Intuitively, marketers know that most new product launches do not succeed at gaining customers’ attention and they generally fail to make an impact on revenues. A new report in Harvard Business Review backs this up: less than 3% of new consumer packaged goods exceed first-year sales of $50 million—considered to be the benchmark of a highly successful product launch. In Europe, over 60,000 new SKUs were introduced over the last year, but only 24% of those reached a full year in the market.
Why is new product launch success so fleeting?
Because consumers are creature of habit and most of us are just on “autopilot” when we shop. Think about your typical trip to the grocery store: you usually buy the same sort of products and brands, and know all the short cuts to the products that you know well. Am I right? Industry veteran Jack Trout says that: “American families, on average, repeatedly buy the same 150 items, which constitute as much as 85% of their household needs.”
How can marketers assure that the conditions for success are in place?
Marketers need to assure that the conditions for new product launch success are in place. A recent Nielsen report (New Product Innovation Report) provides some valuable insights to develop a strong strategy, generate awareness and ultimately convert into trial and loyalty to new products. Here are the 3 conditions for success:
1. A Deep Understanding of the Drivers of New Product Purchase
Affordability, convenience, brand recognition and novelty are the top drivers for purchasing new products. According to the results listed below, if the new product “is more affordable than what I usually use, from a brand that I like, is convenient, makes my life easier and has a great packaging” there are much greater changes to gain the consumer’s attention and become a launch success.
Not surprisingly, consumers also revealed that affordability, health and wellness, convenience, and environmentally friendly meet their needs and desires for new product options.
2. A Laser Beam Focus on the Best Markets and Buyers for New Products
The results show that developing markets are more inclined to try new products: nine out of 11 markets with the highest percentage of ‘early adopters’ are developing countries. “Developing countries can be attractive markets for new product expansion efforts due to their younger demographic composition, rising middle class population and strong appetite for ‘affordable luxuries,’” said Rob Wengel, senior VP and managing director of Nielsen Innovation in the U.S..
3. An Optimal Channel Mix to Generate Awareness and Trial
According to the report, “shoppers’ reliance on earned media is growing while their attention toward some paid media sources is declining.” TV ads had one of the biggest declines (11 percent) compared to the same survey in 2012, but still have the second highest percentage of the 20 sources reviewed. On the other hand, “social media post” is the main channel responsible for the growth in earned media channels. The new big winner for sources of new product information is “Family and Friends,” reinforcing the importance of Word-of-Mouth in a well-rounded marketing campaign. Rob Wengel advises “While TV offers the widest audience reach, a multi-media approach is necessary to connect with consumers at all touch points.” Wengel’s advice goes in line with our recent blog post “Is traditional marketing dead?” that outlines the effectiveness of a combined execution of digital and traditional media channels.
Let’s face it, new product development is risky business. Consumers demand product innovation, expect more options than ever before, are skeptical of paid media, and they are very hard to win over. Therefore, today’s marketers need to assure that the conditions for success are in place – deeply understanding their customers’ needs, investing only in the right target markets and picking high impact media channels to position their new products at the #TopRight corner of the market.