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When understanding failure is the path to marketing success

Research into why new products are rejected can be key, says UCD’s Dr Michael Claudy

It is often said that success has many parents but that failure is an orphan. Nowhere is this more true than the often cut-throat world of modern business where queues rapidly form to take credit for successful product launches while no one wants to be in any way associated with a failure.

While this may be a natural human, albeit not very noble, response, it may also actually be damaging for business in the longer term. The rush to place distance between ourselves and failure means that we rarely, if ever, read case studies of anything but success, and if we don’t know why something failed in the first place there is little to prevent us making the same mistake again.

In this context, it is not altogether surprising that, when developing new products, companies often focus on the early adopters who have been quick to buy new products in the past rather than those who are resistant to innovation.

Fruitful

According to Dr Marius Claudy, lecturer in marketing at University College Dublin College of Business, the latter area – consumer resistance – can prove a more fruitful avenue of investigation when bringing innovations to market. Claudy, along with collaborators from Dublin Institute of Technology and North Carolina State University, has recently published research on this subject, which suggests that companies should aim to understand and acknowledge the reasons why consumers reject a new product or service and make counterarguments to bolster their marketing efforts.

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It's all about consumer behaviour and what Daniel Kahneman referred to as the psychology of gains and the psychology of loss.

“Businesses always assume that a new product has a relative advantage over others in the market,” Claudy says. “But consumers value what they have more than what they could potentially have. They favour the status quo and ask why they should change if what they have already works.”

Indeed, research has indicated that consumers tend to overweigh the value of what they have by a factor of three, while companies tend to overweigh the benefits of their innovative products by the same factor. There is a clear disconnect there, which helps to explain why 40-90 per cent of innovations, across a variety of product categories, never become commercially successful.

Screw-cap wine bottles

Claudy points to screw-cap wine bottles as an example of an innovation that initially faced consumer resistance.

“Screw-caps are still quite frowned upon in many European countries and there are connotations of a cheaper product associated with them,” he says. Yet they have actually been shown to provide a better seal and lower failure rate than their cork counterparts.

In Australia and New Zealand, the winemakers overcame this problem by coming together to promote the innovation and overcome consumer resistance by addressing their concerns with more or less one voice. Crucially, they all agreed to use the screw caps on high-quality wines, thus dispelling the image of cheapness.

Claudy adds that electric vehicles (EVs) face similar difficulties with widespread adoption despite their clear advantages over existing technology in terms of running costs and environmental impact. These advantages have proved insufficient to overcome the “range anxiety” factor, however.

“People say positive things about EVs but there is the factor of range anxiety where they fear that they won’t be able to find a charging point for their car when on a journey,” he says. “They are also quite happy with what they have already, so see little reason to change.”

Claudy’s research project applied behavioural reasoning theory (BRT) to this issue. This looks at the reasons both for and against the adoption of innovation and the fact that these reasons are not necessarily the opposite of each other.

For example, consumers may appreciate the advantages of EVs and have quite positive attitudes towards them but resist because of perceived range and cost issues. People who buy them may do so because of their environmental advantage, though it is extremely unlikely that those people who stick with internal combustion engines wilfully want to do harm to the environment.

Overcoming barriers

The implication is clear: promoting reasons for adoption is different from overcoming barriers that result in resistance. BRT allows for these different factors and reasons to be evaluated in a single decision framework, thereby offering a potentially very powerful tool to product developers and marketers.

Claudy’s research involved two studies carried out in the Republic among two different groups in relation to their attitudes towards, first, renewable energy (and, specifically, solar panels) and, second, car sharing.

In the first study, householders were asked about their intention to purchase a solar panel for their homes. The findings showed that while people see the benefits of solar panels, such as potential savings and environmental advantages, they also have good reasons not to adopt them, including high upfront costs, issues of compatibility with existing power supply, and performance risk.

It was found that the reasons against adoption clearly outweighed those in favour, which offered a plausible explanation for the slow uptake of this technology in consumer markets.

“In order to increase consumer intent to adopt solar panels into mainstream markets, managers should focus on overcoming barriers to adoption instead of over-emphasising the reasons for adoption,” Claudy says.

The second study was carried out among students and staff in a university and looked at the concept of providing consumers with short-term access to cars through a car-sharing service. Consumers sign up for the service, locate a nearby car on the internet, open and unlock it with a smartphone app, drive it, park it at a convenient location, and pay for it through their registered credit card information on the basis of time used and distance travelled.

Decision-making

Unlike in the first study, it was found that the reasons for adoption – convenience, flexibility and cost savings – had a stronger influence on decision-making than reasons against, which included security and availability concerns.

This finding reflects behaviour in the marketplace, where car sharing has been adopted ty a large consumer base in some regions and is rapidly growing in many cities around the world. The conclusion here is that this growth could be boosted still further if the companies involved addressed security and availability issues.

These two studies illustrate the need for context-specific research. The weight given to reasons for and against adopting a new innovation will vary according to the type of innovation involved. Companies should therefore tailor their marketing efforts to strengthen consumers’ reasons for adoption, while also addressing context-specific reasons against adoption. Such an approach could result in a significant drop in that 40-90 per cent failure rate.