Winners Add, Losers Replace
How do new products impact growth and decline of brands? At first glance, it seems they don’t: The 15% fastest growing brands get a similar share of sales from new products as do the 15% fastest declining brands.
That doesn’t tell the full story, however, as new products have an impact on the respective brand assortments:
– Launches by declining brands replace existing SKUs – meaning their assortment does not change in size.
– Growing brands expand shelf space with their innovations, adding the new products on top of their already listed products.
This adds a very new element to our interpretation of innovation performance, as it sheds light on one of the reasons that brands may be winning. Growing brands are launching SKUS that are more attractive to retailers, to consumers, or to both. While sales share for these innovations aren’t any greater, these sales are incremental to the brand portfolio, rather than simply substituting sales in the existing range.
The question then becomes, how are winning brands managing to add to their existing assortment and increases prominence on shelf? Marketeers require a better understanding of how to achieve incremental innovation in their category. Are brands that manage this targeting new occasions or new audiences? Are they meeting new needs that have expanded the category? Until brands understand how to effect incrementality they will be innovating ineffectively.