem to unerringly find the product that nobody else wants, in the long run. They were pinpointed in a report in the American Marketing Association’s Journal under the title Harbingers of Failure. In other words, those who keep taking the road less travelled and can be a ready indicator of disaster.

The researchers, Eric Anderson of Northwestern University and three colleagues from MIT, claim that they found, “Some customers systematically purchase new products that flop. Their early adoption of a new product is a strong signal that a product will fail - the more they buy, the less likely the product will succeed.

“Firms can identify these customers either through past purchases of new products that failed, or through past purchases of existing products that few other customers purchase.”

To put a positive spin on it, he adds: “We discuss how these insights can be readily incorporated into the new product development process. Our findings challenge the conventional wisdom that positive customer feedback is always a signal of future success.”

This is a real torment for a marketer. Usually we carefully watch for early sales and then jump up and down and party when they materialise. But this can be quite the wrong reaction. If our vastly expensive new product launch depends on its success on the word of these Harbingers, we are marching our baby into the valley of Little Big Horn.

These remarkable findings were revealed after the analysis of tens of millions of purchases by 127,000 customers in 111 US stores. The criterion was that a product should be launched and eventually disappear from the major purchases section within three years. We have long known that 40 per cent of products will fail this test - and only a small number will survive into the future. But how could they pass through the thorough market reseach tests before then?

It could be that these Harbingers are a reason. They respond enthusiastically at the newness, the creativity, the niche placement of the product - whether it be a grocery item or a major piece of software - and the marketers rub their hands with glee. We’re on a winner! Yes, but, the rest of the market quickly climbs off this wagon and the expected triumph never happens.

What’s lost is not just the flopped product, but the precious shelf space it held through its death cycle - hugely valuable and denied to some other product in the queue that might have been a hit.

The good news is, say the researchers, that by identifying products that appeal to the Harbingers, you can avoid them and find more of the future winners.

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