‘3 in 4 FMCG launches fail within a year’
More than three in four (76 per cent) new FMCG product launches fail in their first year, according to an analysis by Nielsen, but researchers there have identified four principles common to the few brands deemed “breakthrough innovation successes”.
The Nielsen Breakthrough Innovation Report, based on an analysis of 61,000 SKUs representing more than 12,000 new launches across Europe since 2011, found two thirds of products never even achieve 10,000 unit sales, meaning the majority fail to retain a retail listing beyond their first year.
But Nielsen says marketers can overturn historically high failure rates by changing their approach to new product development and building a passionate culture around innovation.
Johan Sjöstrand, managing director of Nielsen’s innovation practice in Europe, and co-author of the report, says: “Through the study process, we found proof that innovation success is never just a remarkable coincidence. It’s about deliberate attempts to disrupt all aspects of the innovation process and challenge everyday norms, such as consumer attitudes, long-standing beliefs, launch mechanics, organisational behaviour and disciplines.”
The study has identified four components common to the success of new product launches. The authors of the report say the absence of any one of these principles will “severely limit” the possibility of success:
The four rules for breakthrough new product innovation success
1. Choice: get the right innovation – make the right choice of innovation to pursue by walking in the shoes of the consumer to uncover key demand-driven insights. Ask questions like, why don’t people use a category? What causes them stress, confusion, inconvenience or compromise?
2. Process: get the innovation right – have the right organisational framework and processes to shape the chosen innovation into a market-ready offer that has relevance, differentiation and superiority; organisational culture must also allow weak innovation ideas to be filtered out before launch.
3. Marketing: get the activation strategy right – creative marketing has to be original and has to tell the story of the innovation.
4. Togetherness: get everyone right behind you – breakthrough success is the product of organisational togetherness, from top to bottom.
Of the 12,000 products analysed, just seven met Nielsen’s testing criteria for “breakthrough innovation success”. Each product had to have generated a minimum of £10m in first year sales, maintained at least 85 per cent of those sales in the second year and had to be deemed distinctive in the category by the researchers.
The seven “European Breakthrough Innovation Winners” for 2014 are: Foster’s Gold, Magnum Infinity, Milka Choco Supreme, Mullerlight Greek-style Yoghurt, Lucozade Energy Pink Lemonade, Oral-B Pro-Expert All-Around Protection and Sodebo Salade et Compagnie.
In addition, Nielsen also identified three further launches likely to be winners next year: Lay’s Xtra, Cadbury Dairy Milk Marvellous Creations and Ariel 3-in-1 Pods.
Sjöstrand says: “Nothing in our analysis suggests innovation success is out of the reach of any marketer – regardless of whether the brand is large or small, local or multi-national, even if the category is in decline.”
The full report will be available for free from mid-September on Nielsen.com.
Read Marketing Week’s analysis of how to structure for innovation here.
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