Driving New Product Success in Russia
By Johan Sjostrand, Managing Director, BASES and Consumer Research, Nielsen Europe
Almost 7,000 new products were launched in Russia in 2012. While seven of 10 products extended the brand via a line extension, one-third delivered a new innovation to the retail landscape, which is twice as high as the global average, according to Nielsen.
But, we know the sobering fact; only 10 percent of new products will succeed. So how do the select few cut through the clutter and reach mass appeal? Are any factors in the marketing arsenal more impactful than others? Do the same principals for new product success in Eastern Europe (Russia, Turkey and Poland) apply to those launched in other growth markets? To answer these questions, we compared successful innovations launched in Eastern Europe to those in other growth markets to determine what works best and why.”
Can’t Market Your Way Out of a Bad Idea
Our analysis revealed that regardless of where a product was launched, three quarters of success was attributed to getting the initiative right at the onset. A strong product concept that provides a unique advantage in the market may seem obvious, but the mix of the various dimensions that contribute to a successful product initiative, such as distinctiveness, communication, attraction, point of purchase, and endurance, are critical for success.
While endurance (product performance) and attraction dimensions constitute the highest correlation to success rates (39% and 29%), point of purchase (12%) was of particular importance in Eastern Europe. Modern trade in Eastern Europe is developing very quickly, both in terms of concentration and sophistication, so for consumers to be able to find products in both the modern and traditional trade is perhaps more important here than elsewhere in other growth markets.
Price Alone Does Not Determine Success
Looking at how new products where priced in relation to the category, we found that 51 percent of new brands were priced at par with the category, which is the most common pricing strategy for new products in growth markets. But one-third of initiatives were actually set at a premium price, and a small portion (5%), even higher at a super premium price of more than 200 percent above the average category price.
Interestingly, not one of these pricing strategies were more likely than the others to cause success or failure. But one important aspect did have a direct impact on the success/failure ratios. Successful initiatives were much more likely to have offered consumers a low-cost entry point in the category. By giving consumers a packaging option, such as a single-use sachet at a low cost, consumers can try and adopt the new product even if it comes at a premium price.
Big Difference Between Average and Great
There is nothing more important than achieving successful distribution. In our analysis of the 7,000 new launches in Russia, we found that both the weighted distribution and sales per store achieved by the best-selling line extensions were about three times greater than the average line extension.
But getting to the heart of what consumers want is at the core of delivering a successful product. As you think about product concepts for Eastern European consumers, four attributes are worth keeping in mind. Our analysis across 633 successful initiatives revealed that certain product attributes resonated more strongly than others. Forty-one percent favored products that contained flavorful and natural ingredients. Also important to the active shopper are on-the-go products, which were preferred by 36 percent of consumers. With a growing desire to eat healthier, 34 percent preferred good-for-you products and 21 percent wanted products that were enjoyable.
Make Better Decisions
Increasing the odds of new product success is achievable, but getting three steps right is critical. Get your strategy right and ensure your initiative is on track to achieve it. Understand consumer needs and ensure your product has the acceptance criteria necessary for both short- and long-term success. Meet your financial objectives by making sure you generate sufficient volume needed to maximize your return on investment.