Innovation Enablers

Posted by Oliver Koll on Nov 18, 2019

Many new products (NPs) share this fate: After an initial (communicative) hype they are kicked off shelves because performance is below expectations. Different reasons may explain this outcome such as a misunderstanding of shoppers’ needs, an inappropriate innovation process, or a focus on too many new products.

A recent study* identifies the retailer as a key player for successful product introduction in CPG. The study is based on 105 new product introductions from 44 leading national brands at the top 13 retailers in the UK. Overall, the study finds that the following retailer marketing activities (besides manufacturer marketing) are crucial to NP success:

  • A higher price premium compared to the category average harms NP performance. Consequently, it is no wonder that significant sales promotions at the retailer positively im
    pact NP adoption.
  • High (vs. low) promotion intensity at the retailer can push the average sales of a NP up by one third.
  • Besides pricing, also the alignment to the retailer assortment matters: NPs that are more unique compared to the retailer’s typical assortment have a harder time than NPs which are more mainstream (in terms of package size and using an established brand name).
  • NP introductions perform worse in categories where the retailer boasts a high PL share. A strong retailer brand will weaken the relative perceived value of the NP introduced.
  • Finally, format is important: NPs on average perform worse at discounters than at mainstream retailers.

Over the three years nearly 2/3 of all new products were adopted by retailers. The lowest adoption rate (17%) was by a discounter, whereas one mainstream retailer adopted 90%. To secure retailer adoption, manufacturers need to adapt their NP marketing to each specific retailer’s circumstances. For example, manufacturers and retailers should jointly develop the NP’s marketing program (e.g., timing and intensity of sales promotion, alignment with current assortment). Finally, manufacturers should exploit their knowledge and market insights to convince retailers of the reasons why they should adopt their new products