When certain consumers bought its lemonade, did Frito-Lay groan?
Positive customer feedback, to say nothing of positive sales, is always a good sign of a new product's potential success, right? Not necessarily, says a new study in the Journal of Marketing Research. According to the study, there is a small set of consumers who, time and again, purchase and rave about new products that consistently flop. Positive feedback from those customers, whom the study authors name "harbingers of failure," actually means that a product is likely to bomb.
"Certain customers systematically purchase new products that prove unsuccessful," write authors Eric Anderson (Northwestern University), Song Lin, Duncan Simester, and Catherine Tucker (all MIT). "Their early adoption of a new product is a strong signal that a product will fail."
The authors identified those customers either through past purchases of products that failed—think Diet Crystal Pepsi or Frito Lay Lemonade—or through past purchases of existing products that few other customers buy. They used data from 2003 to 2009 from a large chain of American convenience stores selling beauty and healthcare products, food, and general merchandise. A product was judged a flop or failure if it was no longer being purchased after three years on the market. Out of nearly 130,000 customers sampled, more than 16,500, or about 13% of the total sample, qualified: 50% or more of the products they purchased flopped.
The analysis showed that the customers who purchased flops in a first round of purchasing were more likely to purchase flops in a second round, and that this signal was even stronger if the customer had made repeated purchases of the failing item. An additional study showed that "harbingers of failure" could be identified not just by the number of failed products they chose, but by what products they tended to buy in general. These customers tended to purchase niche items that few other customers chose.
"Using both a customer's history of buying flops, and a tendency to buy niche items, a retailer can distinguish harbingers from non-harbingers and make better decisions about whether to continue selling a new product. While the results of this study provide evidence of a class of customers known as 'harbingers of failure,' there is also some evidence of 'harbingers of success.' Future research is needed to more accurately identify both types of harbingers," the authors conclude.