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Battle of the Brands…or Hair Today, Gone Tomorrow

By Louis Winokur

 

It’s a well-known fact that the vast majority of new product launches fail. In fact, close to 90% of the top new product launches have less than $40 million in sales1. Due to this constant churn, shelf sets are constantly evolving in the brick and mortar world, and the competition is fierce since in-store shelf space is finite.

One good example is the hair styling gel/mousse segment. Would you believe that it has annual sales of over $1.4 billion? It’s true. These products are purchased by almost half (46%) of U.S. households, and buyers make an average of 3.7 trips to the category each year2.

Meanwhile, retailers and manufacturers struggle to understand the nature of the category as consumers roam the aisles aiming to satisfy their individual needs. Each of the players – in this and other categories throughout the store – have their own specific goals.

The retailer wants to:

  • maximize category sales
  • generate store trips
  • encourage impulse purchases
  • delete underperforming SKUs

The manufacturer wants to:

  • maximize product distribution
  • optimize shelf placement
  • grow brand penetration
  • generate repeat purchases

The consumer wants to:

  • satisfy a need
  • easily locate the product section in the store
  • quickly determine the difference between items
  • decide which item provides the best value

All of these factors intersect in different ways during the actual shopping trip.

Many years ago I went to my local drug store and decided to look for some hair product for the first time. After discovering where to find the products, I reviewed the items and decided that my main concern was price. I quickly grabbed a large bottle of a colorful bargain brand on the bottom shelf and was on my way.

What happened? The retailer gained a new customer at an entry-level price (current retail cost of $3.49 for 20 oz.3), and the manufacturer successfully converted a new buyer to the category. I bought a product that I was happy with and continued to purchase, for a number of years.

Fast-forward to a few years ago. I was back at my local drug store again looking for my usual purchase. However, this time a different item happened to catch my eye. The premium product was located at eye-level and had a simple, sleek package design. Also, it was on promotion – buy one at the regular price and get a second one for 50% off. Intrigued, I decided to buy it (retail cost of $7.49 for 3.5 oz.4).

What happened? The shelf set and promotion allowed the retailer to get me to buy a higher-priced product. The manufacturer picked up a new buyer and an incremental sale due to its favorable shelf placement, good packaging and the promotion. I tried a new product, which turned out to be far superior to the brand I was using before. And, I also bought a chocolate bar on my way to the register (shopping makes me hungry).

So why does this matter? All I really did was shop at my local drug store like usual. But there was a lot happening in the background. Hiding behind this simple purchase was a complex set of decisions by the retailer and the manufacturer to initially attract me to the category and eventually encourage me to move to a higher-priced and higher-quality product which increased my satisfaction and encouraged me to return to the store for the product again and again. In marketing lingo, I upgraded to a premium product with stronger loyalty measures (42% vs. 25% share of requirements) and more frequent purchase occasions (2.2 vs. 1.1 per year)5 given the smaller size of the new product.

The takeaway for CPG marketers is this: You must continually monitor your category performance using a combination of point of sale and consumer panel metrics. The ideal shelf set must contain a variety of offerings that cater to different consumers’ needs. Even in seemingly routine categories such as hair gel, consumers still look for innovative products and attractive packaging that makes an impression. And, manufacturers and retailers must work together to grow the category and improve the customer’s experience.

When the balance is right, i.e. manufacturer, retailer and consumer needs align, everybody’s happy and everybody wins.
 

1IRI New Product Pacesetters Report 2017.
2,5National Consumer Panel, Total U.S. – All-outlet sales for 52 weeks ending 9/9/2018
3,4Walgreens.com – Note: Brand names are intentionally omitted to protect client data






 

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