Capital equipment companies invest millions of dollars developing new products to improve profitability and market position. However, even when you execute the development program flawlessly, it can fall apart at product launch.
New product launches are high-risk events that can hurt profitability, market position, and reputation when things go wrong. Here are five of the most common product launch failures and how to avoid them.
Money Left on the Table
Pricing a product wrong or over configuring it will erode profit margins. Make sure you base that pricing on value and keep base configurations to the minimum market expectation. Price extended capabilities and features separately.
Make sure that you’ve equipped your sales force to articulate your value proposition and that they buy into it. A vigorous, well-articulated, value-based pricing defense will make them better negotiators.
High Support Costs and Unhappy Early Adopters
When a product goes to market and doesn’t perform as expected right out of the box, two bad things happen; your support costs skyrocket, and your early customers come down with a case of buyers’ remorse. This combination can stall a product launch.
Two failures in product introduction execution create this situation. The first is failing to adequately test the new product in the same manner as your customer will use it at your factory. As a result, you discover early product defects at your customers’ sites where they cost you more to fix and disrupt your customers’ business.
The second is setting selling specifications beyond the product’s capability. Consequently, warranty costs will soar while the whole organization scrambles to fix broken promises.
Don’t skimp on the testing phase of your development program. When the testing is complete, take the time to formally review test results vs. target specifications before you start making customer commitments.
When your customers stop buying your existing product in anticipation of the new product too early, you get a revenue chasm. To avoid this, carefully select the customers who are allowed a pre-announcement look at your new product.
In addition, it’s essential to create a plan with the sales team detailing how you will transition each customer to the new product.
Finally, during “voice of the customer exercises” leading up to the product launch, be vague enough about your new product plans to give yourself a cushion on release timelines.
Nobody wants a warehouse full of parts for the old product, but you’ll get one if you fail to plan for the product transition. Early in your launch planning, create a production plan that forecasts the new and old product shipment mix for the six months before and the twelve months after the launch date.
Nobody Wants to be First
In the case of capital equipment, customers are often wary of buying new systems before somebody else has vetted them. To avoid this, ensure that product validation testing reflects the real-world customer environment and includes the data in your selling materials.
Also, don’t let “beta” be just a code name for early production systems that aren’t quite ready. Use a formal beta process to mature the system with a handful of key customers. Get testimonials from these early adopters to help you calm nervous prospects.
Finally, keep a demonstration system maintained and operated by a well-trained staff in pristine condition. Nothing kills the customer’s view of a new system’s maturity faster than a failed demo.
When you take the steps necessary to avoid these five product launch failures, you’ll be on your way to a smooth production ramp, a better-prepared sales force, happier customers, and a faster time-to-profit.