Startup Junkies

America's Startup Booster Rocket Since 2004

Why New Products Fail

When it comes to new product introductions, you can either share the responsibility – or share the blame.

by Jill Konrath

“It’s our sales force, John,” complained Chris Morgan, product manager for the 5540. “They’ve really dropped the ball on us. All our research showed that if we came out with a product with the capabilities of the 5540, the marketplace would jump on it. Well, we did … and now, quite frankly, I question whether the sales force knows how to sell it.”

Unfortunately, this same scenario – or one very much like it – is being played out with increasing regularity these days at both large and small companies in virtually every sector of American business. To most managers, the question is an all-too-familiar one: Why does a high-quality product that’s priced right and introduced to the market at an opportune time end up as a failure?

All too often, it seems, the simplest conclusion is that the sales force is inadequate. On the other hand, there are two sides to every story. Let’s return for a moment to our fictional scenario and take a look at how the sales organization perceives the 5540.

“I don’t know who in the world ever thought the 5540 was our ticket to the big time,” grumbled senior sales rep Pat Johnson. “I’m approaching my best prospects. I’m telling them all about the 5540 and what it can do for them. But when I tell them how much it costs, they say, ‘Whoa – our problems aren’t that bad.’ They’re not willing to spend that much money. Marketing screwed up again.”

Can Chris and Pat both be talking about the same product? And if so, why are their perceptions so different? How could this well-researched, high-quality product – one that has seemingly been priced according to its value – be involved in such a struggle for acceptance in the marketplace?
These kinds of questions crop up over and over with new product rollouts. In most cases, they can be addressed and answered simply by examining the process of how a new product is introduced to the sales force.

DOING YOUR LEVEL BEST

By the time a new product is ready for market, companies have often invested millions of dollars and several years of time and effort in the project. At launch time, many companies – for whatever reason – close their pocketbooks. After all that expense, they suddenly try to find the cheapest way to bring the new product out.

They don’t want to pull their sales and management people out of the field for meetings or training. They shrink from the cost of additional tools or materials to assist in the selling process. Or they’re overly optimistic about the ability of their salespeople to quickly grasp a new selling strategy. In short, they just don’t realize that selling a new product may require an entirely different process from selling an existing one.

Prior to launching a new product, a company needs to analyze the relationship between the product and the customer. This relationship will in turn determine the level of the difficulty of the sale. Generally, most buyer/seller relationships fall into one of four categories:

Level 1: Existing Customer/Existing Product

When a sales reps calls on the same customer to sell a product extension of their existing line, the sale is relatively easy. The sales rep understands the customer’s needs and knows how decisions are made. The customer is familiar with the sales rep, the sales rep’s company, and knows what to expect.

Level 2: Existing Customer/New Product

When a new product is introduced to an existing customer, the difficulty of closing the sale increases slightly. The critical selling task is figuring out what problems the new product solves for customers and how it addresses their needs. The sales rep must then ensure the sales effort focuses on these areas.

Level 3: New Customer/Existing Product

The sale gets progressively more difficult as the rep ventures into new territory. New customers can be defined as: 1) those in a different industry; 2) those in the same industry but with no prior experience with the company; or 3) new areas within an existing customer’s business. Many times these new customers have different terminologies, ways of doing business, and key concerns. Their problems – and how the new product solves them – are unknown. But the product does have marketplace acceptance making it a less risky decision.

Level 4: New Customer/New Product

When a new product is introduced to a new customer or market segment, all the previous problems apply – and more. The sales rep doesn’t know the industry, the customers, their language, their challenges, or their way of doing business. The customer has no track record with the sales rep. The product is unproven. This is by far the most difficult level for salespeople to operate in.

LET’S GET REAL

In terms of buyer/seller relationships and their impact on new product introductions, Levels 2, 3 and 4 each present a unique set of challenges. To examine each in more depth, let’s look at what happened to three real-life companies that failed to recognize these essential differences:

Level 2 Example: Existing Customer/New Product

A major producer of microfilm equipment and supplies had been in business for years. Sales reps knew their customers well – so well, in fact, that over their entire career many reps had been calling on the same people, all of whom faced the same set of problems in their business.

Then the company introduced a new system with integrated facsimile capabilities. Although the new system enabled information to be instantly faxed, the buyer – usually a records manager – wasn’t evaluated on providing superior service. His job was to keep costs down.

In selling this new product, sales reps needed to do three things: 1) They had to be able to link the turnaround time to critical business issues – delays in making important decisions, meeting internal and external customer needs, and creating a competitive edge; 2) The financial ramifications of these issues needed to be quantified; and 3) New people needed to be involved in the decision-making process – people who valued the benefits of the new system.

Unfortunately, that’s not what happened. Because the company had sold to the same market for years, sales management saw little reason for extensive additional training. Instead, reps were given a day of product training, viewed a demonstration, and were sent into the field where they sold to the same old people in the same old way.

As a result, reps had minimal success – except when the head of the records department saw the system as a way to enhance his or her career by furthering corporate objectives.

Level 3 Example: New Customer/Existing Product

A consulting firm that specialized in quality improvement was a recognized leader in the manufacturing sector. The firm offered a broad spectrum of training courses and organizational consulting services. Most clients achieved substantial improvements and gave the firm glowing recommendations.

The consulting firm’s services were transferable to virtually any organization wanting to implement a quality improvement program. Market research showed that hospitals were a potent source of new business.

On the downside, hospitals constituted a challenging environment for a new product push. Decision makers in this industry expected vendors to understand the current issues facing hospitals, to know the industry trends, and to speak the language. They wanted consulting firms to have a firm grasp on process flow and the likely bottlenecks that would impede quality in a hospital environment. Furthermore, the only references holding any credence came from other hospitals.

To sell to this new market, sales reps needed to understand how a hospital is organized, how departments work together, what problems typically arise, what kinds of improvements are generally sought, and even who the hospital defines as “the customer” (usually it’s the physician, not the patient).

In addition, until the firm acquired references from other hospitals, sales reps needed to show how successes in manufacturing would transfer to the hospital environment. They needed to clearly articulate their strengths in solving quality problems. They needed to determine new ways to justify the substantial human and financial investments hospitals would need to make. Finally, they needed to figure out how to compete against a plethora of smaller quality consulting firms about which they knew next to nothing.

Unfortunately, the consulting firm’s new product launch addressed few of these issues. Because of the reps’ lack of knowledge about the hospital marketplace, the sales process never got off the ground. The result: The firm is looking for a new, easier-to-penetrate niche.

Level 4 Example: New Customer/New Product

An office automation company was widely recognized as providing superior computer hardware and software to administrative personnel. The company’s sales force was quite adept at selling to these end users. They knew how to galvanize their support so management felt confident choosing the company’s products.

But the computer industry never stands still, and new technology in networking and file sharing became available. The company decided to introduce a new UNIX system that linked workstations and enabled file sharing. The system also offered email (which was radically new at the time), database management, key word search, and a host of other features.

Meanwhile, the company’s customer base was changing. The Information Technology (IT) group was calling most of the shots now on computer purchases throughout the organization. Sales reps had few, if any, contacts in this group.

In addition to knowing everything about the new product – how it worked, what it could (and couldn’t) do, how to demonstrate it, and how it connected with other computer products – sales people needed to know the new IT customer and their key concerns. They needed to know how to get appointments with senior IT people, how they evaluated computer systems, and how upper management influenced the purchasing decision.

To its credit, the company realized salespeople needed intensive training on the new product. They developed a comprehensive program to bring reps up to speed on the system’s capabilities and its competitors.

However, they left out key information on the customer, their needs, and the sales process. One frustrated sales rep kept asking, “What problems does it solve? Why would someone buy it? How do they buy it? The answer was a familiar one: “As a salesperson, that’s your job to figure out.”

This, in a nutshell, was the weak link in the roll-out of this new product – and the ultimate cause for its poor showing in the marketplace.

THE WHOLE THING

Most new product launches are designed to bring the sales rep quickly up to speed on the capabilities of the product in the marketplace. Detailed explanations of product features and benefits are given. The unique strengths of the product and why it’s superior to what’s on the market are emphasized.

Training, if there is any, involves giving reps all the critical data they need to speak intelligently about the new product with customers. If the product is particularly complex, reps are also trained on how to use, demonstrate, configure and order it. For the most part, however, almost all training is product-focused, with a heavy emphasis on features and benefits.

The problem with this approach is that it prepares the sales rep to pitch the new product. Why is this a problem? Pitching means the sales rep does the majority of the talking on sales calls. Yet research into successful selling shows the most effective sales reps are those who ask the best questions and seek to understand the customer’s needs. They talk only when they’re confident they can share information on how their product can have an impact on the prospect’s business.

When sales reps talk on-and-on about the new product, they’re digging themselves a hole. Invariably, the customer asks about the price or if the product has specific capabilities. In essence, the customer takes control of the selling process and sales reps find themselves trying to squelch objections and get back to problem solving.

At this point it’s usually too late. The customer has already decided the price is too high or that features are inadequate. Needs haven’t been identified. The prospect is lost.

This happens every time the sales rep focuses on the product instead of customer’s needs. New product launches that hype features and benefits prepare the sales rep to do just that, ultimately leading to failure.

What happens when companies fail to recognize that selling new products differs substantially from selling existing products? Here are several likely outcomes:

The best prospects will be lost because sales reps “pitched” them. The customer’s numerous objections halt the sales process.Sales results fall significantly below expectations.The “window of opportunity” the company invested millions of dollars to capture is wasted as the sales force struggles to figure out how to sell the product.The lifetime profitability of the product is significantly reduced since it’s based on capturing the “window of opportunity” and getting a quick start on sales of the new product.Return on Investment (ROI) will be delayed.Competition develops inroads with existing customers or prevents inroads into new customers and industries. Current market share may fall and projected market share won’t be realized.The sales force develops a negative perception of the product as do potential customers; these perceptions are exceedingly difficult to change.Finger-pointing and blame become rampant between Sales and Marketing, negatively impacting their ability to work together.

Any one of these ramifications is extremely painful for an organization, and for the individuals and teams that have a vested interest in the new product’s success. Still new products continue to be handed off to the sales organization in a way that’s destined to lead to the above consequences.

ONE STEP BEYOND

The key to the success of a new, state-of-the-art product (one that’s introduced to the market at an opportune time, priced right, and utilizes the appropriate distribution channels) is in the final hand-off of the new product from Marketing to Sales.

If this hand-off is done correctly, the organization can capitalize on its “window of opportunity,” keep the competition at bay, increase its profitability and ROI, and achieve its projected sales results.

The most critical element in ensuring an effective hand-off is the collaboration of the marketing, sales, and training departments. The participation of all three groups in introducing a new product is crucial to its success. Given this, it’s paramount that grudges and infighting from previous introductions and conflicts be put aside.

The goal of the new product launch team is to determine exactly what the sales organization needs in order to bring the product to its customers in a way that generates the desired results.

Initially, these teams should specifically identify what the salesperson must know in order to sell the new product. This includes research, compiling, and delivering all the requisite product knowledge and training, as well as addressing the following questions:

The Market

What is the positioning of the new product (i.e., customer type, market segment, or industry niche to which it’s being targeted)?What key information do sales reps need to know about a particular customer type, market segment, or industry niche?What new terms and vocabulary should sales reps learn to successfully sell to this market?
Current Situation

How are customers currently handling their needs for this type of product?What are the key problems, difficulties, or dissatisfactions the new product is designed to solve for the targeted customer?What are the implications of these problems, difficulties, or dissatisfactions within the customer’s organization? How will the customer benefit from the new product?
The Sales Process

Who should sales reps call on in the customer’s organization?

Where and how are decisions made?What are the key concerns of the people involved in the decision process?What does the sales rep need to do to get an appointment?What questions need to be asked to uncover the customer’s problems and develop them into needs requiring immediate resolution?How can the sales rep get the support of people in the customer’s organization so they will sell internally?How can the cost of the new product be justified?What questions will the sales rep most likely be asked? What are the most effective responses?Who is the competition?What are competitive strengths, weaknesses, and differentiators?

Don’t stint on budgets when introducing new products. It’s precisely at launch time that companies should open their pocketbooks and invest whatever it takes to prepare their sales organization to march triumphantly into the marketplace. The new product launch team needs the commitment of the organization, both financially and in terms of human resources to:

1. Design tools for the sales rep that highlight the customer’s current situation, potential needs, the sales process, and appropriate strategies and tactics to use on the sales call.

2. Develop a kickoff plan that focuses on customers and how the new product addresses their critical needs.

3. Create training programs that go beyond product capabilities to focus on how to sell. After sales reps are trained, they should be able to say, “I understand the product. I know who to call on. I know what their needs are and how this product addresses them. And, most importantly, I know the sales process I need to follow to uncover and develop these needs so I can get the business.”

4. Develop implementation processes that ensure sales management supports the selling efforts with appropriate coaching and feedback.

THE HIGH COST OF FAILURE

Companies that fail to prepare their sales forces with the knowledge and skills needed to sell their new products are forever destined to struggle for marketplace acceptance. By setting themselves up to fail on their new product launches, it’s unlikely they’ll achieve projected sales results.

On the other hand, companies that arm their sales forces with the critical knowledge and skills needed to sell a new product will be able to capitalize on their “window of opportunity,” maximize their sales results and achieve the success they deserve – and have earned.

This article is by Jill Konrath of Selling To Big Companies. Her web site is full of resources to help consultants, entrepreneurs and salespeople win big contracts with large corporate accounts. For a free newsletter or more information, visit http://www.sellingtobigcompanies.com

0
0
0
0
0
0
0
0
or copy the link

Leave a Reply

Your email address will not be published. Required fields are marked *

Recent Comments

Categories

Archives

Seed Capital

startup support