Re-posted with permission from Supermarket News | By Jim Hertel
More than 2,000 new products will be introduced this year, and most will see their way into distribution through a retailer’s “one-in, one-out” mandate. The practice of de-listing one of the manufacturer’s SKUs in order to take on another happens nearly 98% of the time, meaning that of the 2,000+ new items introduced, only 40 or so will result in net distribution gains.
The “one-in, one-out” approach is not without merit, since new items typically face long odds of success. Retailers often use these SKU trade-outs, as well as slotting, to mitigate their risks when onboarding a new item. However, this practice impedes true innovation and it’s the shared consumer that ultimately bears the brunt of this trading partner dynamic.
Innovative, disruptive products outperform line extensions by more than 10 to 1
Line extensions are unquestionably a safer bet even though they may not offer as much upside potential as disruptive new products. However, in a recent study, Willard Bishop found that disruptively innovative products attracted new shoppers to the category at a rate that was ten times more than bottom tier new items. (Note: the bottom tier was largely comprised of line extensions.)
We also discovered that:
- Half of the buyers of disruptive products had not purchased in the respective category within the prior twelve months
- Disruptive new products increased the spend-rate of existing category buyers by as much as 50%
- Spend-rates of existing buyers continued to increase for as long as 12 months beyond the new item’s initial roll out
- Even the lowest performing new items added some value, although disproportionately less than disruptive items
A case in point
Last year Musco Family Olive Company introduced Olives To Go! This novel product, with high retail relevancy, attracted new buyers to the category and increased the spending of existing category buyers. (Content published with permissions from the Musco Family Olive Company; source: Willard Bishop Total Store SuperStudy.)
Specifically, the Olives To Go! introduction:
- Brought 33% new users to the category
- Increased spend-rates for existing category buyers by 20%
- Appealed to smaller households and children
- Increased consumption by extending olives from a predominantly ingredient-based product to a healthy, alternative snack
Benchmarking new item performance
The number of new items is nearing record levels; therefore, retail relevancy is more critical than ever. New products delivering mutual gain (retailer, manufacturer and consumer) will provide exponential growth for both trading partners, while providing another platform for retailer-manufacturer collaboration.
Moving forward, manufacturers should align their cycles of discovery and innovation with the retailer’s performance metrics. Specifically, they should ensure that their new items deliver on one or more of the following:
- Brings new buyers to the category
- Increases the spend-rate of existing category buyers
- Encourages consumers to shop the total store
New items, those steeped in retail relevancy, will capture disproportionate growth for manufacturers and retailers, while bringing innovation and convenience to the shopper.
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