New Product Introductions' Success Rates

According to a new study by The Nielsen Company, there were more than 122,000 new SKUs rolled out in 2007 but only 3,701 or 3% reached the million dollars a year in sales mark. Only 206 or 0.2% earned more than $10 millioin in sales, and 10 or 0.01% made it to the $50 million in sales level. The full article from Phil Lempert-Facts, Figures & The Future is below but one of the key takeaways should be the need to micro-manage your product launches from factory to shelf. What isn't stated in this article is the average cost to launch a new product.

Study findings include:
* The failure rate for new product introduction in the retail grocery industry is 70-80 percent.
* The U.S. Top 20 enjoy a 76 percent success rate for new product introductions.
* The "Bottom 20,000" U.S. food companies have an 11.6 percent success rate for new product introductions.

A major difference between Top 20 new product introductions and Bottom 20,000 introductions is the apparent lack of research and strategic marketing done by the Bottom 20,000.
* The new product introduction cost for retail grocery stores averages $270 per product, per store. (Approximately 5,000 new products are introduced into a supermarket annually).
* Each year, retail grocery stores spend an average $956,800 per store to introduce new products that will fail.
* Market research and strategic marketing can increase new product success rate and save money for manufacturers


New Products May Be Plentiful, But Success Remains Fleeting

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from Phil Lempert-Facts, Figures & The Future

As usual, there was a plethora of new products arriving on store shelves last year...and as usual, the vast majority of them were unsuccessful. According to a new study produced by The Nielsen Company, there were more than 122,000 new SKUs introduced by manufacturers last year, and yet only 3,701 of them, or three percent, managed to achieve more than a million dollars a year in sales; just 206 of them, or 0.2 percent, generated more than $10 million in sales; and 10 of them, or 0.01 percent, managed to ring up more than $50 million in sales.This means, of course, that more than 118,000 of the new items introduced weren't even able to hit the million-dollar sales threshold.With that being said, if you start adding up the numbers on the products that were successful - whether marginally or wildly popular - it may actually be true that new products are the life blood of the industry.

The fact is that new products in total did manage to generate in excess of $20 billion in sales during 2007, with food and beverage items bringing in more than $9.2 billion in sales, general merchandise generating in excess of $4.2 billion, HBC items generating more than $3.4 billion and nonfood/grocery bringing in more than $3.2 billion in sales.Then again, it all depends on what your definition of "new" is.

Of the top 10 new brands introduced during 2007, nine of them were actually brand extensions - only one was a completely new product. Ironically, experts say that the best way to launch a new product is to create the image of an item that is specifically differentiated from others in the category, and yet to do so from a strong foundation - which ideally means being a brand extension that builds on a brand's core and fundamental value proposition.During 2007, the categories with the most new items were cosmetics and candy, each with close to 5,000 new SKUs available for store shelves; the categories most driven by new items, generating the highest amount of new market share, were women's fragrances (with 32.1 percent of its category) and men's toiletries (with 26.8 percent of its category).

Nielsen notes that shorter life-cycle categories such as fragrances tend to be new-product-driven, in part because they are fueled by heavy levels of co-branding and celebrity licensing that capitalize on trends; high turn, variety-driven categories like snacks and cereal, which often see high levels of new product activity, are geared to satisfy consumer needs for something different. On the other hand, the categories with the least new item impact were flour, frozen juices and drinks (each with new products generating just 0.1 percent of their categories), canned seafood and fresh eggs (with 0.2 percent of category share apiece), and ice (in which, amazingly enough, new products actually generated 0.3 percent of category share).Still, the release of new products is a near universal phenomenon - with 104 of the 105 categories reported by Nielsen having new product introductions last year. There was only one that did not - refrigerated yeast.