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MBPT Spotlight: Advice for New Product Success

To stay relevant to shoppers, companies need to introduce new products, according to a recent report.

Nielsen found that 63% of global consumers said they like when manufacturers introduce new products and 57% said they purchased a new product during their last shopping trip.

However, while introducing new products can lead to more profitability for companies, success can be hard to come by because of an oversaturation of new items.

In Western Europe, 12,000 new products were launched in four countries across 17 categories between 2011 and 2013, while in the U.S. there have been more than 20,000 launches since 2008.

A proliferation of new products is not the only hurdle companies face when trying to expand their lines. They must also contend with growing media fragmentation as they try to promote those new brands and products, along with tightening ad budgets and evolving retail distribution channels.

“New product failure rates are extremely high, but success is no fluke,” says Johan Sjostrand, senior VP and managing director of Nielsen Innovation in Europe. “Success is not simply the result of luck or even genius. Rather, successful product launches are the culmination of organizational focus and commitment to product development, creative marketing, smart leadership and, above all else, an in-depth understanding of what drives consumer preferences.”

The report points out that the “vast majority” of new product introductions are taken out of distribution before the end of their launch year, and cites statistics in Europe, where of 60,000 new products introduced over the past year, only 55% made it to six months and only 24% stayed on the market for one year.

The report, titled "The Nielsen Global New Product Innovation Survey," polled 30,000 online respondents in 60 countries.

The first step in launching a new product is to know why consumers choose one product or brand over another, what consumer needs drive the purchase and what product attributes are most compelling to get a consumer to buy it.

The report says consumers consider affordability, convenience, brand power, novelty, family friendliness, premiumization, self-expression and environmental and social responsibility when deciding what new product to buy. In the survey, the asked the respondents the reasons for making their last new product purchase.

The survey found that 23% considered whether or not the new product was more affordable than one in the category that they usually use.

In the area of convenience, 22% considered whether the new product was convenient, 19% determined that it will make their life easier, 15% found it to fill a very specific need, and 10% said the new product allowed them to buy only one product instead of several.

Concerning brand power, 21% said they bought a new product from a brand that they like; 15% said they bought it because the brand was well-known; 10% said the brand had a heritage known for a while; and 8% said it was connected to an expert in that type of product category.

As for novelty, 20% said that tried the new product simply because it was new; 11% said they bought it because they saw it everywhere; and 10% liked the packaging.

In the area of family friendliness, 19% said they bought it because the product was suitable for the whole family and 8% said it was a product that could bring the family together.

If the new product was pricier, 18% said they bought it because they determined it was worth paying more for; 17% said they felt it was better than similar products; 14% said the new product allowed them to indulge themselves; and 11% said they bought it because it was from a premium brand.

In the area of self-expression, 16% said they bought the product to improve their mood and 8% said the new product allowed them to express themselves.

As for the environment and social responsibility, 10% bought it because the brand cares about the environment and 7% bought it because they belief it cares about society.

As for products not yet introduced, 43% of all the global respondents said they wish more affordable products would be made available.

“Consumers need to stretch their money as far as possible and they’re looking for products that stay within a budget,” says Rob Wengel, senior VP and managing director of Nielsen Innovation in the U.S. “Savvy manufacturers are those who don’t just sell their products at lower prices or on promotion, rather they build cost-cutting into the product development and design process.”

The report finds that brand recognition is particularly important when introducing a new product. Some 59% of respondents said they prefer to buy new products from brands they are familiar with, and 21% said they have purchased a product because it was from a brand they like.

However, the report also finds that while a brand extension can provide a strong foundation for success, it doesn’t guarantee it. And it points out that if a new product from a brand name is does not go over well with the consumers it could do harm to the parent brand.

The appetite for new products is strongest in developing countries, the report says. Those countries include Brazil, Peru, Colombia, India, South Africa, Bulgaria, Serbia, Croatia and Romania. The region with the highest percentage of respondents who said they bought a new product during their last grocery shopping trip is Asia-Pacific (69%). That’s followed by Africa/Middle East (57%), Latin America (56%), Europe (44%) and North America (31%).

While more younger consumers tend to buy new products, the percentages are also fairly high for Gen X and Baby Boomers. The survey found that 62% of Gen Z (15- to 20-year-olds) respondents said they purchased a new product on their last grocery-shopping trip, compared to 66% of millennials (21-34), 53% of Gen X (35-49), 41% of Baby Boomers (50-64) and 25% of those 65-plus.

“Early adopters aren’t just younger consumers,” says Taddy Hall, senior VP, Nielsen Innovation in the U.S. “Consumers of all ages are looking for products that make their lives better, and all can be passionate advocates if they find a product that fills a need.”

Her advice to marketers, “While millennials are garnering a fair amount of recent time and attention, consider casting the net wider, and do not lose sight of the needs across all age segments.”

As for marketing new products, the report finds family and friends (56%) is the best way to get the word out, according to the survey respondents, with TV commercials (52%) the next best way, followed by in-store promotion (48%).

Nielsen has also issued another report titled "How to Succeed in Years Two and Three" which stresses the importance of marketing at continuously strong levels for new products beyond their introduction year.

This report finds that sales for 55% of new products begin to decline in their second year and by year three, 69% of new product sales have declined.

“In reality, the brands that grow are the ones that keep their media spend constant through the second year,” the report says. According to Nielsen data, brands that increase sales in their second year maintain 94% of their media spend in year two. New products that see sales declines in their second year tend to cut their ad budgets by an average of nearly 80%.

But the report also points out that product quality is key. “While it’s difficult to overstate the importance of multi-year marketing support plans, it’s still unlikely that all the advertising dollars in the world could make a fundamentally poor product successful in the long run.”