Product-in-store innovation: an increasing challenge
Gilles Dallest
If you ask a manager of an FMCG company, whether manufacturer or distributor, about the most important growth levers for his business we can be sure that “innovation” will be among the first answers, if not the first.
For many industry stakeholders, the world of mass consumption is still a universe of innovation that is even still called “modern channel” in some countries even though it has now been around for more than 50 years. In comparison, would it occur to anybody to call a vehicle from the 70s a “modern car”?
It is true that the development of mass distribution, self-service, shopping with your own car etc. was in its time a real revolution in the lives of our parents and grandparents. In parallel, the introduction of “new technologies” at home such as the washing machine, the dishwasher or (yes, yes…) the bathroom, as well as the luxury of leisure and free time available for a wider population pushed the development of new categories and product innovations. Those improvements in the quality of life and a set of new “how” and “what” to buy pushed the world towards the “consumerism” of the second half of the twentieth century.
Son of the 60’s, I started my career in 1988 and experienced how you could revolutionize the yogurt category with a new variety of lactic ferment called “active bifidus”. I continued in the 90’s working with personal care categories that could count as a growth potential the 70% of French males who still dispensed with the use of a deodorant and who only had to be convinced that this would add a great value to their ability to seduce! In both cases the weight of year N-1 innovation in year N turnover was very often above 25% and double-digit growth rates year after year were nothing science fiction.
The fall of innovation
However, from the 2000s two key factors have begun to make consumer product innovation less impactful as a growth engine:
- It is difficult to wash whiter than white: some categories have already reached the point of maximum consumer satisfaction from where begins a slow but inevitable “commoditization” and erosion of value.
- New technologies and leisure go for the consumer’s attention and share of wallet: in 75 there was neither Decathlon, nor Media Markt nor Leroy Merlin, nor Apple, nor PlayStation and only happy few went to London for a weekend. Those new proposals clearly compete with the consumer’s daily shopping trips to supermarkets.
Moreover, in Spain, due to the low concentration and particularities of the distribution, the average level of distribution of innovations only reaches a very low level of 24%, much less than in the rest of Europe and with important differences between retailers*
However, despite these difficulties, it remains essential to keep innovating as innovation generates an additional category growth of 15% growth which benefits both distributors and manufacturers*
How can a true data and information strategy help an efficient new products introduction?
More than for any other existing product, innovation launches must be monitored very precisely and it is important to have daily POS sell out information available in order to:
- Monitor the SKU presence at points of sale in real time: How fast does distribution develops day after day? is it too slow? Are there logistical or administrative problems like code creation? With this information it is possible to react quickly to avoid missing sales opportunities.
- Sales trends real time follow-up: How is the product selling? Has it found its target audience? The comparison of rotations and share of sales of the product at POS level allows to identify the success stories (and repeat them) and correct the situation in stores where it is not working as planned.
- React quickly: thanks to the parameterization of alarms and daily information push to the sales and trade marketing teams it is possible to reach faster the distribution goal, modifying if necessary the implementation tactics and making an innovation a success or not.
Key point: the sale of an innovation to a distributor is not only about agreeing on its relevance for the shopper and negotiating listing fees.
It is also essential to design an “innovation scorecard” that will permit to appreciate its success based on daily sell-out sales data at POS level.
ONLY IN THIS WAY CAN BE ASSURED THE RETURN OF THE IMPORTANT AND ESSENTIAL INVESTMENT REPRESENTED BY THE DEVELOPMENT OF PRODUCT INNOVATION IN FMCG
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