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| Neff, Jack. 2000November. What makes products succeed? Food Processing 61(11):31. | to Top |
- Excerpted: New products keep hitting store shelves as fast as ever, and failed ones keep being removed just as fast. As slotting fees and advertising costs soar, the cost of failure gets worse. But the demands from Wall Street for growth haven't slackened, so the pressure for new product success remains intense too.
What's the secret of success for companies that seem to have better batting averages? Industry and new products watchers still see some of the same keys driving success: strong concepts with clear differences and appeal to consumers, products that deliver on their promises, and sufficient distribution and marketing support to get consumers to notice.
All easier said than done. but just saying the success equation is getting harder, and what manufacturers need to do to succeed isn't always what pleases the retail trade. At the same time, new product success in some cases may mean concepts that appeal at least as much to the trade as they do to consumers.
One key reason that so many new products fail is that so many of them aren't really new, said Jim Miller, senior vice president of A.C. Nielsen BASES, Covington, Ky., at a recent conference hosted by A.C. Nielsen. Only about 6 percent of the 30,000 new consumer packaged goods products launched last year in the United States could truly be classified as new concepts - and that was among the best records in the world. In the United Kingdom, only 2 percent of neew products were substantially new, BASES found.
Innovation ties into not only consumer acceptance but also into retailer acceptance. The sad fact is that new products as a rule take 95 percent of their volume from existing products in a category-representing nothing new for retailers, Miller says.
As much as slotting fees may be hated by food manufacturers, the 95-5 rule provides a good argument that retailers deserve something for taking a chance on a new product. On the other hand, Miller says, truly innovative products probably deserve a break on slotting fees-through it's less clear that they always get it. But even if they don't get a break on slotting, innovative products do get something extra.
'Retailers value innovation because it leads to incremental rather than cannibalized sales,' he says. 'As a result, innovative products tend to enjoy better retailer acceptance, achieving higher levels of distribution and in-store support.'
The Five "Consumer Truths" of New Product Success - Product must deliver on concept promise.
- Advertising quantity and quality matter.
- Distribution quantity and quality matter.
- Innovation is essential.
- Long-term support is essential.
Even if you can't have a product that's genuinely different from everything else out there, it should at least fit into a hot trend, says Tom Vierhile, genreal manager of Naples, N.Y.-based Marketing Intelligence. 'Some companies that have fallen behind came in behind the curve with low-fat products when the trend was away from low-fat products,' he says.
The success of products like General Mills' yoplait GoGurt brand stems from seeing a trend- in this case the trend toward handheld eating-and applying it to a new area. Even if Go-Gurt is just another yogurt, it represented a convenient form of packaging that made it available to a key consumer segment - kids-during more parts of the day, and thus brought at least the potential of expanding overall category sales.
"Significant innovation and meaningful differentiation" are the keys to any new product's ultimate success, says Christopher Miller, founder and president of Innovation Focus, a Lancaster, Pa., new product development and screening firm. But those innovations don't necessarily have to address consumer needs to make for success.
'It could be innovation for others on the value chain as well,' he says. 'It could be the customer who sees it as a considerably easier way to shelve or the transporter who sees it as significantly easier to ship. You can have significant innovation or meaningful differentiation for any member of the value chain."
He recalls a packaging innovaction for Unilever's Wishbone salad dressing brand about 10 years ago that had nothing to do with the product. It involved only a clamshell pack with a set of 12 bottles that could be slit and opened easily, allowing the whole case to be shelved as a unit.
'It was perfect for the new club stores that were coming in at the time,' Miller says. 'They could shelve a whole case in a fraction of the time they did before,' which meant lower costs and an edge in a distribution channel where brand assortment is limited and decisions often are made based on which supplier provides the most profitable volume.
The success of both Go-Gurt and the Wishbone clamshell case point to another important truth about new food concepts-packaging can sometimes be as big or bigger a determinant of success as what goes in the package, Miller says.
Thus, rather than trying to think outside the box, or even inside the box, more food R&D and marketing executives may want to try thinking about the box. Another perfect example comes from General Mills in a category-flour-where actual product innovation is virtually impossible, Miller says. Earlier this year, General Mills introduced clear plastic resealable bags for its Gold Medal flour, providing both a clear differentiation from other flour brands on the shelf and some added convenience for consumers, who no longer need to keep flour in a caniser if they don't want to.
Marketing Implications -
The high new product failure rate reflects in large part the decline in marketing support which typically occurs in years two and three. In many respects, our failure rate is a self-inflicted wound.
************************************************ For a company to be successful in the new product arena, it should consider a brand "new" for at least two to three years and maintain marketing support.
In a similar vein, one flour producer decades ago gained a temporary edge on rivals by putting a carton slitter into each retail case. Realizing that shelf stockers often had dull carton slitters, the flour producer figured the workers would have to open the flour cartons whenever they wanted new slitters and would have to shelve the flour when they did, resulting in more shelf facings for the brand, Miller says. And the strategy worked-at least until other companies started stashing carton slitters in their cases.
but a good idea by itself isn't enough-or even the most important thing-to determine new product success. 'Makretplace success is strongly tied to product performance, not concept performance,' Miller says, pointing to BASES data that show products with low rates of first repeat among consumers 'never wear in other time.''.
'In our experience, you can't spend enough money behind a poor-performing product to make it successful,' he says. 'The question is not what guarantees success but what guarantees failure. A weak concept does not guarantee failure. But a weak prdouct does.'
The right amount and timing of distribution and marketing also are key, he says. New product success appears to be correlated more strongly with distribution than with awareness. 'In a world of limited resources, the first thing you want to focus on is distribution,' he says. And if slotting budgets are limited, Miller says the obvious choice is to concentrate on those stores or classes of trade where a category's sales are the strongest, first.
But BASES' database of 1,000 new product launches shows that successful and failed products both generally achieve distrubiton in outlets representing about 75 percent of volume in their first year. The difference is that the failed products' distribution tends to top out after about nine months and then starts declining in years two and three. Successful products tend to see distrubiton continued to above 80 percent of ACV by year two and to maintain that level into year three.
One source of problems that can lead to failures is that most new products need two to three years of marketing support, but often get only one, Milelr says. "Long-term trial can be as important to long-term volume growth as long-term repeat," he says, and trial is driven by some kind of marketing support.
All other things being equal, it's usually better to spread the same mearketing budget over two or three years rather than concentrate all funds on year one. Miller says. That's especially true for products with long repeat cycles or those that didn't get as much distribution in year one.
The problem, he acknowledges, is that retailers often start delisting failed products within nine to 13 months after alunch, pressuring manufacturers to concentrate their efforts on year one.
'The new product failure rate reflects in large part the decline in marketing support that typically occurs in years two and three," Miller says. "In many respects our failure rate is a self-inflicted wound.'
Updated: Thursday, September 6, 2007.
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