There's no denying new items are the lifeblood of retail. However, along with human resources, adding in a new product is one of the largest controllable expenses for retailers. This factor, plus the potent combination of an expanding number of new items and a higher than ever failure rate, has buyers and sellers looking for ways to hedge their bets on new launches.
The number of new items jumped six percent from 2004 to 2005 and, when the numbers are totaled, will probably rise even more between 2005 and 2006. Despite intense consumer focus groups and mega-advertising budgets, there are still as many bow-wows as hits.
A PriceWaterhouse Coopers study done in conjunction with NACDS has reviewed the new products launch process.
Working together, buyers and sellers have come up with some guidelines to ensure more hits than misses. Both sides of the equation agree that launches today need to be classified rather than just every new item touted as the greatest item to come down the pike.
There are currently four classifications buyers and sellers identified. These are:
- Corporate or market maker introductions
- Core products to a category, which are items in well-established categories
- Trendsetter items that produce a quick hit in the market
- Line extensions that are add-ons to an existing brand
The guidelines for classifying a launch are key because all planning and measurement flows from them. For example, at a recent industry conference, a roundtable of retailers and manufacturers suggested that success has a different set of parameters based on the scope and type of the launch. A hit needs to be measured not only in volume, but whether the numbers were achieved in the planned timeframe and whether each retailer captured the expected level of sales relative to competitors. These are determined by the classification of a launch.
Execution is also paramount in launches and the roundtable suggested monitoring by both buyer and seller. Too often even the best in-store display gets left in the backroom because of poor execution, and the planning and management of this function also derives directly from understanding the scope and importance of a new product.
The suggestions for ensuring better launches included better partnering between manufacturers and retailers as well as a candid approach about the commitment to a launch.
Discussion Questions: Given the pressures of the marketplace to pump out new products at a high rate, is a long lead-time style of planning feasible? Is such planning necessary to bring higher rates of success to new product introductions and to give consumers what they want?