How Adaptive is Your Product Innovation and Launch Process?

Posted on: November 27th, 2012 by Gib Bassett No Comments

Creating and launching new products is the most widely accepted path for Consumer Goods companies to grow their businesses.  Yet, it’s among the most challenging to do successfully.

Less than 1 percent of more than 11,000 new consumer products introduced between 2008 and 2010 yielded cumulative yearly sales of greater than $50 million.  The majority achieve no more than $7.5 million in sales in a single year.  Just the marketing costs averaged $15 million for those 11,000+ product introductions, to say nothing of R&D, production and distribution.

Quantify the additional costs to brand equity and shopper good will when a product fails, as well as the opportunity to focus resources on winners instead, and the total costs are considerable.

The upside to solving this problem could be even more considerable, however.  Imagine if success rates were improved by just a few percentage points.

In spite of this opportunity, innovation has been in decline.  The number of innovative new product initiatives has been falling right along with investment in R&D as a percentage of sales.

Why do you suppose that is?  Clearly the effort is akin to battling some unseeable and unknowable force making new product innovation and launches completely unpredictable.  The safest path lies with product extensions within existing categories, but the payoff pales in comparison.

To attack this problem with confidence and predictability takes detailed insights at every stage of product innovation and launch – an Adaptive Product Innovation and Launch Process lacking in most Consumer Goods organizations.

Viewed as shown below, the process can be broken into different dimensions. 

How would you classify your organization’s position along each dimension, where on the outermost edge lives the most detailed and diverse data?  Moreover, can you put the data to use to inform each phase at the speed of today’s consumers and shoppers?

Market

How well do you know your target market?  Do you base decisions on historical results and long held beliefs?  Or are you instead employing voice of customer methods where data from social media and the social web melds with syndicated and other sources to inform target market insights?

Consumers

How well do you know your consumers?  Can you identify the shoppers among them?  What about the attitudes, opinions, demographics and preferences of both?  Or the 2 percent who account for 80 percent of volume in year one of a new product introduction?  Do you have a line of communication to them, based on permission?  Or, like many of your peers, is consumer marketing data locked away in agency and third party marketing services systems?

Differentiation

What product attributes do your consumers and shoppers care most about, and which need elevation to inclusion in design, packaging, shelf position and marketing decisions?  Do you have a line of sight into competitive intelligence beyond syndicated data providers and panels, to new methods such as crowdsourcing, social media and the web?

Pricing

Is pricing set infrequently and based on old assumptions or infrequently available data?  Does trade promotion more often than not take the form of price reduction?  Or can you instead observe sales relative to price by outlet, by SKU, and make adjustments to optimize sales and volume without resorting to discounting?  The answer depends on whether you have access to, and embrace, the detailed sales data available from nearly every retailer today.

Supply

Do you plan for production based on historical patterns and generally agreed upon assumptions?  Given the costs involved in researching and producing new products, the situation begs for a plan based also upon knowing the expected consumption and referral behaviors of the 2 percent of shoppers who determine new product success.

Demand

The ability to sense demand in market and adjust supply, price, shelf position, packaging, messaging or the product itself has been shown to turn around a failed launch and produce a winner.  That degree of visibility, in a timely and actionable manner, is only possible when every prior dimension is accounted for at a detailed level.

With marketshare under attack from innovative private labels while retailers continue to demand ever escalating trade funds, it seems incumbent upon Consumer Goods executives to embrace an Adaptive Product Innovation and Launch Process.

Gib Bassett

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