Acing New Product Launches
Prasad Bhoite and Sunil Davis Kolangaden
New products are vital for the growth of companies. Increased competition from other companies, changing consumer behaviour, advancements in technology, ensuring freshness of product offerings, diversification of risk, etc. are some of the reasons why new products have to be launched.
In environments where market dynamics are rapidly changing, a company is considered healthy and growing only if at least 25%-30% of their overall sales is accrued from their new productsi. This is expected to be significantly higher for companies that deal with lifestyle or technology products. So, firms put in a lot of effort into understanding the market and try to continuously develop new products. However, according to research by Clayton Christensen, Harvard Business School Professor and renowned Author, there are over 30,000 new products introduced into the market every year, and 95% of them failii.
What is often not realized is that the success of any new product is dependent not only on its ideation and development stage, but also on the way it is launched in the market. Even a revolutionary product can fail. 75% of consumer-packaged goods and retail products fail to reach the minimum sales expectations after launch. And products that start out strong may also have trouble sustaining success.
This article will examine the challenges faced by companies while launching a new product and the tactics needed to ensure that new products of a company have the best opportunity to succeed and sustain in the market.
NPL – The Challenges
While there could be numerous reasons for products to fail (e.g. legal issues, socio-cultural mismatch, product falls short of claims, etc.), the major cause of failure, for otherwise acceptable new products, tend to be associated with the scale up or roll out.
So, if we did a postmortem of a typical failed product, you are likely to see the following issues:
- Lack of visibility on the shelves at retail counters – The newly launched product is not getting the right placements (both in terms of quantum and the type of outlet). Or after having got the required placements, they are not getting the right visibility. (Note: Products are usually launched with considerable fanfare, ATL/BTL activities to support it. But even if these succeed in catching the customer attention, in most cases these customers will not go beyond their regular, known outlets to try and buy this product)
- Customers could not get the product in many places: Even though the product could be placed in relevant retail outlets and made visible, it became unavailable very soon and vast majority of customers never got the chance to even see it (let alone buy it)
- Delay in addressal of feedback received from the market: There were pockets of customers giving feedback about the new product/ processes, that if included could have prevented the demise of the product. However, company could not act on this in time.
- Customers could not get sufficient product information: Customers did not get a chance to understand how to use the product (new category of product). Or the customers did not understand the products’ new features. This led to loss of interest from consumers.
These indicate that if you don’t scale your supply chain quickly, become available consistently, course correct where needed and grab customer loyalty, your product is toast. Further, your competition may launch its own version and walk away with the market. But how can we ensure that these issues don’t happen during/after launch?
To identify a solution, we must first understand the nature of new product launches in greater detail.
What is the real issue?
The most important characteristic of new products launches is that Consumer response to the new product is uncertain. Even though the product may have gone through a market research phase, reality is the only true test of consumer willingness to adopt a new product and there is no trend data available to predict potential sales.
Because of this, companies are in perpetual dilemma when it comes to launching a new product. “Do they take a cautious approach and launch the product in a select few territories, or do they adopt the big bang strategy and launch it across all their POS?” Both have pros and cons. A smaller launch allows companies to test the trend in demand. Moreover, incorporating any changes to the product or processes without affecting the brand’s reputation is easier if the initial launch is limited. However, a big bang launch means companies can enjoy the first mover advantage in all geographies and increase all sales opportunities before competition gets an inkling.
However, very often, this choice is taken out of the hands of companies. Delays in the new product development of the products, and threat of missing the appropriate timing/launch window (could be beginning of a season, a festival, etc.), result in pressure to launch the product when it is ready across as many territories as possible,. The risks of this are easily imaginable, though. Bigger the scale of launch, higher is the level of uncertainty of demand. The sales team also has to be proportionately bigger to cater to this scale of launch. With very little time available to impart proper training to the sales team, the USP of the product is not effectively communicated to the potential consumer of the product. Moreover, there is very little focus on responding to the feedback provided by the consumers. And, in this rush the supply chain is has also not been equipped to respond to demand fluctuations. This increases the possibility of product shortages in some areas where it is selling well (even though it is available in excess in other parts of the supply chain). Patchy availability of the products eventually puts off consumers. This leads to poor adoption of the product and in the company discarding the product as unpopular.
Product failures creates a vicious cycle for companies, – as products fail more often than not, there is greater pressure to take up more new products for development to ensure growth of the company! So, finding a way to address these challenges and improve the typical hit ratio of product launches is imperative.
Direction of Solution
It is clear that reducing the extent of demand uncertainty during a new product launch will help improve its effectiveness. The best way to reduce uncertainty so as to have better control over the supply chain/sales team readiness is to launch new products in a phased manner- i.e., stagger the rollout across territories/POS.
Ensuring effectiveness of new product launches
Staggering the rollout across territories/POS helps companies take the required steps to ensure effectiveness of new product launches:
- 1. Reduces demand uncertainty by Testing the product: For this the territories and POS should be selected in such a manner that there is adequate representation, this will allow the company to check whether the product is working in those areas before a full roll out. Care also has to be taken to ensure that the product is displayed well (by defining percentage of capital and space for the new product) and there is continuous availability of the new product at the POS
- 2. Align the supply chain in line with expected demand: This is because when the roll out is phased out:
- Manufacturing capacity can be stepped up slowly and aligned in line with the demand.
- The distribution channel can ensure adequate stocks for display and repeat sales where there are more sales.
- There is now even the possibility to ensure buffer capacity to manage any sudden spike in demand.
- 3. Provide adequate training: With this approach, challenges and overheads related to training will also come down. A relatively smaller sales team to be trained before launch, and so the quality of the training improves, and one can expect improved adherence to your sales strategy, communication guidelines, etc.
- 4. Capacity to analyze and respond to the feedback: In a staggered rollout, there is enough capacity in the system to focus on and respond to the feedback provided by the early consumers for both the product and the marketing collaterals. This can help limit the exposure of the product’s issues to a small set of customers, thereby, preventing a negative perception of the new product to a wider audience. One also will have the agility to resolve these issues in a timely manner, resulting in greater customer satisfaction levels with the new product. Collecting and responding to information on marketing collaterals can help align the marketing spends as per market requirements.
Next steps
The learnings gained from one rollout to be transferred to the next rollout. And the sales team already trained on the product initially can be utilized to further train other teams in other territories during this scale up. Thus, the entire sales team gets trained better to effectively communicate product’s USP/features and help customers adopt the product. Moreover, since the company can implement customer feedback into the product and processes in a timely manner, the brand can quickly gain customer trust and loyalty.
When more and more products are launched successfully, the pressure on NPD comes down and they can work in a more focused manner on a more considered number of new products. This will allow them to help launch products in a timely manner reducing pressure on having to take a big bang approach in new product launches.
What to expect?
Implement this new product launch strategy, and significant improvement in success ratio of new product launches is virtually guaranteed (at least 30% improvement in number of hits) and the company can expect ~ 50% increase in contribution of new products into overall sales. Once consistent availability of the products across all potential outlets continues to be assured find out how , the product life of each new product is also expected to improve accruing more returns for the company.
References
Industry Insights
Merchandising Grid: The Mechanism for Product Portfolio Management
How to create product portfolios that maximize sales without too much variety burdening the supply chain
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