Failing fast still carries significant risk
The logic of failing fast, which may also apply to e-commerce and test-market strategies, centers on minimizing upfront investment in order to improve the ROI of innovation. What failing fast cannot address, however, is the opportunity cost of launching with ineffective strategies. What if your fast failure could have been a sustainable success with some simple tweaks to messaging or formulation or marketing support?
Some of the inherent risks of a fail fast approach include:
- Unsuccessful products damage credibility with retailers and consumers. If a consumer didn’t like Brand X when they first tried it, why would they spend money to try Brand X 2.0? And if a retailer delisted Brand X due to poor velocities, why would they give Brand X 2.0 the same shelf space and support?
- Minimal insights are available to diagnose the cause of failure. Was trial interest too low? Were we spending enough on marketing to generate broad awareness? Did we optimize our marketing plan? These questions and more are all addressable pre-launch. Volume forecasting can diagnose causes of lagging sales and quantify opportunities for improvement.
- At what point should we consider a product a failure (when do velocities typically mature)? In a cross-category analysis of sales velocities, we’ve found that if you start small, you typically stay small. Products that grow and products that decline typically reach their maximum velocity in the first two-four months. That means that even if you start with a low sales velocity, it’s likely to decline instead of increase. Discovering a poor sales velocity four months into launch means you’ve wasted valuable time that you could have used to perfect your launch strategy.
The largest drawback of failing fast is having to fail in the first place.
When it comes to achieving sustainable velocities, the bar for success is higher than one may realize. BASES research indicates that new products that achieve velocities (velocity = sales / distribution) in the top 40% of the category are 3X more likely to sustain sales and distribution into year 2.
As you may imagine, that threshold is not easy to achieve: Only 30% of new products generate velocities in the top 40% of the category.
By forecasting sales and predicting velocities, a product’s likelihood of sustaining sales can be determined long before that product is launched (or even produced).
Failing fast promises freedom from the cost and timelines of pre-market research. However, if you apply this fail fast methodology to in-market launches, the benefits fade and a suite of new, formidable risks emerge. The correlation between strong velocities and sustained success allows you to fail fast in a less risky environment (or fail safe), likely reducing costs, timing, and risk to equity. Through rigorous pre-market consumer feedback on simulated test markets and forecast simulators, you can virtually fail safe (and even faster) and open up opportunities to win safe in reality (and even bigger).
Contributors: Laura Casi, Ryan Pearson, Chloe Mark and Anna Campbell