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Enhanced Testing Part II: Evaluating Innovation

By: JP Beauchamp and Shelly Murphy

Part I of this three part series focused largely on the concept of “measure twice, cut once,” pertaining to the potential success of new products in the CPG market. Market contraction and SKU rationalization stemming from the Great Recession have led to a decrease in overall new product introductions, and the pressure to succeed is immense for items that do launch. Product testing is a key component for success as it mitigates risk and enables retailers and manufacturers to fully assess the market opportunity, then allocate the appropriate investment.

One important testing method is innovation testing, which evaluates how shoppers react to a product’s specific attributes, such as package design or ingredients. For example, findings from a 2013 report on package trends by The Mintel Group showed that consumers react positively to products offering wellness, value and fun, so savvy CPG retailers and manufacturers should be sure to play up these attributes in their new product launches, or when changing the packaging or ingredients of their existing products. Products that improve the consumer’s mental and/or physical state conveywellness, as do products with environmentally-friendly packaging. Tough economic times have made value more attractive to all shoppers, who will be drawn to products that offer the most bang for their buck. But despite economic uncertainty, we all want to have fun, so unique packaging can be another attractive attribute.

One popular innovation that encompasses these trends is flexible packaging. In 2012, more than 18 percent of new CPG products used flexible packaging types, such as standup pouches. Consumers appreciate the wellness aspect of flexible packaging (ease of use, single-serving sizes, recyclability) and these packages can lower product costs, thereby increasing value. Flexible packaging can also be fun as it is highly portable and durable.

While clearly attractive, flexible packaging isn’t right for every product. Last year, an IRI client considered changing its breakfast product packaging from boxes to flexible pouches. Changing to pouches had the potential to generate significant savings to the client, but a statistically significant volume loss of 5 percent or greater would negatively impact the brand. The client chose to evaluate the innovation to determine the right course of action. Over a 16 week period, IRI tested the innovation in cell stores, and compared the data collected with data from control stores. The flexible packaging led to a sales decrease of more than 20 percent, so the client did not move forward with this innovation. Through innovation testing, the client avoided a potentially catastrophic investment that would have cost up to $4MM in annual lost sales.

Innovation testing can also be used to evaluate shoppers’ reactions to the ingredients used in CPG products. For example, IRI’s 2013 NutriLink Report shows that 70 percent of shoppers check ingredients prior to purchase, and 76 percent seek out non-genetically modified products. Innovators can address these and other wellness concerns though unequivocal labels and can also use graphics to convey the health benefits of their product in a visually enticing manner.

In today’s uncertain CPG market innovation testing is a valuable evaluation method for new product concepts, packaging, ingredients and related product attributes. It provides deep insight to shoppers’ reactions, which CPGs can use to put the right product in front of the right shopper.

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