Giving them what they want

Nothing is simple when it comes to developing a new product – advertising, in-store environment, product category and brand ‘commitment’ all play their part in consumers’ decisions to purchase

Innovation is the lifeblood of any successful brand, critical in ensuring it stays on top of its game and ahead of the market. McCain is only too aware of this, and is keen to move into new categories (MW last week).

Research shows that innovation is key to brand development. A TNS study of 200 business leaders (marketing directors and executives) identified innovation as the most important business priority, ahead of “understanding your market” and “anticipating changing consumer needs” – but they also felt it is the most difficult to attain.

With 35% of new brands failing in the first year, new products have a tough job to be innovative, drive sufficient sales to justify their presence on shelves and establish a strong product performance to stay on the shelf in the long term. Of the products that get to market, three-quarters make less than &£1m in their first year and only 2% make more than &£10m.

The impact of brand launches and increased consumer choice is also having a major effect on the market share of leading brands. So creating a winning concept and securing a niche in the market is more important than ever.

A recent analysis of new product development (NPD) in the drinks sector (MW May 11) discussed a major industry slowdown in products successfully making it to market. It suggested that NPD has slowed to a crawl and lacks innovation.

But are products failing through a lack of innovation, or a failure to understand what consumers want and how to effectively pre-test to get the best product mix?

Research has helped overcome this challenge by using techniques to elicit consumer reactions which can be sensitively interpreted by researchers to produce answers that NPD teams can act on.With increasing competitiveness and tightening of purse strings, NPD research has to deliver more insight and value to NPD teams via more sensitive approaches.

So what can research tell the industry about how best to execute NPD, and how to place marketing budgets effectively in order to help ensure maximum returns?

New research by TNS shows that in-store product awareness is as big an influence on consumers’ propensity to buy as advertising. Until recently, advertising has been seen as the most important route to market, but new figures suggest that creating the right in-store environment can be more influential.

Some 38% of consumers said they bought a new product because “it caught my eye in store”, and an additional 26% say purchasing decisions are driven by product promotion. In comparison, 34% say advertising influences their decision, while 18% say innovation influences them.

However, the importance of the in-store environment varies significantly from category to category, and in relation to advertising spend.

For example, three product launches were considered – a biscuit brand, a dental care brand and a male grooming product. Some 54% of consumers said that the in-store environment was the reason they bought the new biscuit product, while 31% said advertising was the influencing factor. By comparison, when asked about factors influencing their purchase of a new male grooming product, 47% suggested advertising against just 20% who said the product caught their eye in store.

To assess the impact of in-store awareness on consumers’ buying behaviour, TNS has developed a virtual in-store interactive testing tool. It simulates an in-store environment, and provides a virtual shopping shelf from which consumers can select goods. This approach was evaluated against 70 brands in the UK, France and Germany, to analyse whether virtual buying matched actual market behaviour. The results show consumers replicate real-life behaviour with a high degree of accuracy.

Brand commitment can also have a big impact on new sub-brand sales. Consumers can be classified into one of four groups, each of which has a varying degree of commitment to the core brand: entrenched – consumers with the highest brand commitment; average; shallow; and convertible – those least committed and most likely to be converted to buy alternatives.

Not surprisingly, committed consumers are less likely to defect. These consumers head straight for “their brand”, are less aware of competitor brands and make fewer comparisons. They are also less likely to accept alternatives when their usual brand or product is unavailable, and are less price sensitive than other consumers.

The higher the level of commitment, the less likely consumers are to substitute parent brand purchases with the new product. By modelling each of these commitment groups separately a more accurate picture can be achieved.

Applying more sophisticated approaches to NPD research means marketers can be more confident about the likely success of a new product. If a concept is not performing well during initial trials, cost-effective tests to change the product can be made to assess the impact on consumer responses and predicted sales. This investment early on helps avoid more expensive changes further along the concept development process, and helps ensure the product is one of the few that actually survives in the market.