Question

Why do new services often fail? Can you provide an example of a recent failed service? What were the causes of this failed service? What could have been done to succeed?

Answer 1

New services often fail because of the following reasons.

• Lack of knowledge on the market conditions including correct positioning in the market
• Failure to understand the customer needs
• Failure to identify the potential problems the business may face and make the necessary arrangements to meet the difficulties.
• Wrong pricing strategies which include pricing higher for the service compared to competitors for similar service.
• Failure to provide better customer service due to inadequate experience in handling customers
• Presence of strong competitors in the market who have already proved their capabilities
• Customer loyalty towards existing companies in the market
• Customer reluctance to try new services due to fear of quality reduction

An example for a new service that failed recently includes a beauty parlor service which started in my neighborhood. The main reason for its failure was the presence of other beauty parlors that provide excellent services ensuring better customer service. The customers were not ready to try the new parlor as they did not want to risk their beauty with the new parlor services. Another reason was increased price they charged for the services and the customers who visited there never visited again.

The new beauty parlor could have been succeeded if they were able to differentiate their services from that provided by the competitors by adopting reduced pricing or giving complementary services along with certain services. The staff should have been given more training on how to treat the customers and make them satisfied. The parlor needs to advertise effectively on media highlighting the extra services which would compel them to try the services offered by the new parlor.