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BRASELTON, Ga.-- At the Convenience Store News New Product Marketplace, held Dec. 6-8 at Chateau Elan in Braselton, retailers and product manufacturers joined for a session on working together to achieve success in the new product arena.
The session, "Winning the New Product Game," featured information from BASES, the world's largest provider of new product forecasting, which has tested more than 25,000 new product ideas. "There is a clearly defined role between retailers and manufacturers. A knowledgeable buyer is a better buyer," said Jeffrey S. Cail, general manager for BASES Americas Business Unit. "Manufacturers launch better products, and retailers are informed to buy the right products that will be successful."
According to Cail, it all comes down to execution at the retail level. "The key is knowing which points matter most and executing against what's important," Cail said. "Most new products fail, but one that succeeds can really change the entire history of a company." Launching new products is tough, but it presents an area where improved performance could distance a company from its peers. That's how companies gain a competitive advantage, he added.
Cail outlined five key "Rules of the Road" that will enable manufacturers and retailers to market or retail new products more effectively:
1. Generating awareness is critical to success.
"Drawing in a large pool of try-ers is important for any successful new product," Cail said. "Conversely, if you don't get people to try your product, the size of your business is severely limited." Only 10 to 15 new products a year actually reach $100 million in sales; most are under $10 million in retail sales. Awareness levels are driven by advertising, with TV and in-store promotion leading as the most effective mediums for generating product awareness.
In-store execution counts greatly in product awareness. Manufacturers can help their own awareness cause with standout packaging, which makes consumers sit up and take notice. Favorable shelf positioning on the retail end is also a key element, and will really increase sales vs. less noticeable shelving. "The bottom shelf is just not a good place to be for new products," Cail said. "You can still win, but it's harder." He added that new products do wonderfully if they are outside of main line shelving in barrel coolers, end-caps or promotional racks.
2. Concept/product fit is everything.
"If you tell the consumer your product tastes like a chocolate milkshake, it better taste like a chocolate milkshake," Cail advised. Strong concept appeal -- like the appeal of a chocolate milkshake -- will result in bigger business than weaker concepts, but it does not guarantee staying power in the marketplace. A good concept with a weak product will generate trials, but the longevity of the product will be questionable. After-use product satisfaction is the clear predictor of longevity. The best-case scenario is a new product that doesn't just meet expectations but exceeds them.
In the end, manufacturers need to evaluate what level of risk they are taking with their concept/product fit, and retailers need to be aware of what kind of risk they may incur. This doesn't mean that people shouldn't take risks in the new product game in an effort to win, but rather that players shouldn't unknowingly take risks.
3. Think incremental volume, not just top-line sales.
Creating additional line extensions is a popular trend in new products, but it doesn't necessarily entice new consumers to the brand. Sometimes they simply trade buyers between the parent brand and the line extension and don't really grow the brand.
Line extensions grow a parent brand by 11 percent, on average, but that's only if the proper implications are acknowledged. Launching line extensions that offer unique benefits vs. the parent brand can lead to incremental sales. Also, strategic funding for the line extension can create incremental volume. "If it's incremental funds, it's incremental sales," Cail said. "If it's borrowed funds, it's borrowed sales."
4. Long-term support is essential for new product success.
As many as two-thirds of new products decline in volume from year one to year two, Cail said, at a mode decline of 30 to 50 percent. "Manufacturers would be better served planning for a decline after the first year than an increase," he said. Products that are purchased more frequently, such as soft drinks, can drop faster than products that are not used as frequently, which take a longer period of time to reach their full potential.
Sales volume in year two is also more likely to decline as advertising support declines. The high failure rate for new products in the United States is greatly attributed to this sharp drop in marketing support that happens in years two and three. Cail added that "new product failure rate is in some ways a self-inflicted wound" because of this reduction in marketing funds, and suggested that successful companies should consider a brand "new" for at least two to three years and maintain marketing support.
5. Innovation matters, but maybe not in the way people think.
"Seventy-six percent of new products are really just 'me too' products," Cail noted. "Truly innovative new products can really drive incremental sales for both the manufacturer and the retailer." A uniquely innovative product will be able to stand out from the crowd in terms of advertising and will be more apt to be noticed and remembered in the marketplace.
Innovation can also result in better in-store display support, as retailers value innovation because it leads to incremental, rather than cannibalized, sales. "Retailers are smart when it comes to how to move their sales, rather than how to move the manufacturer's sales," Cail concluded.