New products and line expansions are critical to a brand’s growth and success. However, in terms of new product launches’ failure rate in the U.S., it's between 60% and 80%, according to Catalina, a provider of personalized digital marketing strategies for CPG brands. That’s significant for an industry that makes new products its bread and butter.
"The CPG industry has always had a challenge launching new products, and it’s because of the proliferation of all the items in the store and also with consumers preferences continuing to change," said Marla Thompson, senior vice president of U.S. strategy for Catalina. "… It’s a problem that has been around for a while, but I think it’s just getting exacerbated right now with what’s going on with the industry and consumers."
A new study from Catalina demonstrates the efficacy—or lack thereof—of the launches for 50 of the top-selling food and beverage products, based on data from IRI’s 2014 New Product Pacesetters Report.
The report examined a number of factors that are key to determining the success of a product launch, including the size of the concentration of consumers that drives sales, the incidents of repeat buys by shoppers who try those products, the purchase dynamics around the product line and extension, and the long wait time that marketers have to face in getting their new products to mass distribution, said Thompson.
Why aren’t more consumers trying and buying?
Why product launches aren’t successful vary by the brand, product, product category, and the consumer.
What can be said is that trends among triers and buyers of new products are not based on demographics—they’re based instead on the nature and tastes of individual consumers.
"That is not driven by a demographic — that is more driven by a consumer and personal wiring," said Thompson. "It’s not a millennial trend or baby boomer or something else. It’s more based on an individual, and we see that across all levels of shoppers."
The challenges facing the food and beverage industries may make new products a hard sell at times. Brands have responded by being more "cautious and selective" about the new products they bring to market, Catalina said in its report. And product launches have declined in turn — 4.2% in 2013 and another 4.6% in 2014, according to IRI.
The answer isn’t always clear for brands in terms of improving the success rate of their product launches, but it isn’t to stop innovating to entice consumers and increase loyalty to the brand.
Key product launch stats
- Just 0.7% of shoppers drove 80% of volume for top-performing food and beverage products after the first full year of sales.
- On average, 76% of franchise buyers did not try a new product extension.
- Consumers who purchased both existing products and new line extensions were worth, on average, nearly four times as much as other franchise buyers.
- On average, only 11% of triers in the first 26 weeks of a launch remained engaged with a new item after 52 weeks.
- Brands lose millions of dollars due to lack of repeat purchasing. If every trier bought at the same rate as those who repeated, the average new product would have grown revenues by $30.5 million in just the first 26 weeks of a launch in the subset of 11,000 stores tracked in this study.
- Reaching critical mass in distribution takes a long time. On average, it took 28 weeks for new products to reach 75% of their highest distribution within the Catalina network.
The implications of these trends in product launches
These may be sobering statistics for food and beverage manufacturers, but the implications of these numbers can give companies insights on how to make those launches more successful.
New products rely on extremely small concentrations of shoppers to drive their success.
With only 0.7% of consumers generating 80% of volume for these top-performing brands, prospects look grim in terms of what other brands without this much penetration might be experiencing. If this small a percentage of buyers is driving all of the revenue for a new product, then a good strategy may be being aware of the demographics of brands’ most likely buyer groups and targeting their marketing specifically toward those likely buyers.
Brands have a difficult time retaining buyers who try those new products.
Focusing on driving retention is key, because "the retention component is at least as important to the success of those new products as acquiring those new buyers because only a tiny fraction of all shoppers are going to drive the volume," Thompson said.
She suggests that if brands nurture buyers, that could grow volume and increase repeat buys both during and after the launch.
Brand franchise buyers frequently do not try new product line extensions, but those who do tend to be worth a lot more to the franchise.
Brands do have a significant opportunity to grow from within, but more than three-quarters of franchise buyers aren’t purchasing new products. Increasing awareness of the benefits, similarities, and differences of new products as compared to the ones franchise buyers already purchase in a cost-efficient way might encourage existing franchise buyers to make purchases across the entire line of products, including those that are newly launched.
Marketers and brand managers face a no-win scenario when it comes to planning marketing campaigns due to delayed mass availability of a product.
Thompson called the 28-week wait period for marketers and brand managers "a predicament that can seriously undermine their success." For a product to take that long to reach mass availability, which Catalina calculates to be 75% of the product’s highest distribution, that means marketers are left in limbo in terms of when to start a national campaign.
Start too soon, and they can lose impressions and potential buyers who don’t have the product yet available in their market and who might then lose interest. Start too late, and products may sit on the shelves with no marketing to support them or drive awareness or sales, and retailers might remove those products from their shelves if the new product isn’t getting enough lift.
Being strategic about national campaign planning is always key, but finding other ways to reach out to consumers in more localized markets may also make up for a slower rollout.
