Three New Product Success Factors You Should Measure, Control and Own

Marketers know first-hand how challenging it is to introduce successful new products-and the stakes involved when new products fail.

There are many reasons new products do not succeed. Some fail because of the offer, while others fail because of the execution. Still others fail because neither the offer nor the execution can fully overcome marketplace constraints, such as category penetration and fragmentation. With so many variables having the potential to impact new product success, it is difficult for Marketers to discern which factors they can and should control to increase the chances for success.

Until now.

Leveraging its global DESIGNOR174 database of 10,000 new products and more than 55,000 established brands, Ipsos Marketing identified three factors crucial to new product success:

1. Relevance
2. Expensiveness
3. Differentiation

At Ipsos Marketing, we refer to Relevance, Expensiveness and Differentiation as our RED measures.

The absence of purchase intent in the list above may surprise many Marketers who have traditionally used this measure as a benchmark for success. The omission of purchase intent is purposeful. This piece provides empirical evidence for the superiority of relevance, expensiveness and differentiation in predicting new product success.

Defining New Product Success

In order to identify key predictors of success, one must first define "success." For example, success can be defined as presence on shelf two years after introduction. Although this definition is intuitive and is easy to measure, it is problematic if the goal is to isolate the factors related to the offer that can be controlled.

For example, if a product is launched in a category where there are few brands, or the competition is not very strong, a weak product can remain on shelf for a long time. Moreover, sales of a weak product can be bolstered by increasing advertising and promotions, or by reducing the price.

Therefore, to measure the strengths and weaknesses of a product, one must identify a measure of success that takes into account competition, but is independent of the marketing actions a company employs. To control for the impact of marketing actions, a logical approach is to focus on base trial and base repeat. Trial success can be defined as follows:

A product can be defined as a trial success if its base trial is higher than the expected trial for the category in which the product is launched.

Having defined trial success, we analyzed our DESIGNOR database to determine which factors are most predictive of base trial. The analysis revealed that the following factors are most significant:

1. Relevance
2. Expensiveness
3. Differentiation

Accordingly, Marketers should be measuring, evaluating, and improving these factors throughout the new product development process in order to increase the chances for new product success.

Relevance

According to Tim Manners, author of Relevance: Making Stuff that Matters, "Relevant brands seek to help people live happier lives but do so by addressing everyday problems..."¹ Similarly, at Ipsos Marketing, we define relevance as the extent to which a product meets consumer needs, both functional and emotional.

Our analysis of the DESIGNOR database revealed that 81% of products with high relevance scores were considered to be a success based on the definition of success above, while only 22%of products with low relevance scores were considered to be a success.

Frozen foods, disposable diapers, and liquid soap are historic examples of products that created new and sustainable categories because they were relevant to consumers in meeting their need for convenience.

Savvy companies continue to make products that are relevant to consumers, recognizing that their chances for success are much higher if consumers believe they have a need for the product. For example, realizing that consumers have less time to spend on cleaning yet are more germ-conscious, The Clorox Company created Clorox174 Disinfecting Wipes. These pre-moistened, disposable wipes enable consumers to quickly sanitize household surfaces without the hassle of using a spray or pump cleaner and having to wash out a sponge when the job is done.

Relevance is by no means limited to convenience benefits. In 2008, Dole Food Company released their Distinctively Dole174 line of premium salad kits. These ready-to-eat salads include toppings such as cheese, carrots, croutons, cranberries and almonds-and are thus relevant to consumers who seek a superior salad experience in terms of taste, texture and variety.

Not only is relevance a strong predictor of new product success, it is a construct that Marketers can clearly measure and impact.

Relevance vs. Purchase Intent

Purchase intent has traditionally been considered a good success criterion because it has a strong correlation with in-market purchase. However, analysis of our DESIGNOR database indicated that relevance is a better predictor of success than purchase intent.

• Specifically, products with high relevance scores have higher success rates than products with high purchase intent scores (81% success rate for products with high relevance scores vs. 70% success rate for products with high PI scores). Conversely, products with low relevance scores are less likely to succeed than products with low PI scores (22% success rate for products with low relevance scores vs. 32% success rate for products with low PI scores).

These findings suggest that better decisions are made based on using relevance as opposed to purchase intent. Why? Because relevance is more dependent on the underlying idea than on the quality of the concept execution and product-related elements such as number of varieties and packaging appearance.

Expensiveness

Expensiveness is the extent to which a product is priced higher or lower than competition.

Our analysis revealed that if a product is not considered by consumers to be expensive, it has a relatively good chance of success (66%). On the other hand, if a product is considered expensive, it has only a 35% chance for success.

Like relevance, expensiveness is a metric that Marketers can directly impact to improve their chances of new product success.

Differentiation

Differentiation is the extent to which a product has unique functional and emotional benefits vs. competitors.

According to our analysis, if a product is perceived by consumers to be differentiated vs. the competition it has a much better chance of success (68%) than if it is not considered differentiated (only a 35% chance of success).

Like relevance and expensiveness, differentiation is a measure that Marketers can tip in their favor. Procter and Gamble successfully distinguished itself in the marketplace with its one-of-a-kind Mr. Clean174 Magic Eraser174. This revolutionary sponge contains micro-bristles that combine with water alone to remove dirt from household surfaces, and stands out from other products because it enables consumers to effectively clean without the use of chemical agents.

Kraft leveraged the power of differentiation with their 2008 launch of Kraft174Bagel-fuls. Unlike fresh or frozen bagels currently available in the marketplace, Kraft174Bagel-fuls are pre-filled with cream cheese (Kraft's Philadelphia174Cream Cheese to be exact). With these unique bagels, consumers save money by not having to make a separate purchase of cream cheese and save time by not having to spread the cream cheese on the bagel.

The Combined Power of Differentiation and Expensiveness

When differentiation is combined with expensiveness, its ability to predict new product success becomes even stronger.

According to our analysis, if expensiveness is low and if differentiation is medium to high, the chances of success are quite good (nearly 80%). And, even if expensiveness is medium, but differentiation is high, the chance for success is still good (73%). This finding confirms that a highly differentiated product can support a higher price point.

For example, as one of the few organic baby foods available in the mass market, the Earth's Best174 line of organic baby food is able to command a higher price than traditional baby food because it is perceived by parents to be a healthier alternative for their children.

Another success story is the Bertolli174 line of frozen pasta meals, introduced nationally by Unilever in 2005. Unilever developed a differentiated pasta product by using higher quality ingredients, offering unique flavor varieties (such as Chicken Florentine and Farfalle), and packaging the product in a bag instead of a traditional box. Unilever reinforced its positioning-and validated its price to consumers-with a marketing campaign that emphasized that the Bertolli174 line offers a "restaurant quality at-home Italian dining experience."²

A Word About Repeat

Of course, new product success is not only dependent on trial, but also on repeat. Our DESIGNOR database was analyzed to uncover which factors were most predictive of repeat. As expected, after-use performance was the main driver of repeat. This is a factor already known to Marketers, and one which most Marketers already strive to improve. The combination of after-use performance and expensiveness-in essence, the value of the product-is extremely predictive of success. The best chance of success (97%) is with a product that has low to medium expensiveness combined with high performance. However, a product will still have an excellent chance of success if it has low expensiveness combined with medium performance (91%).

Concluding Remarks

The identification of relevance, expensiveness and differentiation as critical new product success factors is an important breakthrough in innovation research. Ipsos refers to these as the "RED" measures, and we track them across the research stages for new product research. Relevance, in particular, has been proven to be more reliable than the traditional purchase intent measure in predicting new product success.

Marketers should include these factors in their new product research surveys and compare results to corresponding benchmarks. Armed with this information, Marketers can improve their chances for success by taking the necessary steps to impact relevance, expensiveness and differentiation in their favor and, ultimately, own these factors in the marketplace.

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¹ Manners, Tim. Relevance: Making Stuff that Matters. Penguin Group .USA. 2008.

²http://www.bertolli.us/classicdinners.aspx