Reasons Why New Products Fail and How To Avoid It?

Vladislav Gavriluk

Vladislav Gavriluk

CEO & Founder at Arounda

Launching a new product is an exciting and meaningful event for any business, especially a startup. It is also a complex and risk-laden undertaking. The reality is that, quite often, it becomes a disaster. According to the U.S. Bureau of Labor Statistics, about 20% of new businesses fail within their first year. The estimates of product failure vary significantly as the exact figure depends on the industry. The numbers are somewhere between 40% and 95%. Why do so many new products fail?

Since Arounda has helped to create or improve many products, we have some insight. In this article, we'll explain why new products fail in general, in the digital world in particular, and how to protect yourself from it. 

Table of Contents

What Are the Reasons Why New Products Fail?

Each product development stage presents its challenges and complexities. Feasibility analysis requires thorough market research and financial assessment. Product design involves tackling technical issues and aligning the features with customer needs.

Despite the substantial investments in time, resources, and capital, success is far from guaranteed. Here are 4 reasons why new products fail:

Lack of market research

Market research is an indispensable aspect of the product development process. It provides vital insights into market trends and the competitive landscape. Without this information, companies risk designing a product nobody wants or needs.

Common pitfalls in market research include:

  • Relying on outdated data.

  • Not considering a representative sample of the target market.

  • Disregarding cultural factors. 

Failure to identify customer needs

When a product fails to meet customer expectations, it struggles to find a market. Customers will only buy a product that solves their problem or meets their needs. Hence, understanding pain points form the basis for product development.

Feedback and user testing are pivotal in refining product features and functionalities. Companies can ensure that the final product aligns with expectations by engaging users.

Poor product differentiation

Products often fail to stand out due to a lack of unique features or similarities to existing products.

Companies should focus on innovation, quality, design, customer service, and brand story. Moreover, conveying a unique value proposition to the target audience is necessary.

Ineffective marketing and communications

Effective marketing and communications can make or break a product. They influence how potential customers perceive a product and determine its market reach.

Common mistakes in product marketing include unclear messaging and targeting the wrong audience. Underestimating the power of social media is also one of them. Even a great product may fail to attract attention and generate sales without effective marketing.

These are the key points that explain why new products fail in the market. External factors, like changes in consumer behavior, technological advancements, and political instability, also lead to product failure. Therefore, companies must continuously monitor the external environment and adapt their product strategy accordingly.

What About Digital Products Failures?

Product development and market success principles also apply to digital products. However, some factors are particularly pertinent in the digital space. In addition to the above reasons why new products fail, digital products have their own:

Poor user experience (UX) design

Poor UX design deters users and results in high churn rates. Thus, user-friendly design, smooth navigation, and intuitive interfaces are essential for digital product success.

Lack of Agile development and iteration

Agile development and iterative processes can quickly identify and rectify issues. It enhances product features and aligns the product with market needs. A lack of such processes leads to stagnation and failure.

Technological challenges and limitations

Digital products also face technological challenges and limitations: bugs, security risks, and scalability issues. These challenges need to be proactively addressed.

Poor project management

Project management impacts competitiveness and customer satisfaction in industries where time-to-market, such as digital product launches, is crucial. 

Poor project management often leads to quality issues. The team may ignore quality assurance, testing, and risk management steps. As a result, the final product may suffer from bugs, usability problems, or security vulnerabilities.


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Strategies to Avoid Product Failure

To enhance your business, learn from the past mistakes of major brands and try to understand why new products fail (with examples). We've highlighted some tried-and-tested strategies to prevent product failure:

Postpone the launch until the product is truly ready

There's an old saying, "You never get a second chance to make a first impression." It holds especially true for product launches.

Companies often rush product development to beat competitors, resulting in a subpar product. Instead of hurrying, take your time to refine and polish your product. 

A bug-free product at launch increases the likelihood of positive word-of-mouth marketing. It is invaluable in today's connected world.

Verify the product's distinctive features to influence buyers

The second strategy is to thoroughly test your product and ensure it has unique features or benefits that sway buyers. It should offer something unique or superior compared to what's already on the market.

Before you launch, test your product with a variety of potential consumers. It could be through focus groups, beta testing, or surveys. Their feedback will provide insights into the product's attractiveness. If your product doesn't stand out significantly, it might be time to return to the drawing board.

Do your best to help users understand your product

User-friendliness is a crucial factor in product success. If customers can't understand how to use your product within a few moments, they will likely abandon it. It is especially true in today's fast-paced world, where consumers value simplicity and convenience.

Invest time and resources into creating intuitive UI, UX, and straightforward, concise instructions.

Consider scalability and performance from the beginning

When designing a digital solution, it's essential to anticipate future user growth and plan for scalability. It ensures your product handles increased traffic without compromising user experience.

Performance optimization should be an ongoing effort throughout the product development lifecycle. Conduct regular testing and benchmarking to identify bottlenecks and areas for improvement. Implement robust monitoring and alerting systems to track key real-time performance metrics. 

Update and optimize code, database schemas, and caching strategies as necessary. Regularly review and upgrade your infrastructure to take advantage of new technologies in the field.

Set realistic goals and milestones

Establish clear goals and milestones for your product development process. Ensure these goals are achievable and meet market demands and customer needs.

Evaluate your team's capabilities, budget, time, and technological constraints. Be realistic about the resources available. Setting overly ambitious goals without considering these factors leads to unrealistic expectations.

Break down your goals into smaller, manageable milestones to make progress measurable. Engage individuals from different departments, such as product management, engineering, marketing, and sales.

Stay agile and be willing to adjust your goals as needed to adapt to changing circumstances. This flexibility allows you to seize new opportunities and address emerging challenges.


Seemingly simple and apparent things explain why so many new products fail. Companies can increase their chances of launching a useful product if they understand and address them. Success, after all, lies in having a great product idea and executing it well.

Arounda provides a comprehensive and compelling product strategy to move businesses in the right direction. Through our expertise and industry insights, we offer a winning approach that aligns with your goals and maximizes your chances of success. Let`s have a talk.

Vladislav Gavriluk
Vladislav Gavriluk
CEO & Founder at Arounda
I make sure our clients get the high-quality result from the beginning stage of the idea discovery & strategy to the final digital product.

Frequently asked questions

  • What are some common reasons why new products fail?

    One common reason why new products fail is due to a lack of thorough market research. With an understanding of the market and its needs, a product may meet consumer expectations and address their problems. Products also fail if they don't offer a unique value proposition. The lack of differentiation from existing offerings makes new products just another option among many. Also, if the target audience isn't aware of the product's benefits, it is less likely to buy.

  • What are the key factors to avoid failure?

    Conduct thorough market research to ensure the product meets a real need and offers a unique value proposition. Consider the competitive landscape and identify how your product can stand out.Quality and performance should also be top considerations. Your product must function as promised and meet or exceed customer expectations. Also, understanding your target audience and how to reach and engage them impacts success.

  • What are the risks of poor product quality or performance?

    Customers may express their discontent through negative reviews and spread negative word-of-mouth. The result is damage to the company's reputation. It also makes it harder to sell not only a particular product but also other products in the company's lineup.

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