Testing times for new products

Successful new product launches are rare. Of the Top 100 grocery brands, only seven have launched in the past ten years, while over 50 per cent are more than half a century old. The market has changed and the barriers to success for a launch have increased.

However, this is not discouraging new product launches, which have grown strongly in recent years.

Today, retailers can make faster decisions on new products based on early performance. Category management techniques force brands to work harder – brands’ shelf space is pressured by own-label, and the pace of innovation has accelerated.

For those seven brands within the top 100 (Mller, Clover, Dolmio, Heinz Weightwatchers, Radion, Pringles and Always), there are common elements to their success: a clear usp; consistent advertising support; constant brand development; and luck – they were in the right place at the right time.

Understanding consumers’ responsiveness to new products and capitalising on this knowledge can be critical to the success of a new brand. For example, from a Homescan survey, almost two-thirds of the pre/new family households, representing approximately 20 per cent of the UK, either agreed or strongly agreed with the statement “I like to try new products”. So, by targeting new products to these groups, faster product trial will result.

In addition, 43 per cent agree “I find out about new products from TV advertisements”. Of the pre/new and established households, 53 per cent agreed with this statement.

It is clear that television is the main informer, particularly for the groups who are inclined to try out new products. Indeed, half of new families agree they have often bought new products as a direct result of seeing them on television.

Sampling and promotion techniques also have a role in the launch campaign. Three-quarters of households say they are more likely to buy a new brand if they have had a chance to sample it, and over two in five agree with the statement: “I buy a brand I don’t normally if it is on offer.”

Retailers can influence the success of a brand launch through their own strategies. Own-label is a threat to new brands, and marketers should consider how much of the market they can target. In addition, retailer budget lines had a more detrimental impact on branded product than on own-label brands. New product potential in categories where retailers have introduced this counter-offensive to the discounter threat can be extremely limited and restrict success from the onset (Chart 1).

Achieving a high level of penetration is very dependent on trade support, and the speed of distribution through different retailers and category/grade of store.

The efficiency of the distribution chain, and the concentration of retailers, means that 50 per cent of the grocery trade can be reached within three months of launch.

However, in launching, it is important to evaluate the potential consumer reach achieved by listings in different retailers. For example, a Tesco or Sainsbury’s listing would potentially give one exposure each to about a third of the population within four weeks. It is possible to maximise consumer reach, in the most cost-effective way, by reviewing the best combination of retailer listing at a market level (Chart 2).

From Homescan, a listing in Tesco and Kwiksave will almost achieve the same reach as Tesco and Sainsbury’s because of the different shopper base. Such knowledge at a market level will maximise consumer reach on launch and help developing a loyal buyer base in those critical first six months (Chart 3).

From the Homescan panel, a range of new product launches over the past five years were examined to establish benchmarks against which to assess new product performance. Inevitably the first six months proved to be critical in terms of penetration (level of households purchasing) and repeat purchase rate.

Isolating the best-performing brands, and rerunning the analysis against the newly established norm, it became evident that repeat rates levelled off at about 37 per cent for both groups.

However, the best performers were able to establish a base of loyal buyers more quickly. This is important when one considers that after the critical six months into launch, converting those who have tested the brand becomes a slow process, unless boosted by a major injection of marketing activity (Chart 4).

These brands focused on TV for their launch advertising, and spent an average of 2.4m per brand. This ensured a high level of consumer awareness, and that those most likely to trial were reached. In the first three months of launch, 27 per cent of these new brands sales were on promotion, ranging from money-off to multi-buys, from coupons to extra free offers.

This figure compares with an average of 22 per cent for the market as a whole. This was reinforced with further bursts of promotional spending some nine to ten months into the launch.

These brands ensured they maximised their opportunities for brand success and should be an example for other marketers when launching a new product.