Harbingers of Failure

Abstract

We show that some customers systematically purchase new products that flop. Their early adoption of a new product is a strong signal that a product will fail - the more they buy, the less likely the product will succeed. These customers, whom we call ‘Harbingers’ [of failure], prefer products that other customers do not want. More broadly, we document that distinguishing among the types of customers who adopt a new product can be predictive of whether a new product will succeed or fail. We discuss how these insights can be readily incorporated into the new product development process. Our findings challenge the conventional wisdom that positive customer feedback is always a signal of future success. The possibility that firms are encouraged by Harbingers’ purchases during pilot market tests may help to explain the high failure rate for new products.

Keywords: new product development, early adopters, lead users, preference heterogeneity

JEL Classification: M31