The spectacular failure of Dasani raises questions about why innovation goes wrong. Liz Hamson kicks off our special report
Whenever new product development comes up in conversation, someone trots out the statistic that eight out of 10 are destined to fail. And they’re the optimists.
But why, given the number of new products launched every year and the almost universal claim by major food and drink companies that NPD is a key driver of growth, is the conversion rate between conception and commercial success so low? In this week’s major special report on NPD, The Grocer explores what part the corporate mentality plays in these failures; and how much can simply be attributed to poor consumer research.
We also assess what went wrong with Dasani; unveil the top 50 new products as chosen by consumers; and bring you the latest update on the four surviving new products in our ‘A year in the Life’ series. Last but not least, we deliver our prognosis for another new product courting controversy: Masterfoods’ Mars Delight.
First, the development process itself. As Coca-Cola Enterprises is painfully aware, investing an eye-watering sum of money into a product launch is no guarantee of success either. Ask experts why NPD often goes awry and the answer is universal: a corporate context is not conducive to real innovation.
Former Golden Wonder head honcho Paul Monk set up his business InVentaBrand to challenge the high failure rate and recently launched health drink Vitaminsmart with celebrity backing from sports stars Lawrence Dallaglio, Ian Botham and Rodney Marsh. He says: “Whenever you look at where the successes and failures are, most new brands come from start-up businesses,” he
says, citing the successes of Kettle Chips,Red Bull and PJ’s Smoothies.
“It’s the corporate area that has a poorer success rate. They’re coming from a corporate point of view and are geared up to saying, ‘we must improve our profit year-on-year’. New brands need nurturing but adopting that sort of attitude is almost the opposite of what they’re trying to do with the business.”
In short, big companies tend to have big problems thinking small, says Monk, pointing out they often lurch straight into mass marketing a product, whether or not it is an appropriate tactic for the target market.
“Lots of consumers want to have the feeling they’ve discovered the brand,” he says. “That doesn’t sit well with a corporate product because doing things small is difficult for a big corporation, for obvious reasons. There is also an element of sanitising the process and execution of NPD. It’s a big issue for corporations, particularly for brands for 16 to 25-year-olds. If the idea feels comfortable to most of the senior management, it probably won’t work.”
Monk believes the answer is not only to think small but be small. Companies should consider outsourcing the process to an independent company or follow the example of Nestlé and Unilever, which have both created incubator businesses to handle their NPD. He adds: “Once you’ve got your idea, it shouldn’t be a matter of let’s put £xm behind it and here we go.
“If you undertake mostly small brand development, it’s significantly cheaper than a major brand launch. Where a major brand
launch might cost £30m, you can develop smaller brand ideas at a cost of £1m to £2m at a time. You’d have 10 times the number of ideas, and 10 times the success.”
Drawing on the example of Red Bull, which was ingeniously ‘seeded’ in dustbins outside nightclubs that were not selling the energy drink, he adds: “There should be more seed marketing rather than mass marketing of new brands.”
But what about consumer research? Can that help to reduce the number of NPD casualties? Monk is sceptical. “The failure rate is either because consumer research isn’t working or because it is not able to give you the answers that you need. The evidence suggests it can’t tell you whether your product is going to be a success or not.”
Jonathan Smith, managing director of Axis Management Consulting, however, disagrees. He believes that manufacturers could save millions of pounds and significantly improve their success ratios if they conducted consumer research far earlier in the development process.
“Studies by business schools and management consultants confirm what common sense suggests: the great majority of launch failures are due in one way or another to flawed consumer appeal. So why do we so often find that consumer research is not used or is poorly conducted?”
Small companies often argue they cannot afford to carry out research, says Smith, but in reality they cannot afford not to.
He points to the potential savings even a modest-sized business could generate with better-targeted research. “Imagine a business that looks to generate £100,000 profit a year from each new product launch. If it used research, it might be able to reduce the failure rate from eight to six out of 10. That would mean that for every 10 products launched, it would make an extra £200,000. That dwarfs the amount than would be spent on the research and doesn’t even take
into account the potentially massive saving in wasted cost and effort.”
If a company does already conduct consumer research, it should ensure it is carrying out the right sort of research at the right time, says Smith.
He highlights the tendency of some fmcg companies - particularly the big ones - to carry out large-scale consumer research on projects already months down the line. “It’s almost as if they see it as little more than a final check the product is okay. But by that time, people have invested so much time and personal credibility they’re sometimes prepared to justify the unjustifiable.
“We often see the project list clogged up with projects that should have been killed off at the early stages.”
It is a sobering thought that if you strip out brand extensions, it is difficult to think of any new big brands that have been launched by major corporations over the past decade: the majority of success stories started small.
Smith and Monk may differ in their opinions on the best solution to the problem of NPD, but they agree on one point: big companies need to think small.
Monk has publicly set out his stall to reduce the failure rate to two in three. It may prove over-optimistic. But then again, why should eight out of 10 be a fact of life?
Whenever new product development comes up in conversation, someone trots out the statistic that eight out of 10 are destined to fail. And they’re the optimists.
But why, given the number of new products launched every year and the almost universal claim by major food and drink companies that NPD is a key driver of growth, is the conversion rate between conception and commercial success so low? In this week’s major special report on NPD, The Grocer explores what part the corporate mentality plays in these failures; and how much can simply be attributed to poor consumer research.
We also assess what went wrong with Dasani; unveil the top 50 new products as chosen by consumers; and bring you the latest update on the four surviving new products in our ‘A year in the Life’ series. Last but not least, we deliver our prognosis for another new product courting controversy: Masterfoods’ Mars Delight.
First, the development process itself. As Coca-Cola Enterprises is painfully aware, investing an eye-watering sum of money into a product launch is no guarantee of success either. Ask experts why NPD often goes awry and the answer is universal: a corporate context is not conducive to real innovation.
Former Golden Wonder head honcho Paul Monk set up his business InVentaBrand to challenge the high failure rate and recently launched health drink Vitaminsmart with celebrity backing from sports stars Lawrence Dallaglio, Ian Botham and Rodney Marsh. He says: “Whenever you look at where the successes and failures are, most new brands come from start-up businesses,” he
says, citing the successes of Kettle Chips,Red Bull and PJ’s Smoothies.
“It’s the corporate area that has a poorer success rate. They’re coming from a corporate point of view and are geared up to saying, ‘we must improve our profit year-on-year’. New brands need nurturing but adopting that sort of attitude is almost the opposite of what they’re trying to do with the business.”
In short, big companies tend to have big problems thinking small, says Monk, pointing out they often lurch straight into mass marketing a product, whether or not it is an appropriate tactic for the target market.
“Lots of consumers want to have the feeling they’ve discovered the brand,” he says. “That doesn’t sit well with a corporate product because doing things small is difficult for a big corporation, for obvious reasons. There is also an element of sanitising the process and execution of NPD. It’s a big issue for corporations, particularly for brands for 16 to 25-year-olds. If the idea feels comfortable to most of the senior management, it probably won’t work.”
Monk believes the answer is not only to think small but be small. Companies should consider outsourcing the process to an independent company or follow the example of Nestlé and Unilever, which have both created incubator businesses to handle their NPD. He adds: “Once you’ve got your idea, it shouldn’t be a matter of let’s put £xm behind it and here we go.
“If you undertake mostly small brand development, it’s significantly cheaper than a major brand launch. Where a major brand
launch might cost £30m, you can develop smaller brand ideas at a cost of £1m to £2m at a time. You’d have 10 times the number of ideas, and 10 times the success.”
Drawing on the example of Red Bull, which was ingeniously ‘seeded’ in dustbins outside nightclubs that were not selling the energy drink, he adds: “There should be more seed marketing rather than mass marketing of new brands.”
But what about consumer research? Can that help to reduce the number of NPD casualties? Monk is sceptical. “The failure rate is either because consumer research isn’t working or because it is not able to give you the answers that you need. The evidence suggests it can’t tell you whether your product is going to be a success or not.”
Jonathan Smith, managing director of Axis Management Consulting, however, disagrees. He believes that manufacturers could save millions of pounds and significantly improve their success ratios if they conducted consumer research far earlier in the development process.
“Studies by business schools and management consultants confirm what common sense suggests: the great majority of launch failures are due in one way or another to flawed consumer appeal. So why do we so often find that consumer research is not used or is poorly conducted?”
Small companies often argue they cannot afford to carry out research, says Smith, but in reality they cannot afford not to.
He points to the potential savings even a modest-sized business could generate with better-targeted research. “Imagine a business that looks to generate £100,000 profit a year from each new product launch. If it used research, it might be able to reduce the failure rate from eight to six out of 10. That would mean that for every 10 products launched, it would make an extra £200,000. That dwarfs the amount than would be spent on the research and doesn’t even take
into account the potentially massive saving in wasted cost and effort.”
If a company does already conduct consumer research, it should ensure it is carrying out the right sort of research at the right time, says Smith.
He highlights the tendency of some fmcg companies - particularly the big ones - to carry out large-scale consumer research on projects already months down the line. “It’s almost as if they see it as little more than a final check the product is okay. But by that time, people have invested so much time and personal credibility they’re sometimes prepared to justify the unjustifiable.
“We often see the project list clogged up with projects that should have been killed off at the early stages.”
It is a sobering thought that if you strip out brand extensions, it is difficult to think of any new big brands that have been launched by major corporations over the past decade: the majority of success stories started small.
Smith and Monk may differ in their opinions on the best solution to the problem of NPD, but they agree on one point: big companies need to think small.
Monk has publicly set out his stall to reduce the failure rate to two in three. It may prove over-optimistic. But then again, why should eight out of 10 be a fact of life?
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