July 23, 2007
New Product Challenges
By Faye Brookman, special to GMDC
There’s no denying new items are the lifeblood of retail. However, along with human resources, adding in a new product is one of the largest controllable expenses for retailers. This factor, plus the potent combination of an expanding number of new items and a higher than ever failure rate, has buyers and sellers looking for ways to hedge their bets on new launches.
The number of new items jumped six percent from 2004 to 2005 and, when the numbers are totaled, will probably rise even more between 2005 and 2006. Despite intense consumer focus groups and mega-advertising budgets, there are still as many bow-wows as hits.
A PriceWaterhouse Coopers study done in conjunction with NACDS has reviewed the new products launch process.
Working together, buyers and sellers have come up with some guidelines to ensure more hits than misses. Both sides of the equation agree that launches today need to be classified rather than just every new item touted as the greatest item to come down the pike.
There are currently four classifications buyers and sellers identified. These are:
- Corporate or market maker introductions
- Core products to a category, which are items in well-established categories
- Trendsetter items that produce a quick hit in the market
- Line extensions that are add-ons to an existing brand
The guidelines for classifying a launch are key because all planning and measurement flows from them. For example, at a recent industry conference, a roundtable of retailers and manufacturers suggested that success has a different set of parameters based on the scope and type of the launch. A hit needs to be measured not only in volume, but whether the numbers were achieved in the planned timeframe and whether each retailer captured the expected level of sales relative to competitors. These are determined by the classification of a launch.
Execution is also paramount in launches and the roundtable suggested monitoring by both buyer and seller. Too often even the best in-store display gets left in the backroom because of poor execution, and the planning and management of this function also derives directly from understanding the scope and importance of a new product.
The suggestions for ensuring better launches included better partnering between manufacturers and retailers as well as a candid approach about the commitment to a launch.
Discussion Questions: Given the pressures of the marketplace to pump out new products at a high rate, is a long lead-time style of planning feasible? Is such planning necessary to bring higher rates of success to new product introductions and to give consumers what they want?
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Tremendous management focus is based on achieving shorter and shorter cycle times. Increasing new item planning lead times isn’t likely. When your competitors are quicker to adapt to market trends, you have to be faster, too. New product failure is more likely to be caused by poor or nonexistent market research than anything else. Short-term tactical failures (poor display adherence, promotion errors, etc.) certainly can’t be blamed for the overwhelming mortality of new product introductions. Most new products aren’t really new, they’re minor changes used for short-term sales promotions. And most promotions are executed as well or as badly as most other promotions. Only a few new products survive because only a few new products have any innovative meaning that capture the shopper’s heart. Any brand can spare themselves a lot of wasted effort by screening out the mediocrities in the market research phase.
Not only is an extended lead time necessary in today’s fast-paced market–it will become essential to the success of new items. Collaborating with key members of the supply chain and gaining approval every step of the way will surely separate winners from losers. It’s an entirely new ball game–shelf space has never been more limited; shopper loyalty is fickle; commoditization of the retail shelf is rampant; and suppliers cannot simply introduce a new product and expect immediate results.
New items are indeed the lifeblood of our industry. Future survival will likely be reserved to the fittest.
The amount of money spent on introducing new products that fail is astronomical. Yes, consumers like innovation, so there is value in offering new products. However, consumers will only pay for new products that do offer them tangible value. If you are guessing whether your products will offer value, you are risking a tremendous amount of money. Spending a lot of time on market testing tips off your competitors giving them an opportunity to be first to market. You have to know what’s important to your consumers, what problems frustrate them, and what they value enough to pay for. If you don’t know that, introducing new products is a game of chance that you have little opportunity to win.
Slotting is actually the most economically efficient means for retailers to evaluate the viability of new products. Manufacturers that are unwilling to pay the prevailing rate are, by definition, quantifying their confidence in the new product. Slotting doesn’t require long lead times and is, therefore, more consumer-centric in that the process can be more adaptive to changing consumer demand.
New products succeed in large part if they fall into one of three scenarios.
1. An existing need is met in a significantly better way. This is not just a lower price or a larger box. It is about a specific need being met in a significantly better way.
2. An emerging yet conscious need is addressed in way which brings a significant number of new customers into a market. Examples are a significant drop in price, a redesign to eliminate technical learning curves, or simply empowerment marketing identifying the product’s ability to meet the emerging need.
3. An entirely new need is created. And yes, this happens. The Inventor’s Dilemma articulates the scenario extremely well.
Is a longer lead time inherent in meeting any of these scenarios? Not necessarily. What is inherent is intentional design in the product development process. I’ve used the imagery of a series of funnels, each equipped with its own specific filter. However, before the first funnel does it’s job, there is the act of reaching out for ideas, concepts and “Stuff” to run through the filter. This act must also be intentional.
My experience is that product development is not an intentional process, is often driven by what the company needs, not what the consumer needs, and often fails to be managed by those who understand consumers and production.
As a former Big Retail Sr. Executive, I can tell you for certain that buyers are already hedging their bets on the new products that come to market each year. More often than not, buyers have implemented some form of guaranteed sale. The fact is that merchants don’t wish to get hung out with the aftermath of unsuccessful brand extensions or completely new launches that become unsuccessful.
This is a double edged sword, indeed. If one spends any part of their professional life with retail, then it is apparent that new products and new product innovation is mandatory for the market to grow. This is statistical fact! What’s not a statistical fact is that both buyer and seller use all the tools at their disposal to closely predict the success or failure of these new launches. Often the addition of these brands is motivated by other needs that a buyer or seller may have ‘at the moment’. Pressure on sales, gross margins and ancillary income often plays a role in the acceptance or denial of new product. Sometimes retailers may accept a brand because it comes with great funding. That ancillary funding may be needed at that particular time and may be the reason to say yes to that shiny new widget.
If one were to choose new product based on just the product, then what one might consider is more accurate product mapping. This procedure is technologically based and often very accurate. It is the science of predicting a brands likely performance based on its attributes compared to other, existing or previous brand launches. Using this method can take the emotion out of the buy and help merchants make sound decisions on how fast and how deep to go on a new brand launch. Making such a decision requires an experienced merchants ‘know how’ and a statistical solution that provides ‘the science’ for the best decision. Retailers and buyers can do a much better job of taking advantage of such solutions. To what end you ask? The answer is quite simple. This effort will result in creating in-store excitement with what’s new while maximizing both sales and products to the benefit of the retailer and manufacturer. By the way, product liquidation expenses of unsuccessful brands can dramatically be reduced as well.
Bottom line? We must continue to support new items, period. We just must continue to enhance our skills to do so in a smarter manner.
We live in an information age. Hundred of millions of consumers are visiting the Internet daily and regularly use their cell phones and PDAs for shopping-related tasks.
Yet why do retailers struggle to place essential product information on databases so that their shoppers and employees can get access to it? It would go so much easier if manufacturers included in their launch kit the necessary digital materials bring their products into a digital marketplace.
Retailers biggest struggle is to come up with good photographs suitable for both web stores and planograms. Category Managers, provide these pictures for them! The kit should include tender juicy texts that address such essentials as description, key features and benefits, care instructions, and what’s different. But it should include audio or video clips from the designer that could be podcast or streamed.
Category managers, if you want your products to be successful at the retail level, make it easy for retailers sell them to information age shoppers.
The total issue of new products, retailer acceptance, predicting, hedging, etc. is extremely inter-dynamic among a huge amount of variables. Every month, we conduct real-talk counseling and exchange summits with companies launching new products. Here are just a few of the real world issues for would-be suppliers, new items, and retailers:
1. Every new product needs a simple working business plan for placement, pricing, promotion, basic marketing, and funding. Without this, new products are relying too much on luck. Candidly, I encourage my small and medium size clients not to be scared away by this process because it does not have to be extravagant. Honestly, most of what needs to be explained actually can be presented on the back of a napkin! Although, that isn’t necessarily my recommendation! However, what retailers need, and what retailers should be looking for, is evidence that the new item is not strictly relying on retrial traffic, luck, and a bet on the come, because that approach has a failure rate of more than 95%.
2. However, retailers need to understand that most of the truly great new items that break through, expand, or generate true excitement, usually come from small time entrepreneurs that might not have the same approach as P&G in presenting new items. Therefore, it’s well worth the time of retail buyers to give these items a chance to be shown and presented, even if the inventor walks in with his or her plan mapped out on the back of a napkin! Well, here is a promise–if they come to me first, I will try to send them to you with an action plan that is typed out on notebook paper!
3. Retailers need to evaluate new items with the appropriate criteria that fit the item and its potential. Candidly, I constantly see retailers pass on great new items because the criteria for assessment is often too much the same as it would be for a different type of item or classification. In other words, not all new items need a media spend of $25MM to be successful and drive new customers and profits to the retail stores.
4. I do recommend that would-be new item suppliers not try to go it alone. Know how to choose the right broker for your situation, or an alternative type of representation, if you prefer to not use a broker. However, you need to be well trained and know how to present your own product to the retailer so that no time is wasted for either party, and so that the most pertinent information is exchanged beyond just the features and benefits of the product itself. And my advice to retailers is not to rely on only the information from a broker or third party because no one knows the product better than the inventor or the company that is launching the new item.
So much to talk about with this topic. Feel free to write me at RetailWire and we can delve more into this because it’s what truly determines success for retailers and supplier-partners, and ultimately, it’s what drives the consumer!
New product launches are tricky but if the marketers and research people are doing their jobs, they should within some degree of accuracy estimate demand and velocity of a new product. Long lead times are only necessary if there is going to be a partial rollout of the product because research data is incomplete. Vendors and buyers are doing a disservice to their customers when a ‘hot new product’ comes out and they do not buy enough of it. Nothing screams frustration when a consumer sees an ad for a new product, they run to the store to buy it and they are greeted with an empty 4 foot bunker or endcap display.
What should be happening is buyers and marketers should be teaming up and saying: “this is the campaign we are going with, it’s aggressive etc. so we need the inventory numbers to reflect that.” Long lead times are not necessary but there has to be some in depth ‘due diligence’ when rolling out the next big thing.
The idea of an “agreed” characterization of a launch’s priority is intriguing. On the surface, it makes sense and could well take hold. But we have been here before. Remember the early days of category management? When everyone thought their category was “destination” and no one wanted to be pigeon-holed as “convenience”?
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Tremendous management focus is based on achieving shorter and shorter cycle times. Increasing new item planning lead times isn’t likely. When your competitors are quicker to adapt to market trends, you have to be faster, too. New product failure is more likely to be caused by poor or nonexistent market research than anything else. Short-term tactical failures (poor display adherence, promotion errors, etc.) certainly can’t be blamed for the overwhelming mortality of new product introductions. Most new products aren’t really new, they’re minor changes used for short-term sales promotions. And most promotions are executed as well or as badly as most other promotions. Only a few new products survive because only a few new products have any innovative meaning that capture the shopper’s heart. Any brand can spare themselves a lot of wasted effort by screening out the mediocrities in the market research phase.
Not only is an extended lead time necessary in today’s fast-paced market–it will become essential to the success of new items. Collaborating with key members of the supply chain and gaining approval every step of the way will surely separate winners from losers. It’s an entirely new ball game–shelf space has never been more limited; shopper loyalty is fickle; commoditization of the retail shelf is rampant; and suppliers cannot simply introduce a new product and expect immediate results.
New items are indeed the lifeblood of our industry. Future survival will likely be reserved to the fittest.
The amount of money spent on introducing new products that fail is astronomical. Yes, consumers like innovation, so there is value in offering new products. However, consumers will only pay for new products that do offer them tangible value. If you are guessing whether your products will offer value, you are risking a tremendous amount of money. Spending a lot of time on market testing tips off your competitors giving them an opportunity to be first to market. You have to know what’s important to your consumers, what problems frustrate them, and what they value enough to pay for. If you don’t know that, introducing new products is a game of chance that you have little opportunity to win.
Slotting is actually the most economically efficient means for retailers to evaluate the viability of new products. Manufacturers that are unwilling to pay the prevailing rate are, by definition, quantifying their confidence in the new product. Slotting doesn’t require long lead times and is, therefore, more consumer-centric in that the process can be more adaptive to changing consumer demand.
New products succeed in large part if they fall into one of three scenarios.
1. An existing need is met in a significantly better way. This is not just a lower price or a larger box. It is about a specific need being met in a significantly better way.
2. An emerging yet conscious need is addressed in way which brings a significant number of new customers into a market. Examples are a significant drop in price, a redesign to eliminate technical learning curves, or simply empowerment marketing identifying the product’s ability to meet the emerging need.
3. An entirely new need is created. And yes, this happens. The Inventor’s Dilemma articulates the scenario extremely well.
Is a longer lead time inherent in meeting any of these scenarios? Not necessarily. What is inherent is intentional design in the product development process. I’ve used the imagery of a series of funnels, each equipped with its own specific filter. However, before the first funnel does it’s job, there is the act of reaching out for ideas, concepts and “Stuff” to run through the filter. This act must also be intentional.
My experience is that product development is not an intentional process, is often driven by what the company needs, not what the consumer needs, and often fails to be managed by those who understand consumers and production.
As a former Big Retail Sr. Executive, I can tell you for certain that buyers are already hedging their bets on the new products that come to market each year. More often than not, buyers have implemented some form of guaranteed sale. The fact is that merchants don’t wish to get hung out with the aftermath of unsuccessful brand extensions or completely new launches that become unsuccessful.
This is a double edged sword, indeed. If one spends any part of their professional life with retail, then it is apparent that new products and new product innovation is mandatory for the market to grow. This is statistical fact! What’s not a statistical fact is that both buyer and seller use all the tools at their disposal to closely predict the success or failure of these new launches. Often the addition of these brands is motivated by other needs that a buyer or seller may have ‘at the moment’. Pressure on sales, gross margins and ancillary income often plays a role in the acceptance or denial of new product. Sometimes retailers may accept a brand because it comes with great funding. That ancillary funding may be needed at that particular time and may be the reason to say yes to that shiny new widget.
If one were to choose new product based on just the product, then what one might consider is more accurate product mapping. This procedure is technologically based and often very accurate. It is the science of predicting a brands likely performance based on its attributes compared to other, existing or previous brand launches. Using this method can take the emotion out of the buy and help merchants make sound decisions on how fast and how deep to go on a new brand launch. Making such a decision requires an experienced merchants ‘know how’ and a statistical solution that provides ‘the science’ for the best decision. Retailers and buyers can do a much better job of taking advantage of such solutions. To what end you ask? The answer is quite simple. This effort will result in creating in-store excitement with what’s new while maximizing both sales and products to the benefit of the retailer and manufacturer. By the way, product liquidation expenses of unsuccessful brands can dramatically be reduced as well.
Bottom line? We must continue to support new items, period. We just must continue to enhance our skills to do so in a smarter manner.
We live in an information age. Hundred of millions of consumers are visiting the Internet daily and regularly use their cell phones and PDAs for shopping-related tasks.
Yet why do retailers struggle to place essential product information on databases so that their shoppers and employees can get access to it? It would go so much easier if manufacturers included in their launch kit the necessary digital materials bring their products into a digital marketplace.
Retailers biggest struggle is to come up with good photographs suitable for both web stores and planograms. Category Managers, provide these pictures for them! The kit should include tender juicy texts that address such essentials as description, key features and benefits, care instructions, and what’s different. But it should include audio or video clips from the designer that could be podcast or streamed.
Category managers, if you want your products to be successful at the retail level, make it easy for retailers sell them to information age shoppers.
The total issue of new products, retailer acceptance, predicting, hedging, etc. is extremely inter-dynamic among a huge amount of variables. Every month, we conduct real-talk counseling and exchange summits with companies launching new products. Here are just a few of the real world issues for would-be suppliers, new items, and retailers:
1. Every new product needs a simple working business plan for placement, pricing, promotion, basic marketing, and funding. Without this, new products are relying too much on luck. Candidly, I encourage my small and medium size clients not to be scared away by this process because it does not have to be extravagant. Honestly, most of what needs to be explained actually can be presented on the back of a napkin! Although, that isn’t necessarily my recommendation! However, what retailers need, and what retailers should be looking for, is evidence that the new item is not strictly relying on retrial traffic, luck, and a bet on the come, because that approach has a failure rate of more than 95%.
2. However, retailers need to understand that most of the truly great new items that break through, expand, or generate true excitement, usually come from small time entrepreneurs that might not have the same approach as P&G in presenting new items. Therefore, it’s well worth the time of retail buyers to give these items a chance to be shown and presented, even if the inventor walks in with his or her plan mapped out on the back of a napkin! Well, here is a promise–if they come to me first, I will try to send them to you with an action plan that is typed out on notebook paper!
3. Retailers need to evaluate new items with the appropriate criteria that fit the item and its potential. Candidly, I constantly see retailers pass on great new items because the criteria for assessment is often too much the same as it would be for a different type of item or classification. In other words, not all new items need a media spend of $25MM to be successful and drive new customers and profits to the retail stores.
4. I do recommend that would-be new item suppliers not try to go it alone. Know how to choose the right broker for your situation, or an alternative type of representation, if you prefer to not use a broker. However, you need to be well trained and know how to present your own product to the retailer so that no time is wasted for either party, and so that the most pertinent information is exchanged beyond just the features and benefits of the product itself. And my advice to retailers is not to rely on only the information from a broker or third party because no one knows the product better than the inventor or the company that is launching the new item.
So much to talk about with this topic. Feel free to write me at RetailWire and we can delve more into this because it’s what truly determines success for retailers and supplier-partners, and ultimately, it’s what drives the consumer!
New product launches are tricky but if the marketers and research people are doing their jobs, they should within some degree of accuracy estimate demand and velocity of a new product. Long lead times are only necessary if there is going to be a partial rollout of the product because research data is incomplete. Vendors and buyers are doing a disservice to their customers when a ‘hot new product’ comes out and they do not buy enough of it. Nothing screams frustration when a consumer sees an ad for a new product, they run to the store to buy it and they are greeted with an empty 4 foot bunker or endcap display.
What should be happening is buyers and marketers should be teaming up and saying: “this is the campaign we are going with, it’s aggressive etc. so we need the inventory numbers to reflect that.” Long lead times are not necessary but there has to be some in depth ‘due diligence’ when rolling out the next big thing.
The idea of an “agreed” characterization of a launch’s priority is intriguing. On the surface, it makes sense and could well take hold. But we have been here before. Remember the early days of category management? When everyone thought their category was “destination” and no one wanted to be pigeon-holed as “convenience”?