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3 in 4 of all new products in Asia-Pacific are flopping. What can we do about it?


According to a recent study, most companies in Asia-Pacific are failing to successfully position their new products in the market. This is particularly interesting seeing as many Aussie businesses looking to grow beyond the borders see Asia as their next market rather than the US or the EU.

The Global Pricing Study 2014 conducted by the strategy consultancy firm Simon-Kucher & Partners in collaboration with the Professional Pricing Society (PPS) surveyed approximately 1,600 managers from more than 40 countries across Asia-Pacific, the Americas and Europe.

This study has revealed that companies in Asia-Pacific are failing more and more to achieve the prices they aim for with only a quarter of planned price increases actually getting enforced in the regional markets – less than elsewhere.

Furthermore, the study found that almost three quarters (74 per cent) of all new products in the region miss their profit targets. A quarter of the respondents even admitted that not a single one of their new products fulfilled the profit targets.

Go ahead, ring the alarm bells!

Why are so many new products in Asia-Pacific flopping?

The experts over at Simon-Kucher believe this is because companies have done a poor job of integrating customer value and pricing policies into the innovation process.

“Most companies deal with product pricing and marketing when it’s already too late – often only right before the launch,” explains Christoph Petzoldt, Managing Director of Simon-Kucher’s office in Sydney and responsible for the Oceania region.

And the consequences of this poor approach are devastating: despite the economic recovery and attempted price increases, over a third of the respondents (36 per cent) were unable to improve their margins in the last few years.

The long-term profitability of companies in Asia-Pacific is at serious risk here. “Before you know it, the profits necessary to finance innovations will be gone. And it’s precisely these innovations that companies need to compete sustainably in the market,” Petzoldt warns.

However, some companies are actually excelling

It is worth noting that in the study, one group of the respondents rose above the others.

This group, the “Best”, consisting about 10 per cent of all the respondents, meet their price targets for new products and continue to do so in the long term, despite price and competitive pressure. Reminds me of my straight A’s neighbour back in high school…

Asia-Pacific’s “Best” have a 57 per cent higher share of innovative products in their portfolio, their share of new products that meet profit targets is 62 per cent higher than for the “Rest” and are 62 per cent more successful at enforcing price increases than the “Rest”.

So what are the “Best” doing differently?

“The ‘Best’ thoroughly understand the value their new products offer and are therefore able to achieve the planned profits. That’s what separates them from the ‘Rest,’” says Petzoldt.

The overall study results show that the “Best” work with a powerful mix of measures: innovation, value and price management are C-level objectives at these companies.

Furthermore, they completely integrate marketing and pricing into innovation processes already right from the product inception to the market launch. They work with professional methods and customised software to measure value and set prices.

“The ‘Best’ leave nothing to chance,” Petzoldt explains. “If you know the true value of your product, you can set the right price. Besides, it’s essential that companies are able to make tough decisions when necessary – from the beginning to the end of the innovation process.”

This also means having the courage to kill new products if it becomes clear that they won’t meet their profit targets, and this is something everyone ought to take to heart.