Five factors for successful innovation
Developing successful new product lines is vital for a brand, but proves to be one of the hardest things to get right. Our research shows that the UK has a higher failure rate than most countries when it comes to launching new products. Of course, success can be measured in different ways - but most important is whether it has an incremental impact on the category. The aim of NPD should be to drive extra sales for the overall category, not just replicate products meeting existing shopper needs, yet in the UK just one in three launches achieves this aim.
While it’s difficult, it’s not impossible to generate incremental sales. Our expert analysis of new product launches finds there’s five factors that successful innovations have in common:
Think incremental: All launches should aim to add incremental value to the category overall. Debutants which simply encourage shoppers to switch from one product to another are of little value to retailers – giving them no motivation to make space on already crowded shelves. The best-performing launches either bring in new shoppers or entice them to make extra trips or buy in bigger quantities. The challenge is that attracting more shoppers is a difficult ask; many categories have already reached high penetration and struggle to bring in new buyers. It is equally hard to increase sales volumes in categories where shoppers are actively looking to cut spending or consumption.
One of the most effective ways around this challenge is to target different occasions through a brand extension. Bailey’s Strawberries and Cream has taken a much-loved brand and applied it to summer occasions, new territory for a tipple which is more associated with curling up next to a log fire. Similarly, Elvive’s Dream Lengths takes a strong existing brand and delivers a distinct benefit. Both of these launches focus on new opportunity rather than duplication. Only by developing this incremental mindset can a brand drive true growth.
Premiumise: Given it is so difficult to reach more shoppers, one of the most effective ways to generate value through NPD is to encourage existing shoppers to trade up. To add value, new lines should command a higher price point; our studies show that a price premium of 30-40% is best to maximise revenue for the brand and category. Of course, this approach only works if the product can sustain this price premium over time. Marketing your brand as ‘the best’ encourages shoppers to trade up, but the product needs to justify its premium price tag. Our ranking of the top NPDs of 2018 found that successful launches from Persil, Bold and Comfort commanded a price premium. Added benefits, plus premium positioning, higher price and high-end packaging is the formula for success.
Crack the big four: Our research finds that, in FMCG, it is vital to for new lines to get listings in the top four grocers in order to reach £5 million sales in the first year. Brands which are listed in the top four retailers are 10 times as likely to hit this sales target as those which fail to do so. In order to win as many shoppers as possible, listings in the key channels are essential. Being there is one of the simplest principles, but one of the most important.
Get promotion right: The principles outlined by leading manufacturers, especially P&G, show that innovation is the source of long-term growth, whereas price promotions provide a short-term sales bounce. However, the mantra “promotions win quarters, but innovation wins decades” is open to possible misinterpretation. While long-term growth is driven by innovative product development, price promotion is a vital tool in the marketing of NPD. If a manufacturer launches a new product in a highly promoted category, it follows that the NPD needs to be promoted to gain traction with shoppers. Therefore, for those brands operating in a highly promoted category like crisps and snacks, it is essential to promote. Walkers, the market leader, promotes its NPD at a similar level to its core lines.
Capture the zeitgeist: The greatest NPD will incorporate all of the above principles but add one crucial element; it will tap into a current trend. Halo Top, 2018’s star-performing NPD, encapsulates the trends of our age. As health is clearly a greater issue for shoppers now, it makes sense that a successful innovation incorporates this. Halo Top crucially creates a healthy indulgent product, addressing the trends of health and indulgence in one product. It also encourages shoppers to trade up with its high price per volume and premium positioning.
Applying these principles will not change the fact that successful NPD is hard to achieve, especially in the UK, but it does mean a much greater chance of success.
Our ranking of the most successful innovations of 2019, published next week, will uncover which brands are getting it right.