SymphonyIRIs Recommendations

Understanding the market and building strategic relationships mitigates the risk associated with innovation Testing the market with a new product is instrumental prior to a full commitment Near real time tracking during the implementation phase facilitates successful management of the product forecast Availability of category specific benchmarks, to identify, track and forecast new product trends can guide the launch implementation process. Identifying targets to aim for, provides a diagnostic for assessing a products true potential, within weeks of launch. Fast identification of issues with in store availability at key times in addition to promotional and merchandising compliance enables the deployment of mitigation actions

New products are the lifeblood of business so risks should be kept to a minimum Developing strategic relationships for NPD will lay foundations for end to end success Granular data and expert analytical insight provides a clear direction for developing new product campaigns. It is vital to understand previous launches to reduce the chance of implementation mistakes

Full launch of a new product across markets is expensive and getting the product, shopper communication and in store implementation right is fundamental for success Store level data and analysis using test versus control methodology provides a detailed assessment. A pilot can be properly reviewed and used to finalise a full go to market strategy

SymphonyIRI Snapshot Report

Can success be shaped in challenging times through product innovation?

Innovation continues to be a key element of the FMCG brand development itinerary. Even during challenging times, shoppers are still drawn towards new products and retailers remain keen to incorporate innovation within trading relationships. When a staggering 4 out of 5 new products fail, what are the drivers of success?

SymphonyIRI can supply solutions that relate to:

Consultancy facilitated product development In depth market insights are essential to win at the shelf. Understanding what the shopper wants and the effectiveness of go to market campaigns is crucial for developing the most effective strategic plans.

Snapshot report highlights

The rate of introduction of new products into FMCG categories has declined over the last year but this trend could now be reversing. Despite the difficulties that the consumer recession brings, many new introductions have successfully negotiated the barriers to establish a solid sales platform from which to grow further. At 3.2%, Personal Care benefits from twice the average value contribution from new products. For every successful new product, four fail. For the category to benefit from the introduction of a new product its critical for it to outperform the majority of the existing products in the category achieving a Sales Rate Index of 80 or more. It is clear whether a new product will succeed within 8 to 10 weeks of a new full launch (inclusive of all intended supporting marketing activity). The retail argument for increasing distribution can be clearly made based on sales rate. Gaining and maintaining distribution is a key success driver for new product success. Strong new product development can definitely create category growth opportunities as shoppers will buy into the excitement of brand innovation even during challenging economic times.

New product effectiveness and trends

Using key measures derived from weekly sales data in addition to observed promotional information, the effectiveness of new product launches can be tracked and evaluated.

New product forecast management

Category specific benchmarks, to identify, track and forecast new product trends, provides guidance through the launch of product innovation and can support the process to improve long term performance prognosis.

Store testing and NPD piloting

Use granular store level information to accurately quantify the effectiveness of new in-store marketing projects and identify opportunities to improve the program and mitigate costly risks associated with a national launch.

Kelloggs plans to achieve 25% more sales from innovation launched in 2011 than it did in 2009 as part of a strategic move from renovation to innovation for existing brands. As part of this strategy, the group is placing increased focus on consumer need states and differentiation based on the emotional benefits of each product.
www.igd.com, 9th June 2011

In store execution and on shelf availability

Using retailers daily sales data and in store observation, track and optimise on shelf availability both on and off promotion, and merchandising commitments to ensure new products are launched with the best retail environment to promote success.

To discuss this report in more detail arrange a meeting with SymphonyIRI. Contact your account representative, call the new business team on 01344 747 856 or email SnapshotReports@SymphonyIRI.com

The data in this report was extracted from 175 continuously reported FMCG categories in 2010 & 2011. The categories have been amalgamated into industry groups for ease of interpretation. New products have been drawn from the database at a variety of levels dependent upon recent characteristics of NPD within the category. All data used is from the multiples sector and excludes NPD from retailer own brand ranges. The minimum distribution requirement for inclusion in these results was 15%.

New product development has not been a priority

A steady decline in the number of new launches and in their value contribution, looks to have turned around in recent months. Whilst still only around 3% of total annual value sales, it is a sign that despite the enormously high cost of trade promotions, which could have stunted innovation investment, manufacturers and retailers are still very much aware of the importance of successful brand evolution whether that consists of new sizes, pack types, flavour variants or completely new brands. Personal Care has the highest contribution from innovation At 3.2% Personal Care benefits from twice the average value contribution from new products, Confectionery is close behind with 2.8%. With the highest level of trade promotion support and the deepest deal depths, new Personal Care products enjoy the best relative sales rates and gain better distribution than most. This has long been a feature of this sector, whereas, new Food & Drink products contribute by far the most in absolute terms they are not as successful and are promoted less aggressively. New products are usually launched with a price premium Across all new products studied, the average level of price premium was a significant 70% on a like-forlike volume basis over their first 2 years of sale. This means that in times of heightened price competition and squeezed margins, new products provide a welcome boost to sales value if shoppers are prepared to make the investment. New Food & Drink products carried, on average, a 54% price premium whilst OTC & Health had the highest at 135%. But the premium doesnt last. Although averaging 70%, it starts at just over 80% and falls over time. This will have been partly due to the competitive price marketing that we have learned to accept but its
Personal Care and Confectionery benefit most from new product introductions

Shaping success through innovation

group achieved only 65. To grow the sales of their sector, they need to sell faster than the sector average. In fact, only 1 in 5 (21%) achieved this but those that did, hit the jackpot with combined sales accounting for 50% of value sales from all new products. New products in Food & Drink can find it tough going Success is harder to achieve in Food & Drink than in any other sector apart from Beer, Lager and Cider. To succeed, it is necessary for the Sales Rate Index to reach 80 and to exceed, the rate should reach 120, outperforming existing items on a like-for-like value sales basis by 50%. In Food and Drink, the largest sector by far, only 1 in 20 new products exceed, half the rate seen in Personal Care categories. Maintaining distribution is all about Sale Rate To maintain its distribution a new product must exhibit a superior sales rate. Even some of the best eventually succumb to the inevitable churn in the marketplace as retailers conduct their range reviews but for new products with the lowest sales rates delisting begins after only 6 months. There are some, however, for whom this loss of distribution could be avoided.

Has the tide turned on the decline of new products being launched?

Only 1 in 5 new products are successful

The sales rate determines the longer term distribution trend

worse for new products since so many of them struggle to maintain their position and try to use lower prices to bolster sales. Most new products do not succeed Success can be measured in many ways but in this study the key criteria is a relative sales rate measure, known as the Sales Rate Index (SRI). Compared with the average value sales for existing items in their category sector, when normalised for distribution differences, new products overall come up short. Against the existing item average Sales Rate Index of 80, new products as a

1 in 10 new products sell well enough to grow their distribution

with a well positioned fact-based representation to the retailers. It is clear early on if a new product launch will succeed Within 8 to 10 weeks of a new full launch (inclusive of all intended supporting marketing activity) the retail argument for increasing distribution can be clearly made based on sales rate. This is an important window of opportunity and if action is taken then these new products would benefit from a stark statistic, that absolute sales from new products achieving distribution above 50% sell 4 times more than those that dont.

To grow sales its critical for new products to sell faster than the average of existing products.
Selling faster than average gives good cause to extend distribution. It only takes 6 months for the worse performers to start being delisted. Only 1 in 5 new products sell faster than the sector average.

Achieving good levels of distribution is a fundamental for launch success