Making innovation work
Thousands of new products hit the shelves every year but many of them fail. A new study highlights six factors toward achieving sustainable growth.
Every year, around 30.000 new European Article Numbers (EANs) are registered. The flop rate of these products, however, is high – eliciting speculation that 'new' doesn't always spell 'better' from the consumer's vantage point. Roland Berger Strategy Consultants and market research organization BK&S examined the reasons behind this phenomenon to discover that out of 2000 participants in the survey, only 28% could actually spontaneously remember a single product innovation. Many fail to associate a new product with the core brand. Surprisingly, the study found that consumers see discount markets were innovation leaders, refuting the argument of producers and distributors that constant innovation is the only way to counter-act the discount market boom. Roland Berger study demonstrates how innovation co-relates with other marketing tools to generate sustainable growth.
The right kind of innovation is the key to long-term success
Innovation is a key lever for brand growth, yet it is often incorrectly applied, the authors of the study argue. Only a few companies manage to achieve long-term growth with their novel products. Winning brands are able to keep their innovative, new products on the market for longer. How do they do this? By presenting innovative products with a clear functional added value for customers, instead of attempting to sell emotional needs with an empty shell. Consumers look for criteria such as better performance (49%), convenience (34%), health benefits (22%) and quality ingredients (21%) in making their choices with respect to new products. Monetary savings are less important and weigh in at only 13%.
Every year, around 30.000 new European Article Numbers (EANs) are registered. The flop rate of these products, however, is high – eliciting speculation that 'new' doesn't always spell 'better' from the consumer's vantage point. Roland Berger Strategy Consultants and market research organization BK&S examined the reasons behind this phenomenon to discover that out of 2000 participants in the survey, only 28% could actually spontaneously remember a single product innovation. Many fail to associate a new product with the core brand. Surprisingly, the study found that consumers see discount markets were innovation leaders, refuting the argument of producers and distributors that constant innovation is the only way to counter-act the discount market boom. Roland Berger study demonstrates how innovation co-relates with other marketing tools to generate sustainable growth.
The right kind of innovation is the key to long-term success
Innovation is a key lever for brand growth, yet it is often incorrectly applied, the authors of the study argue. Only a few companies manage to achieve long-term growth with their novel products. Winning brands are able to keep their innovative, new products on the market for longer. How do they do this? By presenting innovative products with a clear functional added value for customers, instead of attempting to sell emotional needs with an empty shell. Consumers look for criteria such as better performance (49%), convenience (34%), health benefits (22%) and quality ingredients (21%) in making their choices with respect to new products. Monetary savings are less important and weigh in at only 13%.
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Companies also need to make clear improvements to their existing products to stay ahead of the game. The authors of the study thus caution against believing the “new is always better“-hype many management gurus advertise.Their research proves that product improvements actually received a slightly higher acclaim from consumers than ideas for completely new products.
Klaus Schumann, Procter & Gamble Head of Operations for Germany sums it up: “You cannot constantly be putting out a new product or introducing a new brand. In my view, innovation can also be a noticeable product improvement. What’s important is that the product becomes more interesting to the consumer and that he reconnects with it.“
The study highlights two further strategies to optimize the use of innovation in brand management: boosting point of sale (POS) presence of new products, as consumers often see these in stores for the first time, and a better coordination between the producers and retail outlets to maximize revenues. Generally, the study proved, consumers perceived innovative products when they were already on retail shelves (65% of those questioned), less so through traditional advertising (only 22%).
This underlines the importance of using direct marketing in stores to interest customers, making the prominent placement of this product in the store all the more important. Research also proved that consumers realize changes in a product line most strongly in stores that sell a limited number of brands, such as in discount retail outlets. Lindt & Sprüngli chocolates have proven particularly adept at playing the POS card: by introducing strategically planned, seasonally themed product lines and placing these in central locations in individual stores, the company has differentiated itself successfully from the competition, giving customers an emotional shopping experience.
Klaus Schumann, Procter & Gamble Head of Operations for Germany sums it up: “You cannot constantly be putting out a new product or introducing a new brand. In my view, innovation can also be a noticeable product improvement. What’s important is that the product becomes more interesting to the consumer and that he reconnects with it.“
The study highlights two further strategies to optimize the use of innovation in brand management: boosting point of sale (POS) presence of new products, as consumers often see these in stores for the first time, and a better coordination between the producers and retail outlets to maximize revenues. Generally, the study proved, consumers perceived innovative products when they were already on retail shelves (65% of those questioned), less so through traditional advertising (only 22%).
This underlines the importance of using direct marketing in stores to interest customers, making the prominent placement of this product in the store all the more important. Research also proved that consumers realize changes in a product line most strongly in stores that sell a limited number of brands, such as in discount retail outlets. Lindt & Sprüngli chocolates have proven particularly adept at playing the POS card: by introducing strategically planned, seasonally themed product lines and placing these in central locations in individual stores, the company has differentiated itself successfully from the competition, giving customers an emotional shopping experience.
In order to achieve benefits for all sides, producers and retailers must work together more actively than ever before to better place and communicate the new products at the point of sale. The authors of the study suggest the creation of an ‘innovation evaluation’ system to help retailers and producers identify which new products have the highest chances of success and thus deserve the strongest support in the stores. Without a fact-based system, the authors caution, it is impossible to identify the most important innovations objectively and use the resources available at the POS effectively. Steering innovation correctly can make successful innovative products less of a coincidence and more of a guaranteed strategy for sustainable growth.
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