January 8, 2007
New Products Rolling Out Naturally
New products are the lifeblood of the food business. They add excitement to the category… You’ve heard it all before, and along with the value of new items comes the reality that the vast majority will no longer be on store shelves a year after being introduced for a very simple reason consumers didn’t buy them.
Now, there are many reasons products either succeed or fail and many of those have nothing to do with the item’s quality or even the retail price. There are slotting fees and associated upfront monies to pay, consumer marketing to create a buzz, retailer support, especially in the area of store-level compliance, etc.
Still with the deck clearly stacked against them, manufacturers continue to roll out record numbers of new items. According to Mintel International, 2006 saw 17,799 new products introduced. That number was almost 2,000 higher than the year before.
As for what was hot in 2006 and what should be hot in 2007, Lynn Dornblaser, director of Mintel Custom Solutions, told The New York Times, “It seems now that everybody is getting into organics.”
Mintel’s numbers indicate that 3,761 new food items billed as organic or natural were introduced in 2006. That number, many believe, is likely to grow as more manufacturers and retailers place greater emphasis on the business. Wal-Mart’s stated commitment to growing organic food sales in its stores is seen by many as the event that will finally bring these items into the mainstream.
Aside from organic and natural foods, there are other categories where Mintel expects to see a jump in new items. Included among these are baby foods, ready-to-eat items and desserts.
“We’re also seeing more of a focus on authentically ethnic foods,” Ms. Dornblaser said. “It’s not just pasta sauce: it’s pasta sauce from Tuscany.”
Indian food, while still small, is achieving exponential growth. Last year, 143 new Indian items were rolled out, which was nearly twice as many products that had their premier in 2005.
Looking ahead, Mintel has identified trends it believes will have an effect on new items to hit the market this year.
“The overall theme of responsibility – to the environment, to growers, and to one’s well-being – can be seen throughout many of the year’s upcoming trends,” said Ms. Dornblaser in a release put out by Mintel last November. “Manufacturers are offering consumers more opportunities to support causes or to participate in sustainability and conservation. In addition, we are seeing increased targeting of both younger consumers and older consumers, addressing the needs of the two largest consumer groups. While most of the key trends for 2007 focus on simplicity, we will see creative uses of technology, aiming to make the lives of consumers easier.”
Discussion Questions: What factors are most likely to determine if a new product succeeds or fails? Does the current procurement system in mainstream grocery work to hinder both manufacturer and retailer success when it comes to bringing new items to market?
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The new product fills a consumer need that suppliers were not aware of. The new product also sells at a reasonable price. These two characteristics help bring it repeat business, thus guaranteeing the success of the new product. Also, being new, initially the product wouldn’t have competitors. This would give the product the chance to increase its impact.
Too many new items aren’t. If the “new” item is the same as the old, but now it comes in another size, many manufacturers say “New!” If the “old” already comes in 10 flavors and the “new” is flavor #11, is that really new? If the “old” had 12 speeds and the “new” has 14 speeds, is that really new? It seems there’s Line Extension New (Update New) and Innovative (Really New). Which one matters? And should they be analyzed differently?
The product that succeeds, as always, is the one which fills or creates a need.
There are too many products out there. There have always been too many products out there, which is one reason the failure rate is still above 90%. However, it doesn’t help the cause when buyers make more money on the buy than they do selling the product. It’s a self perpetuating issue.
Many years ago I worked on a study with Doug Adams (now of Prime Consulting) and the then Ernst & Young Consulting organization. We examined the roots of “new item” failure and determined that if you eliminated UPC churn — the proliferation of new UPC numbers attached to existing items making them appear to be new items — then the old saw about “most new items fail” — would, well, fail itself. Of course very few people paid any attention to that study because it said two important things nobody wanted to admit were true. First, genuine innovation usually succeeds (key word — genuine). Next, the “problem” of new item failure is, in reality, nowhere near as large as certain forces in the industry — including one of the “leading” trade associations has argued, and never has been. However, it was a good lesson. In this industry, conventional wisdom trumps fact every time.
Having enough resources to properly target a new product is the overriding factor which determines success or failure…assuming the product is a good one. Manufacturers and retailers must have the resources to determine placement based on ensuring the target consumer with the highest propensity to buy is given an opportunity to do so, right out of the gate. Missing this consumer will either doom the product or commit the manufacturer to higher launch costs based on ultimately getting to that consumer. This is going to be true in any category.
When it comes to organics, research and buying behavior has demonstrated that the “overall theme of personal responsibility,” as outlined by Ms. Dornblaster, is creating an new, smarter, more dynamic consumer than ever before. The upside for manufacturers is this: you will know what the consumers think faster than ever.
New Product success begins with a clear vision of identifying what shoppers want, then building or sourcing that product to fit those interests. That starts with marketing/consumer insights research, where new items begin their life cycle and then moves to manufacturing in a way that ensures all the right attributes are built into the product.
Slotting fees are not the key reason items succeed or fail and while slotting is part of the equation (unfortunately) in financing and supporting any new item the key is understanding the shopper’s desires and building products that exceed those interests. Yes, marketing $$$ to promote and advertise helps, but there are examples where the item was so unique and desired that the consumer demanded the opportunity to buy it, even above the retail price which moves us back to understanding and fulfilling shopper desires as the most important element to success with new products.
Retailers need to have overall new product launch strategies in place that serve as a guideline for handling all new product launches. Strategies should include the following considerations:
1. Marketing behind new products: a) determining a true consumer need (instead of an internal, self-created need) or trend in a category; and b) supporting the launch with a strong “go to market” campaign. If products are launched without some solid market research, or if trends are not indicating there is an opportunity within a particular area, it may not be a strong idea. Or if there is no marketing support behind the launch, how will the consumers be educated on the new product?
2. Uniqueness: is this a new concept in a category, or is it a “me too” item that a competitor has already launched? As more “me too’s” are introduced in a category, their results tend to pack less and less punch.
3. Projected category growth: How will the new product grow category $$? Does this new product provide a new benefit that consumers will trade up to (a higher dollar ring per transaction)? Does this volume growth consider cannibalization of products that are currently in the category? How will the new product interact with private label? These are all important considerations when listing new products. And for suppliers, these questions should be addressed properly in new product launches to the retailer.
4. Listing $$: Big listing $$/slotting fees from retailers sometimes inhibits the success of new products.
5. Impact on Assortment and Merchandising: Proper assortment and merchandising (shelving) are critical for the success of a new product launch. If there is a great new product listed by a retailer, but limited support in the stores (due to clearout issues, no room on the shelf, inaccurate planograms), the results will be limited too.
Once again, retailers need to have a solid new product launch strategy that addresses these types of issues, to ensure that new products are launched efficiently and effectively. And suppliers need to ensure they address these issues when launching new products. Also, retailers need to consider if a new product is being listed purely based on the listing $$/slotting fees, rather than on the consumer need and category growth potential that it represents.
It’s vitally important to sort out the “success factors” that drive initial trial versus those that drive repeat purchasing. These are two entirely different behavioral processes and they should not be aggregated together if a firm really wants to understand (and forecast) a new product’s performance.
Once you acknowledge this decomposition, it’s easy to answer the key question here. Trial is driven by awareness and retail availability, and repeat is driven by quality/satisfaction. It’s as simple as that, but a failure to treat these processes separately will generally lead to a much murkier understanding of what’s going on.
Reaching and satisfying the customer is the challenge that must be met. First, the target customer has to be aware of the new product and have access to it.
Second, the product has to motivate a purchase by:
1) offering qualities that the product the customer will be replacing it with lacks, or
2) making a sale that otherwise would not have taken place
Third, for the new product to succeed (assuming it is a product meant to be purchased repeatedly), the customer must embrace it, remember it, and become loyal to it.
We all know how few new products actually succeed in the market. Others have pointed out the wide range of elements that impact the new product hit rate: i.e. genuine “newness” (filling a need), marketing support, $ for trade slotting, category dynamics, competitive response, consumer trial and consumer re-purchase assuming a level of quality/satisfaction.
An area I’ve observed that’s a key factor in new product success is whether a manufacturer has an innovation strategy and plan. Few companies seem to have a true top-to-bottom commitment to developing new products, including objectives (number of new items tested or launched in market each year, revenue from new products over a 5 year time frame); a dedicated R & D team in place; a stated percent of net revenue to be funding new product innovation; a “Stage Gate” -type system to prioritize new product potential and “fit”; an employee suggestion system that taps into internal innovation, etc.
New products are a risky business; marketers minimize failure and maximize scarce investment $ by having a comprehensive innovation program in place that guarantees that only the best of the best concepts go to market.
One often overlooked reason for new item success or failure in the CPG industry has to do with whether or not the “new” item actually supports the overall store “brand.” Take organics and natural products for instance (over 3,000 new items launched in 2006). Are these more/less likely to succeed or fail under a traditional supermarket banner, or under retail entities like Wild Oats, Whole Foods, or Trader Joe’s? And despite the depth of marketing budgets and technical prowess of even a Wal-Mart, how likely is it that their customer base is going to deliver sustained support of new organic/natural products? Simply carving out shelf space, pricing and promoting effectively is still no guarantee of success if the “new” product adds little no value to the retail format (thus target market) served.
I agree with Robert’s comment about some manufacturers’ lack of long-term planning. Many are so obsessed with sell IN that they ignore sell THROUGH and potential exit strategies. That said, it is incumbent upon the retailer to give new items and new programs a fair amount of time to take hold; however, this too can point back to suppliers. An up-front discussion of realistic time frames is crucial and should be initiated by the supplier if necessary. The mega-million dollar debacle that was Revlon’s Vital Radiance launch is a great example of how product “success” is a matter of interpretation in this regard. Mass retailers said it had had quite enough time to take, thank you and goodbye. Drug retailers railed because the line was then unceremoniously yanked before they even had a chance to try it (leaving big holes in shelves), and Revlon cried foul, saying that the line wasn’t given enough time, particularly considering its pioneering price points and the consumer niche work that inspired it. Who was right? Perhaps everyone.
Retailers and vendors are also getting wise to the pitfalls of auto roll-out syndrome and how “where” can be just as important as “how.” Metro 7 worked wonderfully in 350 Wal-Mart stores then died as it moved to 1,500+.
There are many factors at work here and many of them have already been pointed out. One problem is that many manufacturers are always looking for inexpensive ways to bring out new products so they can hit overall volume targets and command more shelf space. This is where so many of the line extensions, new flavors, new sizes and other introductions that aren’t really new at all originate. Then these products are given a bare-bones minimum of marketing support. It is no wonder that they fail and plug up the pipeline for the truly innovative new products. Many of the most unique new products never make it to the shelf because they can’t compete with the budgets of the Fortune 500 food companies. That is a shame.
Satisfying a consumer need with a differentiated brand product is the key to success. Then comes the proper targeting of the determined audience predisposed to the product or survive. “Me too” products or slight variations are losing before they are presented into today’s world!
If the research upfront is done properly and monitored during the repeat period, and validates the shoppers interest, then the marketing program is what the channel of distribution director and his/her procurement, marketing and merchandising team must investigate, and value for their consumers.
All the slotting monies and intro deals will not (or shouldn’t) validate a poorly defined brand’s product, its marketing support, and the predisposed consumers’ interest.
Maybe this is one small reason for distribution slotting dollars. Hmmmmmmmmmmm
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The new product fills a consumer need that suppliers were not aware of. The new product also sells at a reasonable price. These two characteristics help bring it repeat business, thus guaranteeing the success of the new product. Also, being new, initially the product wouldn’t have competitors. This would give the product the chance to increase its impact.
Too many new items aren’t. If the “new” item is the same as the old, but now it comes in another size, many manufacturers say “New!” If the “old” already comes in 10 flavors and the “new” is flavor #11, is that really new? If the “old” had 12 speeds and the “new” has 14 speeds, is that really new? It seems there’s Line Extension New (Update New) and Innovative (Really New). Which one matters? And should they be analyzed differently?
The product that succeeds, as always, is the one which fills or creates a need.
There are too many products out there. There have always been too many products out there, which is one reason the failure rate is still above 90%. However, it doesn’t help the cause when buyers make more money on the buy than they do selling the product. It’s a self perpetuating issue.
Many years ago I worked on a study with Doug Adams (now of Prime Consulting) and the then Ernst & Young Consulting organization. We examined the roots of “new item” failure and determined that if you eliminated UPC churn — the proliferation of new UPC numbers attached to existing items making them appear to be new items — then the old saw about “most new items fail” — would, well, fail itself. Of course very few people paid any attention to that study because it said two important things nobody wanted to admit were true. First, genuine innovation usually succeeds (key word — genuine). Next, the “problem” of new item failure is, in reality, nowhere near as large as certain forces in the industry — including one of the “leading” trade associations has argued, and never has been. However, it was a good lesson. In this industry, conventional wisdom trumps fact every time.
Having enough resources to properly target a new product is the overriding factor which determines success or failure…assuming the product is a good one. Manufacturers and retailers must have the resources to determine placement based on ensuring the target consumer with the highest propensity to buy is given an opportunity to do so, right out of the gate. Missing this consumer will either doom the product or commit the manufacturer to higher launch costs based on ultimately getting to that consumer. This is going to be true in any category.
When it comes to organics, research and buying behavior has demonstrated that the “overall theme of personal responsibility,” as outlined by Ms. Dornblaster, is creating an new, smarter, more dynamic consumer than ever before. The upside for manufacturers is this: you will know what the consumers think faster than ever.
New Product success begins with a clear vision of identifying what shoppers want, then building or sourcing that product to fit those interests. That starts with marketing/consumer insights research, where new items begin their life cycle and then moves to manufacturing in a way that ensures all the right attributes are built into the product.
Slotting fees are not the key reason items succeed or fail and while slotting is part of the equation (unfortunately) in financing and supporting any new item the key is understanding the shopper’s desires and building products that exceed those interests. Yes, marketing $$$ to promote and advertise helps, but there are examples where the item was so unique and desired that the consumer demanded the opportunity to buy it, even above the retail price which moves us back to understanding and fulfilling shopper desires as the most important element to success with new products.
Retailers need to have overall new product launch strategies in place that serve as a guideline for handling all new product launches. Strategies should include the following considerations:
1. Marketing behind new products: a) determining a true consumer need (instead of an internal, self-created need) or trend in a category; and b) supporting the launch with a strong “go to market” campaign. If products are launched without some solid market research, or if trends are not indicating there is an opportunity within a particular area, it may not be a strong idea. Or if there is no marketing support behind the launch, how will the consumers be educated on the new product?
2. Uniqueness: is this a new concept in a category, or is it a “me too” item that a competitor has already launched? As more “me too’s” are introduced in a category, their results tend to pack less and less punch.
3. Projected category growth: How will the new product grow category $$? Does this new product provide a new benefit that consumers will trade up to (a higher dollar ring per transaction)? Does this volume growth consider cannibalization of products that are currently in the category? How will the new product interact with private label? These are all important considerations when listing new products. And for suppliers, these questions should be addressed properly in new product launches to the retailer.
4. Listing $$: Big listing $$/slotting fees from retailers sometimes inhibits the success of new products.
5. Impact on Assortment and Merchandising: Proper assortment and merchandising (shelving) are critical for the success of a new product launch. If there is a great new product listed by a retailer, but limited support in the stores (due to clearout issues, no room on the shelf, inaccurate planograms), the results will be limited too.
Once again, retailers need to have a solid new product launch strategy that addresses these types of issues, to ensure that new products are launched efficiently and effectively. And suppliers need to ensure they address these issues when launching new products. Also, retailers need to consider if a new product is being listed purely based on the listing $$/slotting fees, rather than on the consumer need and category growth potential that it represents.
It’s vitally important to sort out the “success factors” that drive initial trial versus those that drive repeat purchasing. These are two entirely different behavioral processes and they should not be aggregated together if a firm really wants to understand (and forecast) a new product’s performance.
Once you acknowledge this decomposition, it’s easy to answer the key question here. Trial is driven by awareness and retail availability, and repeat is driven by quality/satisfaction. It’s as simple as that, but a failure to treat these processes separately will generally lead to a much murkier understanding of what’s going on.
Reaching and satisfying the customer is the challenge that must be met. First, the target customer has to be aware of the new product and have access to it.
Second, the product has to motivate a purchase by:
1) offering qualities that the product the customer will be replacing it with lacks, or
2) making a sale that otherwise would not have taken place
Third, for the new product to succeed (assuming it is a product meant to be purchased repeatedly), the customer must embrace it, remember it, and become loyal to it.
We all know how few new products actually succeed in the market. Others have pointed out the wide range of elements that impact the new product hit rate: i.e. genuine “newness” (filling a need), marketing support, $ for trade slotting, category dynamics, competitive response, consumer trial and consumer re-purchase assuming a level of quality/satisfaction.
An area I’ve observed that’s a key factor in new product success is whether a manufacturer has an innovation strategy and plan. Few companies seem to have a true top-to-bottom commitment to developing new products, including objectives (number of new items tested or launched in market each year, revenue from new products over a 5 year time frame); a dedicated R & D team in place; a stated percent of net revenue to be funding new product innovation; a “Stage Gate” -type system to prioritize new product potential and “fit”; an employee suggestion system that taps into internal innovation, etc.
New products are a risky business; marketers minimize failure and maximize scarce investment $ by having a comprehensive innovation program in place that guarantees that only the best of the best concepts go to market.
One often overlooked reason for new item success or failure in the CPG industry has to do with whether or not the “new” item actually supports the overall store “brand.” Take organics and natural products for instance (over 3,000 new items launched in 2006). Are these more/less likely to succeed or fail under a traditional supermarket banner, or under retail entities like Wild Oats, Whole Foods, or Trader Joe’s? And despite the depth of marketing budgets and technical prowess of even a Wal-Mart, how likely is it that their customer base is going to deliver sustained support of new organic/natural products? Simply carving out shelf space, pricing and promoting effectively is still no guarantee of success if the “new” product adds little no value to the retail format (thus target market) served.
I agree with Robert’s comment about some manufacturers’ lack of long-term planning. Many are so obsessed with sell IN that they ignore sell THROUGH and potential exit strategies. That said, it is incumbent upon the retailer to give new items and new programs a fair amount of time to take hold; however, this too can point back to suppliers. An up-front discussion of realistic time frames is crucial and should be initiated by the supplier if necessary. The mega-million dollar debacle that was Revlon’s Vital Radiance launch is a great example of how product “success” is a matter of interpretation in this regard. Mass retailers said it had had quite enough time to take, thank you and goodbye. Drug retailers railed because the line was then unceremoniously yanked before they even had a chance to try it (leaving big holes in shelves), and Revlon cried foul, saying that the line wasn’t given enough time, particularly considering its pioneering price points and the consumer niche work that inspired it. Who was right? Perhaps everyone.
Retailers and vendors are also getting wise to the pitfalls of auto roll-out syndrome and how “where” can be just as important as “how.” Metro 7 worked wonderfully in 350 Wal-Mart stores then died as it moved to 1,500+.
There are many factors at work here and many of them have already been pointed out. One problem is that many manufacturers are always looking for inexpensive ways to bring out new products so they can hit overall volume targets and command more shelf space. This is where so many of the line extensions, new flavors, new sizes and other introductions that aren’t really new at all originate. Then these products are given a bare-bones minimum of marketing support. It is no wonder that they fail and plug up the pipeline for the truly innovative new products. Many of the most unique new products never make it to the shelf because they can’t compete with the budgets of the Fortune 500 food companies. That is a shame.
Satisfying a consumer need with a differentiated brand product is the key to success. Then comes the proper targeting of the determined audience predisposed to the product or survive. “Me too” products or slight variations are losing before they are presented into today’s world!
If the research upfront is done properly and monitored during the repeat period, and validates the shoppers interest, then the marketing program is what the channel of distribution director and his/her procurement, marketing and merchandising team must investigate, and value for their consumers.
All the slotting monies and intro deals will not (or shouldn’t) validate a poorly defined brand’s product, its marketing support, and the predisposed consumers’ interest.
Maybe this is one small reason for distribution slotting dollars. Hmmmmmmmmmmm