New product success starts with a solid foundation built on the following four pillars of new product success:
- Research – Fully understanding your market
- Marketing – A commitment to the consumer
- Financial – Getting the money right
- Vision – A clear view of what success looks like
In a four-part series of posts, we will explore each pillar and how you can use it to maximize your efforts and results.
Pillar 1: Research : Fully Understanding your Market
One of the most common and undervalued aspects of obtaining new product success during a launch is the importance of understanding the dynamics and complexities of your target market. This is a common reality with new product companies and entrepreneurs who many times are overwhelmed with their product and the potential that they feel it holds. While passion for the new product launch is critical, even vital, it is important to have a dose of reality for the market opportunity that lies ahead. So, it is important to know as much as possible about the market itself and how products traditionally are distributed.
We have come to understand that there are five key factors to understanding the complexities of the market ahead. This process begins with first identifying where your product is to be merchandised in the store. Is it frozen, shelf-stable, grocery, non-foods, etc? Once you have determined which category your product is going to be placed in the store, here are the key elements to consider.
Market Size
Question to ask:
- How large is the market in terms of retail sales?
It is important to identify market size not only to manage your expectations for sales and profits but to establish these same expectations for potential investors. Obtaining syndicated data, the most popular and acceptable forms being IRI, Nielsen, SPINS, Mintel, or others, can be challenging. However, there is a wealth of generic category information available through online resources. Give the free offerings at Statista a try before investing in other paid services.
Market Regulations
Questions to ask:
- Are there specific government regulations that you are going to need to support your product’s distribution?
- Are there industry certifications required?
- Is the production of your product conducted in an approved facility?
While these attributes may seem non-essential, they are most certainly critically important to your consumer and to the buyer that you will inevitably present your new product to.
Competition
Questions to ask:
- Do you know your competition?
- Who are the brands that are competing for the same shopper that you are trying to sell your product to?
They may be easy to find and understand, simply through a Google search or an actual in-store investigation. Competitors may be obvious or not. The point is – it is critical to understand who these competitors are. Once this knowledge is obtained, you are now able to dig further into understanding the strength of your competition.
Again, another critical factor to consider. Are you planning to compete against well-established, entrenched companies with huge brand equity built over years? Or, are you competing against newer brands within a trending segment or category? One of the best tools that we have used in the past to launch new products is the Product Comparison chart. It is a simple understanding of your own brand POD’s (points of difference) versus the competition. This process will help identify opportunity gaps and unmet consumer needs. It is one of the most useful tools that you will need in building your brand, defending your brand, and inevitably selling your brand. You can create a presentation ready comparison chart using the free tools at canva.com.
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Trends – many new products are launched on the backs of current trends. This is good because retailers are always looking to provide their shoppers with solutions that are not currently available. It is important for you in launching your new brand to ensure that you are ‘trend right’. It is important not to be too early in a trend cycle, especially when the category or the sales opportunity may not be proven. Likewise, it is important not to be too late within a trend cycle, allowing your competition to gain market share first and thereby reducing your opportunity for new product success within the category.
Finally, it is critical to understand how products are distributed to retail stores and eventually to the consumers who shop these stores.
Role of Distributors – as you can imagine, products do not just magically show up on the shelf in your local retail store. Industry-specific distributors are responsible for that role, along with retailers who use a self-distribution model. You must identify how products within your category are being distributed today. Working through an established distributor is a challenge in and of itself. Distributors manage thousands of products for many different retailers. Regardless of which distributor you use, it is important to understand how these distributors make money. Today’s distributors will consider the costs of bringing your product to a retail store and add that cost to the price that you sell the product to them. Many successful brands work through distributors by establishing a distributor price schedule. This is different than a wholesaler price schedule, which a retailer will use to establish their selling price and their expected gross profit. Strategically, new products should be price engineered to allow the retailer to make their expected profit and to establish the retail price in accordance with your own SRP (suggested retail price). To accomplish this and for all players within the distribution chain to make money, distributors should be offered a price for products that is lower than the wholesale price. Each distributor has its own expectations and cost overheads, however, if you can establish a distributor price schedule that is 10%-15% below the wholesale price, you have a good chance of supporting your SRP.
Barriers to Entry – obviously, slotting or placement costs, in terms of free goods or cash, are an industry norm. Most retailers use this practice to cover merchandising and planogram costs but also to protect themselves against potential new product failures. Eliminating these barriers may be possible under special circumstances such as a certified minority business ownership or a veteran business. But for companies that do not have these attributes, your best course of action is to have a strong understanding of your target consumer and how that target consumer relates to the store. This knowledge can then be supported with a strong marketing program. These two elements will be critical in your ability to negotiate a most favorable situation as it pertains to these barriers of entry.