Marketing trap for new products
The consumer goods industry launches tens of thousands of new products each year, and statistics on corporate innovation rates are rocketing. The effort behind all the new product and brand launches is a complex and costly process. The result is sobering: the flop rate of all launches of fast-moving consumer goods in Germany is between 50 and 60 percent, according to the Society for Consumer Research.
More than half of all new products and brands are therefore removed from the shelves of retailers twelve months later due to unsuccessfulness. This is a gigantic destruction of value that shareholders and companies alike should be tremendously worried about.
No wonder that the marketer and market research profession is under attack, at least under close observation by controllers. There is more demand for “return on marketing investments”. Consultants are increasingly offering sophisticated modeling models to give company management more security, which does not exist and never will. The tasks of the Chief Marketing Officer have become more and more complex as a result of the digitization of marketing, but it is time for those responsible for marketing to return to the core of their task: creating sustainable company value through the long-term development of brands.
Marketing as the nucleus for profitable growth
The greatest successes in marketing history such as Red Bull, Nivea, Lululemon, Starbucks, Louis Vuitton or Nike are the successes of marketers who had a feeling for the needs of their target group and who came onto the market with a brand or product innovation at the right time differentiated from others and of the highest relevance for the consumer. Marketing as a market-oriented corporate policy is the nucleus for profitable growth. A branded goods company can only successfully assert itself in the market and gain market share if the brand is constantly cultivated as a psychological carrier system and stands for differentiating and relevant innovations.
In today’s fast-paced and highly competitive markets, branded goods must constantly create incentives and always be one step ahead of the competition in order to generate added value that can be capitalized. That is why innovation and new product policy is of central importance, and this is where most mistakes happen, as the dramatic flop rate shows. In the innovation value creation process, there are two main reasons why new products and brands are not anchored in the minds and hearts of consumers.
Why so many innovations fail
A core cause of a later flop can already be found in the conception of the product or brand idea. This is a promise that the brand makes to the consumer. You should be able to formulate the idea in three sentences. Two criteria are elementary: Is the idea unique, does it differentiate itself from the existing offer, or does it at least offer “more” compared to the competition? And is the idea relevant in the intended target group? Most novelties fail because they don’t offer consumers anything new. The other category of new products offers something new, but nobody needs it. There is insufficient need or desire or there are too few consumers for the introduction to pay off.
As a marketing manager, I had more than 20,000 innovation concepts in front of me – most of them failed because of the two questions asked above. Uniqueness cannot only be achieved through functional use; it can also be “old wine in new bottles”. In the face care market, Garnier achieved huge success with the introduction of the “BB Cream” and created a permanent segment. From a functional point of view, the “BB Cream” does not differ that much from a tinted day cream, but it was possible to sell the combination of care and skin in a new way in terms of appearance, which met a very relevant need.
International corporations strive to globalize brands that already exist in countries or that have been acquired over time. But what is successfully placed in the USA, for example, does not have to work in other countries. The concept may already exist in the new target market. Building new brands is extremely expensive in the fragmented media landscape. There is seldom room for staying power because of the profitability requirements in companies.
The second core cause of failure of innovations is the choice of the brand umbrella. Ideally, the brand binds consumers in the long term. The brand becomes more resistant to the attacks of the competition due to the loyalty force. However, product innovations or line extensions have to fit the brand in order to appear credible. Market research can only test that to a limited extent. A hair care brand like Gliss Kur by Schwarzkopf, which stands for special repair care, will fail as a line against dandruff. Of course, the dandruff segment is alluring because it is large. However, money that is invested in the shed line will not be available for the core “Repair” line. In the end, the scale line flops and the core line is neglected, which leads to a loss of market share.
Forcing new concepts under unsuitable brands because there are no suitable ones in the portfolio or building new brands seems too expensive hardly works. A head of marketing also has to say “no” and prevent company management from jumping on every train of competition. Me-too products are difficult. Top brands skim the cream. Only if a me-too product fits well with the target group of your own brand and thus gives brand fit to consumers more relevance and price differentiation takes place, you can generate a significant market share as a second or third party in the market. The more marketing dedicates itself to the task of how brands maintain their uniqueness and relevance, the less it has to turn on the price and promotion tap.
This helps in the short term, but undermines the brand in the long term. In short: If you can answer the first of the two following questions from Harvard Professor Cynthia A. Montgomery with “Yes”, you have done your company the greatest service: “If your brand disappeared today, would the world be different tomorrow? And if they won’t miss you then, how much do they need you now? “.
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