Innovation matters. In the realm of consumer products, it can drive a company’s profitability and growth, helping it to succeed even during tough economic times. Consumers have a strong appetite for innovation, and they are increasingly demanding and expecting more choice than ever before.
Around the globe, some 63% of respondents say they like it when manufacturers offer new products, and 57% say they purchased a new product during their last grocery-shopping trip. But success can be hard to come by. Brand competition is intense and shelves are crowded.
The Nielsen Global New Product Innovation Survey polled 30,000 online respondents in 60 countries to understand consumer attitudes and sentiments about the drivers behind new product purchase intent. It is important to note that in the eyes of the consumer, not every product that is new to them is new to the market. As such, for the purposes of this study, Nielson defined a new product as any item a consumer has never purchased before.
Aside from competition, manufacturers must also contend with growing media fragmentation, evolving retail distribution channels and tightening budgets, among other obstacles. As a result, the vast majority of new product introductions are taken out of distribution before the end of their launch year. Of over 60,000 new SKUs introduced in Europe over the past years, just over half (55%) made it to 26 weeks, and only 24% reached a full year.
While new product failure rates are extremely high, success is no fluke, said Johan Sjöstrand, senior vice president 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 organisational focus and commitment to product development, creative marketing, smart leadership and, above all else, an in-depth understanding of what drives consumer preferences.”
The study highlighted that the consumers’ reasons for purchasing are not always in alignment with what they say they want, presenting strong product development opportunities.
Globally, affordability tops consumers’ list of reasons for purchasing a new product, but there are regional differences in the order of importance placed on this attribute. In Asia-Pacific, affordability is the third most important reason for purchasing a new product, behind value and convenience. North Americans place affordability second on their list, behind novelty and tied with brand recognition. In Latin America, affordability is just slightly behind brand recognition as the reason for making a new product purchase.
When it comes to the new products consumers wish were available but are not currently, products at affordable prices are the most desired in all regions – by a wide margin. Some 43% of global respondents say they wish more affordable products were available, 14 percentage points above the next-highest attribute, healthy options.
Rob Wengel, senior vice president and managing director of Nielsen Innovation in the US said: “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. Cost-driven innovation requires letting go of traditional assumptions, and it starts with understanding what tradeoffs consumers will make when they can’t afford a product.”
Shoppers want products that help restore balance and free up time to do the things they value most. Some 22% of global respondents say they purchased a new product because it was convenient, and 19% say they purchased it because it made their life easier. Consumers’ desire for these kinds of products is even higher. More than one-quarter of global respondents say they wish more products were available that make their life easier (27%) and are convenient to use (26%).
Consumers are also yearning for healthier options.
“The healthy eating space holds great potential, but manufacturers looking to establish or expand their presence in this area should start by looking at what they can remove from foods rather than what they can add,” said Sjöstrand. “Consumers want to go ‘back-to-basics’ with fresh, natural and minimally processed options.”
Manufacturers need to make it easy for consumers to eat healthier, he stressed. “Consumption habits are changing for time-crunched consumers who increasingly forgo the traditional three meals a day and eat when it best fits their schedule, which is often on the go. But for many consumers, it’s not enough to be convenient, products must also be healthy and nutritious,” said Sjöstrand.
A brand name can be one of the most valuable assets a company possesses. But brand building can be costly and time-consuming, so growing via line extensions can be extremely advantageous. Some 59% of global respondents prefer to buy new products from brands familiar to them, and 21% say they have purchased a new product because it was from a brand they like.
Brand recognition is particularly influential in developing markets. On average, more than two-thirds of developing-market respondents (68%) say they prefer to buy new products from brands that are familiar to them, compared with 57% in developed markets. In addition, 22% of developing-market respondents say they purchased a new product because it was from a brand they like, versus 17% in developed markets.
“Brands can signify quality and inspire confidence,” said Wengel. “For a consumer with limited disposable income, the potential loss from an underperforming product is magnified. As a result, they’re often hesitant to take a risk on a product that might not live up to expectations, and are sometimes even willing to pay more for brands they trust. For new products launched without the benefit of a strong brand name, extra care must be taken to provide strong assurance that the product will be perceived as a good value for the money.”
However, brand extension does not guarantee it. If not managed well, it could harm the parent brand, cautioned Nielsen. “To protect a brand’s reputation, a line extension should clearly link with the core product while also offering consistency, uniqueness and relevance in the market. Line extensions with little differentiation could lead to cannibalisation. Likewise, if a line extension varies too dramatically from the parent, it can dilute sales.”
As for eco and socially conscious products, barriers to their more widespread usage and acceptance include a perception of higher prices and poor performance along with distrust in sustainability claims. “But perhaps even more telling is that consumers are just not finding the ecological products they desire. In many categories, green or socially responsible options don’t exist, are difficult to find or consumers simply don’t know about them. Better product labelling, shelf placement and promotion tactics that encourage trial can go a long way in closing the gap between desire and availability. To ensure consumers are not turned off at the shelf, brands must strike the right balance between ecological and effectiveness claims, testing and optimising claims and packaging before going to market,” said Wengel.