Risky Business

After slashing R&D during the recession, manufacturers are only now beginning to invest in new products, but innovation is still scarce.

Developing a new product is fraught with difficulty. It is expensive, time consuming and stands an 80 per cent chance of failing.

Little wonder that during the recession, manufacturers slashed their npd budgets, laid off R&D staff and limited themselves to a few line extensions, rather than launching totally new, innovative products. According to researchers Leatherhead Food RA, the number of new food products – usually the largest sector for new product launches – introduced during the recession, fell by about 17 per cent.

Nick Sawbridge, managing director of NPD specialist Innovate, says: “The major players battened down the hatches and were not prepared to take the risks involved. The few companies that didn’t cut back tended to be family-run firms not shackled by shareholders. They are the ones now getting the payback. “

However, there has recently been a return to npd, and it is not just the smaller private companies that are taking it seriously. Some of the major brand owners are once again beginning to invest in innovation and plan for the long term.

According to Helen Owen, managing director of Tutssels: “Npd is back on the agenda and there is a greater feeling of optimism about introducing new products and services.” Her view is supported by

David Goudge, director of the Brand Development Business, who says:

“It’s definitely on the increase and across all product categories. Companies are once again prepared to make that leap of faith. People who have been sitting on the fence for a number of years such as Mars are now making npd a much higher priority.”

He says that apart from the food industry, drinks companies – both alcoholic and soft drinks – are investing heavily in new products. The financial services industry, which has faced a great deal of legislative upheaval in the past couple of years, is also putting a lot of effort into npd initiatives.

But Goudge’s optimism is not shared as fully by Creenagh Lodge, chairman of CLK, and the grande dame of new product development. She asserts that there is “no R (research) and very little D (development) in the UK at the moment.”

One reason for the differing views in the industry is that npd is a matter of interpretation. The term can be very loosely applied. Many companies claim to be launching new products, but in reality these are no more than brand extensions. As Duncan Bruce, executive director of Wickens Tutt Southgate, says: “There are very few truly new products on the market, most have evolved from something else. Even alcoholic lemonade, which has been hailed as a great new product, is something that people have made at home for years – adding a splash of Martini to lemonade for example – you only have to ask a few teenage girls that.”

While the argument rages among npd specialists about what constitutes a “new” product, it is generally agreed that brand owners are taking a more considered approach to the process. In the Eighties, some companies launched new products seemingly irrespective of whether consumers had any compulsion to buy them. As Redwood Associates managing director Pamela Robertson says: “Brand owners have learned some lessons from the past decade. They are now much more restrained and circumspect. There has been a shift back to fundamentals, and companies are thinking about their brands and what makes a new product work.”

As part of this more cautious approach, brand owners are beginning to invest in staff that can move the process forward. Robertson says:

“One good thing about the delay ering of management during the recession is that in leaner and meaner organisations npd is now in the hands of more senior people than in the past. They can now take long-term decisions.”

Goudge adds: “Companies that haven’t had an npd department or at least a very senior person responsible for it for a number of years, are beginning to appoint people to specifically look after new products. Npd is moving higher up the management hierarchy.”

While there may be an enthusiasm for new products, and for finding the right people to manage them, there is also a greater emphasis on getting them to market much quicker.

Bruce calls it momentum marketing and says it is something that UK marketers are picking up from the Japanese. “They are throwing out the rule book. You could spend two years developing and planning a product before launch. Now it’s a case of getting it out quickly. Rather than carrying out intensive research, companies are starting to stick new products out on the shelves to see if they sell – if they don’t, then they will simply dump them.”

Robertson agrees: “There is a greater sense of urgency and time frames for projects are sometimes cut in half. If you have a good idea, you have to do it quickly and get a product out there before your competitors come up with the same idea.”

However, CLK managing director Chris Wood says there is a danger in launching new products too quickly. “With so much concentration on getting products launched fast, the emphasis is on speed rather than quality.”

Ask any npd specialist to come up with a list of recent good quality, highly innovative new products and most will struggle to find an answer. As Sawbridge says: “If they are good, they appear on shelves almost seamlessly and become so much a part of your life that it is difficult to think in terms of them being new.”

However, most agree that alcoholic lemonade is a good piece of innovation. The market was created by Bass with its Hooper’s Hooch brand, which has spawned a host of imitators. Goudge says: “We have done research groups with consumers and it is all teenagers can talk about. It has been incredibly successful and is a good example of how to create an entirely new sector.”

Mondex, the electronic cash system on trial in Swindon, which is backed by NatWest and Midland banks, together with a number of blue-chip companies, is also cited by npd consultants as an interesting new development, although it is likely to be some time before it is available nationally.

Robertson says it is not just fmcg companies, but also retailers that are introducing innovation. “Tesco’s Metro concept and the sandwich chain Prêt a Manger are very good concepts and provide busy consumers with what they need.”

She also says some companies are looking at innovation not in terms of their products but in the way they get those products to the consumer. “Daewoo may not be the sexiest cars in the world but the way they have cut out the middle man and are selling direct to consumers is very exciting.”

CLK deputy managing director Richard Zambuni says his favourite new product is the Baygen Freeplay Radio. Although CLK had a hand in its launch, Zambuni insists he is not blowing his own trumpet, because the product – a clockwork radio – is the brainchild of inventor Trevor Baylis, who built a prototype in his garage. Intended for use in the Third World, where batteries are expensive and scarce, it was on sale in UK high-street retailers in time for Christmas. Zambuni says the beauty of the product is that it fulfils a genuine consumer need.

For new products to work, they have to fulfil consumer needs and plug a gap in the market. Companies intent on launching a new product should, say npd consultants, take a look at their existing brands and identify what makes them successful. Robertson says: “A successful new product will move the market on.”

Bruce agrees: “To make a new product really work it must have potential for longevity. Otherwise, it will just be a flash in the pan.”

See Cover Story, page 28

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