Your team has developed the perfect product. The market has been validated, the technology has been proven, and the scale-up has been flawless. You have even completed a solid value pricing analysis that shows that your customer will make more money, and so will you. Six months later, you are still treading water with customers and spending most of your time explaining to management why your can’t-miss product simply won’t sell. What went wrong? There are many factors that can lead to this scenario including mistakes in the market or value analysis, misreading the market, or simply having the market move on. If you have verified that these factors are not at work in your project, maybe a more subtle factor is at play.

After developing and launching a new product, one company that I worked with experienced this situation. Their customer expressed interest in the product, but was on a slow pace to adopt it in two or three years when they planned to launch a new version of their offering. The problem was that switching to our superior offering today carried many costs for them, including modifying their literature, figuring out how to deal with an existing inventory of the older product, and implementing a ‘do-not-mix’ protocol to ensure that none of their customers would receive mixed shipments of old and new material. Overall, the cost of switching to our product now could have cost them six or seven figures more than if they phased in the new product in a future product cycle. To make matters worse, the new product was not yet market proven so carries with it a risk compared to staying with the status quo.

The key learning is that the value to the first customer, or to a customer who needs to change their existing products, may differ from the value to another customer with no change-over or transition costs. You must also assess the value that these customers will see. Remember that these customers take a risk in adopting a new and unproven technology. They need to apply resources to adopt the new product, and then must deal with the change-over and inventory costs. Even if these are acceptable, if the product fails for reasons that you have not anticipated, they are the loser. Further, if you discontinue the product because the sales are lower than anticipated, the first customer is once again the loser.
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While it’s true that the first customer does gain an important first-mover advantage, they also assume many risks that later adopters may not see. So the next time you are launching a bright new product, be sure to ask the question: Will my first customer(s) see the same value as the later adopters, and how should I modify my launch strategy and pricing to address any gaps?