Why products fail (Part XVIII)

Résumé détaillé

In our last series, we discussed how unrealistic ROI expectations can kill a product before they mature. Since this is ...

In our last series, we discussed how unrealistic ROI expectations can kill a product before they mature. Since this is a very serious and well-overlooked factor that has led to the disappearance of many products, it becomes pertinent to speak more about it this week.

When investors are not patient enough in relation to market realities, it will lead to the products being overpriced when compared to their peers, and this leads eventually to a decline in sales and a gradual extinction.

Toyota’s Toyopet failed in 1950s America: underpowered for highways and overpriced against domestic alternatives. Toyota withdrew, retooled and returned a decade later with the Corona, rebuilding costs and pricing around American consumers. The decisive change was not engineering but the financial model underpinning commercialisation. Toyota’s leadership learnt that American buyers would not pay prices designed to recover investment on a Japanese timetable. Resetting the payback period was essential to aligning the product with market realities and enabling its commercial success.

Every product has an appropriate price for its market at a particular time, yet businesses routinely exceed it, usually because of investor pressure rather than market misjudgement.

Pricing above what consumers will pay slows volume growth, limiting economies of scale and keeping unit costs high. Cutting prices then becomes difficult without destroying margins. The business enters a spiral: prices are too high to generate volume, while volumes are too low to support price reductions. Meanwhile, competitors with more realistic financial structures capture consumers. The resulting disadvantage reflects a mismatch between investment expectations and market realities, rather than a simple pricing error.

In the Nigerian beverage market, several premium product launches have stalled because the price required to recover investment was positioned above the threshold that the target consumer segment would routinely…

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Début de l'article, extrait de BusinessDay. Pour lire la suite, ouvrez l'article chez le média.