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October 03, 2012 at 07:40 AM
To keep growing, businesses need to take risks. The top companies do their due diligence to minimize the prospect of failure when introducing a new product. But even the best laid plans falter.
Iconic brands like Coca-Cola, McDonald’s and even Barbie have all made missteps. Such mistakes can lead to millions lost on marketing campaigns and production costs that go for naught.
Some products, like Earring Magic Ken, a part of the Barbie line, sell well despite a a marketing plan–and the doll’s controversial look–that doomed it to be pulled from the shelves in the end. In the end though, the companies often thrive, moving past the debacles.
Here is AdvisorOne’s look at 6 Big Product Flops That Companies Survived:
1. Product: Windows Vista, 2007
Outcome: Product languished behind other Windows OS products
Investor Outlook: The Windows unit’s profit was down, by Microsoft’s was up
Microsoft is the dominant player in the creation and sales of operating systems for PCs. However, the days of every new product being an instant hit are long gone. The company’s Vista operating system, introduced in 2007, is the software giant’s recent symbol of failure.
The software was panned by critics. That, coupled with, according to The New York Times, a tip toward netbooks, as well less robust machines running “slimmer” versions of Windows in emerging countries, led to tepid sales. In addition, many companies did not upgrade to Vista.
Vista may have been a failure, but Microsoft chugs on. Its Windows 7, which shipped the next year, was much more successful than Vista. Windows 8 is nearing its launch and some are calling it a gamble by Microsoft because it is aimed more at the tablet market. They fret because they say the touchscreen-friendly OS might not be so great for laptop and desktop machines.
As an investment, the stock has proved good in the long-term. The stock has been split 2:1 four times since the release of Vista and currently trades at about $30 per share.
2. Product: Heinz EZ Squirt Ketchup, 2000
Outcome: Product Was Discontinued After 7 Years
Investor Outlook: The stock price rose over the life of the product
Anticipation. Surely, the marketing folks at Heinz couldn’t wait till the company, known for its “57 varieties,” introduced its newest product in 2000. The idea, aimed at kids, was to take that traditional deep red color of the company’s signature product and change it to purple, neon green and other “fun” colors and put it in a squeeze bottle.
Unlike some other products that flopped from the start, EZ Squirt was a hit at first. Heinz reported that it had sold about 25 million bottles of the colored goo by 2003. After that, sales dropped off. It’s not clear why. Some speculate moms didn’t like the colors. Others say the novelty wore off. Either way, Heinz stopped selling it in 2006.
The stock price bounced up and down throughout the period paying dividends along the way. In the end Heinz wound up at about $5 per share, closing at $45 per share at the end of 2006.
3. Product: McDonald’s Arch Deluxe, 1996
Outcome: Discontinued despite $100 million marketing campaign
Investor Outlook: The stock stayed the course, although growth was sluggish
Go to into any McDonald’s and you know exactly what you are going to get. It doesn’t matter where you are, the expectations are the same: the burger and fries will be inexpensive and have the taste that’s been the same for decades.
That didn’t stop the powers that be from trying a different tack in 1996 with the introduction of the Arch Deluxe. The new sandwich was aimed at sophisticated adults (I guess the company’s usual customers were too plebian). It was introduced with the slogan the “burger with the grown-up taste.”
That taste came from peppercorn bacon, a bun made from potato flour and topped with mayo, special mustard, lettuce, onion, tomato and cheese.
McDonald’s miscalculated badly. The sandwich was pulled from the menu in a few months. McDonald’s tried to market the burger in Japan with similar results, although it did meet with some success in France, which is known for its sophisticated food.
