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Industry
speakers generally say that 80% to 90% of new products
do not succeed and a recent Nielsen BASES and Ernst
& Young Study put the failure rate of new U.S. consumer
products at 95% and new European consumer products at
90%. Based on research at Copernicus, we believe that
no more that 10% of all new products and services are
successful—that is, are still on the market with
sales steadily growing after three years.
Some
of the most spectacular failures (e.g., New Coke, Ziploc
TableToppers, Cottonelle Moist Wipes) have been consumer
packaged goods (CPGs), so we decided to talk to CPG
insider Steve Rosenberg to get his thoughts on common
mistakes and best practices that increase the odds of
success.
A
16-year CPG veteran, Rosenberg is the former Vice President
of Marketing at Reckitt Benckiser where he was responsible
for, among other things, new product innovation for
Lysol, Easy Off, Mop & Glo, Old English, Glass Plus,
Lime-A-Way, Rid-X , as well as the relaunch of Veet
depilatories. Here's what he had to say:
Copernicus Mzine: Companies introduce thousands
of new consumer packaged goods each year, but very few
are considered successful (i.e., profitable after three
years). As a CPG insider, why do you think that is?
Rosenberg:
In many cases, companies do not execute well against
the product and spending plan they tested. Too often,
marketers change the product in some way or, as is more
often the case, do not execute the marketing spend plan
they put into the test scenario. Further, they often
overestimate distribution levels. Then they wonder why
they did not get the projected results! There have been
several validation studies that demonstrate that the
closer you stick to the product and budget tested and
the more you achieve the projected distribution levels,
the closer your actual results will reflect the test
results.
A
second issue is that marketers and test methodologies
do not do a good enough job anticipating competitive
entries—even though it is usually a sure bet that
your competitors will follow you quickly into the market
with a good innovation. If this is not anticipated correctly,
sales will not be as high as expected, and of course
it will take longer to recoup the investment and have
a profitable new item in the long-term.
Yet
another issue is that many companies seem to focus less
on a few big opportunities, and more on lots of smaller
opportunities. They may be smaller, but they still take
up a lot of human and financial resources to execute
well and do not usually yield the return. Worse, they
distract resources from the few big opportunities which
should get more resources and attention.
Copernicus
Mzine: Thinking back on your personal experiences
with new product development, what parts of the process
and research tools (e.g., concept testing, simulated
test marketing, focus groups, test markets) do you view
as critical to improving the odds of new product success?
Rosenberg:
I believe that focus group feedback at the early idea
stage is important, so you get to hear real consumer
reaction to your ideas. Concept testing and product
testing are critical—make sure you get the concept
right, and that it is focused, succinct and brief so
it can later be translated into a :30 or :15 second
TV or print ad. Product testing is a strong indicator
of long-term success (repeat purchases) and is a must
for any new product launch.
Over
the years, my competitors and I relied much less on
in-market testing because we were hesitant to tip our
hand, and often a competitor would come in and "sabotage"
the test market by flooding that market with coupons,
heavy up media, etc. The in-market test subsequently
becomes a gigantic waste of time and resources.
Some
competitors instead launched in "lead markets,"
i.e., 6 to 9 months prior to a national roll-out, perhaps
as a disaster check and to gain some tactical learnings
against a national launch plan. My own opinion is that
this middle ground does not serve a new product well
as either a test or in preventing competitive response.
In fact, I never used this route but did take advantage
of a competitor who did, giving me enough time to prepare
and launch nationally my own competitive entry.
Copernicus
Mzine: What were some of the most interesting observations
you made as you watched the new product development
and testing process in your past experience?
Rosenberg:
I believe the entire process is fascinating, but it
is particularly interesting to track the evolution of
a new product idea from conception to launch… the
more exciting new products are those that evolve from
an attribute-based concept to more of a benefit-based
concept.
Marketers
brainstorm to come up with new product ideas that possess
"cool" features and attributes. They fall
in love with the idea; write the concept; and run a
test. Even if test results were positive, if they are
wise, they will give the concept further thought and
realize that the "cool" attributes may not
have long-term legs. It is at that point that a new
product team revisits and identifies those benefits
that drove consumer interest.
In
one case, we completely revamped the form, packaging,
and so on, of a new product because a different configuration
delivered the desired benefits better than the original
concept. We re-tested and got equally good scores, but
without some of the deficits of the original configuration.
While this may seem like basic product development practice,
it is amazing how often marketers and product developers
forget these basics and push full steam ahead with an
attribute or features-based idea, forgetting that consumers
are ultimately driven by needs and benefits.
Finally,
we found that the more you share your new products program
with your key retail customers to get their input, the
more likely they are to accept the new item when you
are ready to put it on the shelf. While you must be
careful regarding which of your customers to trust with
maintaining confidentiality (they should be willing
to sign a confidentiality agreement), the rewards are
great—once they have been part of the process,
they will most likely accept the item.
Copernicus
Mzine: If you had the ear of every CEO in the world
for five minutes, what would you say to them about how
to develop successful new products?
Rosenberg:
Here goes:
- Create
an atmosphere where it is 'safe' and even encouraged
to take well-thought out, calculated risks.
- Ensure
adequate funding of new initiatives, both in Year
1 and plan for solid funding in Year 2 and 3. Many
new products do not ultimately pay out because the
company significantly decreases subsequent year funding,
often to the detriment of the long-term health of
the new item.
- Stick
to the spending plan you tested! Set clear parameters
for volume, payout and profitability expectations.
If possible, review test plans and be aligned with
the team on the spend plan(s) to be tested. Do not
commit to a test plan that you don't feel you can
deliver in the real world.
- Finally,
keep an open mind even if the initial idea seems weak
or strange. Be self-aware; your negative reaction
may be a function of your own biases based on opinion
and/or past experiences which may not be relevant
to this idea in the current market environment. Encourage
the team to build upon the thought and improve the
ideas. Sometimes a "crazy" idea is the seed
for a great one.
Steve is currently an independent consultant and
his areas of expertise include brand strategy and new
product development for both large and small businesses.
He can be reached at ROSECLIFF2000@aol.com.
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