Share from Innovation: Not necessarily a good indicator of success!

Posted by Oliver Koll on Apr 25, 2018

“Share from new products” which shows how much a brand’s new offerings contribute to its total sales is often a measure of innovation success. Looking at this variable without considering a brand’s total assortment strategy can be misleading and may result in wrong conclusions.

We calculated four equally sized groups based on value sales accounted for by new products (using a dataset of 32797 brands in 31 countries and 86 categories between 2012 and 2016). We compared these groups with respect to number of new products introduced, % of assortment that is retained, and % of assortment that is new.

The Top-Quartile represents brands where 50% of sales on average come from new products (13%, 2% and 0% in the remaining quartiles). While this may at first sight indicate high launch success, it is partly a result of assortment turnover: Over 5 years, this top quartile only retained 78% of the existing assortment compared to 93% in the bottom quartile.

Nonetheless, the brands that perform best with respect to share from new are also the only group that substantially increases its range and achieves market share growth (0.2% per year) whereas the other three groups experience a decline – most pronounced in the group that does not innovate.