By Joan Driggs and Larry Levin, IRI
Remember the days when slapping the word “new” in a brightly-colored font on a package was all a product needed to catch consumers’ attention? How things have changed! To resonate with shoppers today, a product needs to appeal to consumers by hitting on a multitude of needs and wants such as offering a great experience, meet or exceed consumer expectations, and demonstrate a commitment to simplicity, either in ease of use, simple ingredients or a strong sustainability message. Yes, the new product ante has been raised considerably.
This new reality was brought to life in IRI’s latest annual New Product Pacesetters™ report, which analyzes the most successful CPG product launches across food and beverage, non-food and convenience store sectors.
Innovation done right accelerates company growth, and much of it today continues to focus on products that deliver on the themes of wellness, indulgence and convenience. Interestingly, we continue to see more small companies taking the lead with well-targeted and thoughtfully designed products that appeal to the needs or desires of specific consumer groups. More than half of the latest round of New Product Pacesetters came from small companies, defined as those with less than $1 billion in sales. Perhaps more in line with tradition, however, the largest companies, those with sales of more than $5 billion annually, accounted for 54% of total Pacesetter sales dollars, even if they accounted for just 22% of Pacesetter products.
The correlation between smaller companies and their increasing presence on the Pacesetter scoreboard, however, is notable. Successful brands are not trying to be all things to all people. One trend over the past several years is that Pacesetter product sales are declining. Pacesetters have declined more than $3.4 billion in value between 2012 and 2108. A full two-thirds of 2018 Pacesetters earned less than $20 million during their first full year of sales, a consistent level we have noted for four years now. It’s further evidence that companies large and small are homing in on consumer needs and trends, appealing to select consumers with focused products and engaging target shoppers via the channels and mediums those shoppers most prefer.
This approach is already part of smaller companies’ DNA. They are inherently focused and scrappy, often with a built-in commitment to doing good for the planet and for consumers. Larger companies are getting on board, too; sometimes by purchasing smaller companies that are complementary to their own, and sometimes by launching new brands that consumers might not immediately associate with the parent company but that also adhere to the values their target audience is looking for.
Making New Product Success Stick
The fact is that few Pacesetters reach the $100 million+ sales mark in their first year – there were just four such products across all multi-outlet food and non-food launches – these new products drive a lot of revenue to a company’s top line.
But, alas, Pacesetter status in year one doesn’t ensure big gains for year two or beyond. A dedicated approach to innovation includes marketing support, continuity of messaging and continually pumping “new” into these innovations. While it might seem out of the realm of innovation, one key strategy is grounded forecasting. Consider the size of that target audience and their propensity to buy – and how much they’ll buy.
Tapping into the different sources that influence purchase behavior is another strategy. Since early avid adopters account for a good portion of the consumers who buy new products, getting in front of them is key. Brands need to ensure that their products are appealing through blogs, social networks, websites and smartphone apps – influencer marketing plays an important part here. Also, stories around sustainability are key for connecting with consumers, especially early adopters. Since social media often has more influence than other forms of advertising, brands need to be a relevant and positive part of the conversation.
Of course, U.S. demographics and trends are constantly evolving. The CPG companies that find success in today’s changing marketplace have an uncanny understanding of today’s consumer wants and needs. They know the importance of driving volume, maintaining a targeted approach to mergers and acquisitions, and acting on influential trends that drive sales. While becoming a Pacesetter is an achievement in itself, winning CPG brands know better than to stop there. They keep the momentum going by upping the consumer experience, creating a long-term approach, and ensuring that they are targeting the right consumers at the right time and in the right way.
Sounds to us like a plan for new product success.
Read the latest IRI New Product Pacesetters report and contact IRI@IRIworldwide.com with any questions.