There’s an interesting new perspective about certain early adopters of new products: Rather than being a predictor of success, they could well be a harbinger of failure.
Four researchers – Eric Anderson of Northwestern University along with Duncan Simester, Song Lin and Catherine Tucker from MIT – have come to this conclusion after analyzing actual purchase transaction data collected from consumers.
Their findings were published in the January 2015 edition of the American Marketing Association’s Journal of Marketing Research.
Specifically, the researchers mined a comprehensive dataset of purchase transaction information collected by a large retail chain that sells consumer packaged goods.
What the four researchers discovered was that there are certain customers whose decisions to adopt a new product are a signal that the product will likely fail rather than succeed.
Moreover, their analysis revealed that because these early adopters have preferences that aren’t representative of other consumers in the market, these adoption patterns can be isolated from those of other customers, enabling a company to predict the propensity of a new product to succeed or fail.
These “harbingers of failure,” as the researchers dub them, are consumers who fall into two categories:
- They purchase products that are “flops” – the ones that end up failing and being removed from the market.
- They purchase products that, while remaining available in the market, are “niche” offerings that few other customers buy.
Either way, the consumers exhibit purchase behaviors that are an “unrepresentative” subset of purchasers.
The study suggests caution when looking at aggregate positive sales figures in product test markets. Instead of considering sales figures in the aggregate, companies should drill down and study the characteristics of the buyers – whether they are ones who typically back winners or losers.
The report draws ties to several “historical” brand introductions in which purchasers of the Swiffer® mop correlated with Arizona Iced Tea® – both winning product introductions – as compared to purchasers of Diet Crystal Pepsi® and Frito-LayTM Lemonade – both of which bombed.
According to the researchers, the success of the second product (Arizona Iced Tea) could have been foretold by analyzing the sales behavior of the first (Swiffer).
Similarly, the failure of Frito Lay Lemonade could have been foretold by looking at the disappointing sales behavior of the first (Diet Crystal Pepsi).
Because of the extensive database of transactions tied to individuals that is available today thanks to bar-code scanning, loyalty programs and the like, many large consumer product firms have access to a wealth of granular data. The study contends that more people should use these data to improve their share of product introduction successes.
The full report, including research methodology and statistical analysis, can be viewed here.