Accepting failures and exiting a new product from the market is not an easy decision. It is not something that marketers plan for. Hence the most common response organisations give when faced with a failed new product is to ignore it. But is that the right thing to do?
Planning for a new product exit is as important as planning for its market launch. One cannot simply withdraw it from the market place without so much as a word. There are many stakeholders involved in the product by this time — distributors, retailers and even consumers. The last segment is particularly important; just because a new product has been deemed a failure does not mean it has zero appeal or relevance to all consumers. This is where formal communication becomes important.
Two steps of exiting
Exiting a new product involves two broad steps — communication and execution.
Communication : This involves keeping everyone in the business chain informed on the reason and timing of the exit. This can take place only after there is internal alignment on the reason of the exit.
Since a new product is a cross functional effort, the marketing department needs to call for a formal meeting and make the announcement of the new product’s performance, which hasn’t been up to the mark. And that the company is withdrawing it from the market. Other functions may demand answers and explanations, since much of their energy and time had gone into developing and launching the new initiative.
Communication should also be external. As mentioned earlier, trade and distributors should be taken into confidence. They put in financial investments into the project and hence need to be told how they will be compensated for the loss in business due to this. The best way to achieve this is by keeping them continuously involved during the performance tracking process so there are no surprises later.
Execution: The second step requires a fair amount of planning. Some questions to be asked at this stage include which markets to exit from, which specific product lines to exit from (within the non-performing product range) and the timing of exit.
As in new product planning, this decision too needs to be made after a detailed discussion with all departments. And the implementation plan is to be communicated to trade. Much personal effort is required in this, since the trade may still be dealing in other products of the company. The exercise of exiting should be done as pleasantly and as clearly as possible, so as not to affect other businesses.
Unwillingness to face failures
However, many organisations refuse to accept that the new products have failed. This could be due to several reasons.
~ Attachment of top management : Many a times, top management attaches itself to the development process, maybe because it was their idea and there is high ownership. So they aren’t able to see the failures objectively.
~ Investment : The company may also believe that a huge investment has been made in it, so they don’t have the heart to close the tap on new products. This is faulty thinking, since those costs need to be treated as sunk costs and further losses should be avoided.
~ No replacement : Another reason why new product failures are not accepted is because there is no replacement for them existing in the portfolio. Till such time this is made ready, the company believes that there is no point exiting the new product.
~ Presence of competitors : Finally there may be the presence of a competitor that prevents the company from withdrawing its failed product. The company may think that it is better to give some alternative to competitor, than none at all, and hence persist with the new product.
Whatever the situation, it is important to face new product failures and work out a plan for their systematic exit. This ensures that the marketplace image of the company is salvaged in a timely manner.