Actionable Insights From APT's Retail Practice

Three Steps to Introducing Products with More Success

June 30th, 2015 | Posted by JDouglass in Manufacturing

CPG companies are predicted to introduce over 2,000 new products in 2015. However, new product launches fail between 60-80% of the time.

Why can’t CPGs crack the code of rolling out the right products? What are these multi-billion dollar CPGs missing in their innovation process?

The answer: a robust in-market testing process. While many new product development teams actively “test” the look, feel, taste, and packaging of their new products in limited settings (e.g., labs or customer panels), many are not conducting rigorous in-market tests of the actual product introduction before rolling the product out broadly. Given the sizeable production, marketing, and opportunity costs associated with a product launch, CPGs should be carefully testing a new product in stores to maximize ROI of the introduction.

Here are 3 steps to test your way through a smart product launch:

  1. Test the product introduction in a small subset of diverse stores. Measuring the test vs. control sales impact of the introduction will isolate the new product’s incremental topline impact, net of potential cannibalization to other products. This is essential—no amount of beta testing can tell you how shoppers will truly react with their wallets, and it certainly won’t tell you which products they may substitute for this new product. From the results of the test, companies can make the yes/no decision about whether to roll out the product, and even target the rollout to select markets if there was significant variation in performance. An added benefit is that a robust in-market test helps convince retail partners that the product will be beneficial for the whole category, and may warrant more shelf space in their stores.
  2. Test the marketing support. Most product launches require marketing support to ensure success. However, marketing effectiveness can vary widely, and it’s important to test media campaigns, digital ads, promotional signage, etc., to understand the true impact of these investments. Even if your company is leveraging a media mix model, the recommended mixes should be considered “hypotheses” to be tested, especially when dealing with an unknown element, such as a new product. After testing, the optimal spend per channel can be refined, and the campaign should be targeted to markets predicted to be ROI-positive before the full product launch.
  3. Test new varieties. Introducing new varieties can be a longer-term goal once the product is in-market. CPGs can continue to refine their offering by testing new pack sizes, flavors, packaging design, in-store placement, and much more. Too often, companies will become complacent after a successful product launch. To remain relevant with consumers, they must continue experimenting with new innovations within the same product line.

It may be true that 60-80% of new product innovations fail, but CPGs can minimize the risk of these innovations by nimbly testing product introductions in-market. It is not that new product shouldn’t fail. However, companies that build a process to fail fast, learn rapidly, and do so cheaply will significantly speed up their innovation process and ensure that only the best products make it to market.

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