4 Reasons Why a Startup Product Launch Can Fail (with examples) - IQVIS Inc.

4 Reasons Why a Startup Product Launch Can Fail (with examples)

Startups are notorious for their higher failure rate as nearly 90 percent of them go out of business within two years of operations. Unlike the popular perception, startup product failure is not always due to the product idea. Sometimes startup products fail even when the idea is awesome and resources are available. Research has endorsed that most of the new products fail because of entrepreneurs’ product-related decisions.

Here is an overview of statistics on leading causes of small business failure:

1. Incompetence – 46 percent

2. Unbalanced experience or lack of managerial experience – 30 percent

3. Catchall category (includes neglect, fraud, and disaster) – 13 percent

4. Lack of experiences in line of goods or services – 11 percent

According to the US Bureau of Labor Statistics, “50 percent of all new business make it to their fifth year and one-third make it to their tenth year”.

The reasons for startup product failure are countless, but addressing a few will help you develop a successful product development and launch strategy one.

In this article, we’ve listed down 4 key factors that lead to product failures. Before you head towards your new product launch, make sure you’ve read them and made a plan accordingly.

Here are those……

1. Product Does Not Solve the Problem

The idea behind a product launch is to provide a solution to the consumers (on a mass scale or on a small one). No matter, how big you invest and what resources you have utilized, product will fail drastically unless you evaluate the pain points of masses. Here, the brand commits the classic mistake of ignoring modern customer experience and going for something that seems charming to you.


RJ Reynolds introduced smokeless cigarettes in the late 80’s to create a cleaner alternative of traditional cigarettes. It tasted like sh** as said by the manufacturers own CEO.

However, the customers were not sure whether the smokeless cigarettes were less harmful than the traditional ones. Four months later, smokeless cigarettes were pulled off the market, as smokers didn’t try it, while non-smokers didn’t bother to have a try.

The solution is to meet with masses, speak to them, ask what is missing, and what more they need and hint them about what will be their reaction if so and so product is offered. Their answers will give you an idea on whether your product will fail to grab the attention of target market or succeed.

2. Failing to Recognize the Shifting Trends

Why someone spends money on a product? Simply, because it offers some value in terms of money, convenience and time. The idea of the new product is either adding value to the existing product or simply a new concept.

However, many of the new product developers fail to understand whether the product is a substitute for the competitor’s product or not. Without doing market research, they dive into the market that is already saturated and filled with customers.


Consider the example of Betamax by Sony, the first company to offer video recording tape in 1975. Sony (on the other hand) was also working on recording video data on magnetic tapes. In 1976, JVC introduced VHS format and from there on format battle began.

The reason for failure was that VHS could hold two hours of video content while Betamax offered only one hour of recording. As a result, production companies decided to go for VHS instead of Betamax. In 1988, Sony decided to accept the defeat and began producing VHS.

What is the solution in your opinion? In our opinion, the Sony should have analyzed the future trends way before the new product launch.  Video recording of just one hour is definitely not enough and Sony must have analyzed the competition that was growing in the VHS and Video Recording consoles.

3. Sole Reliance on Branding

Strong branding doesn’t mean that your new product launch will be a success. Few brands are known for targeting the specific niche and aimed to offer products that are centered on their core product. However, the problem is when they introduce something outside their core product and customers are not willing to pay for what they are offering for many years.


Colgate introduced Colgate Kitchen Entrée. The concept was to offer Colgate meal to the consumers and then they would brush their teeth with Colgate toothpaste. The product wasn’t able to capture the market and was pulled from the shelves of the supermarkets.

The idea was not bad, but the strong branding of Colgate in oral products was stronger than what they offered lately. It is important not to confuse your customers with your brand image. It was better to research and find whether the name was good. Using the same name can be somehow successful, but the product categories in case of Colgate was much diverse.

4. Pricing in Terms of Value

When it comes to pricing the product, a number of companies failed to win the consumer’s heart. Even though the product offer value proposition in terms of money, but when it comes to consumers, are they willing to pay such a high price.

The answer is “No”.


If we go back to 1993, Apple launched a handheld device named “The Newton” that was overpriced at $700. On the other hand, some observers consider poor handwriting recognition as a reason for the product’s failure, yet the price tag of $700 was excessively high for consumers to afford.

The reason behind its failure was not only the price but also the value it offered in terms of sluggish handwriting recognition. Consumers don’t just go for the brand name and invest blindly to get the product. They also evaluate the value in terms of money. Apple, in this case, had overpriced the PDA and failed to capture the market.


The given examples indicate that irrespective of your size, type, and industry, a product may fail to capture the market if you do not make the right strategic choices.

How Can We Help?

At IQVIS, we aim to help startups and enterprises in developing and growing successful products. Whether your challenge is development or growth hacking, we can help you cope with it and build a strong brand. Get in touch with your pain point and our experts will be back with a practical advice and solution.

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