Five Ways to Drive True Innovation and Increase Sales

Five Ways to Drive True Innovation and Increase Sales

Mike Asche, Vice President, Nielsen

Gaining increased retail shelf space can provide a major boost in driving sales growth for the brands and product portfolios of consumer packaged goods (CPG) manufacturers. Yet, increased shelf space—which requires significant retailer support—can be difficult to achieve.

While hundreds of new products are launched each year, many tend to be closer to in-line extensions that, at best, persuade consumers to switch brands within a product category. While this approach benefits the winning brand, it does little for the retailer who would have made the sale anyway. Thus, retailers are often less invested in these types of product launches and have little incentive to award valuable increased shelf space. To overcome this challenge, new product innovations must deliver true category growth that will offer material benefits to both the manufacturer and the retailer.

Category Growth = True Innovation

There are two ways to increase category sales: bring new consumers into the category (traditional “category growth”) or persuade current buyers to spend more within the category (“category expansion”). When manufacturers launch truly innovative products that offer something new to consumers in a category, retailers are far more likely to offer support by way of  increased shelf space and fast distribution, which gives brands the best opportunity for significant gains.

Unfortunately, category growth can be elusive. A Nielsen analysis of nearly 300 new product launches in over 100 CPG categories found the overwhelming majority resulted in brand shifting—existing category consumers switching brands within the category—rather than pure category growth or expansion.

CPG Category Growth

However, a small percentage of studied launches did achieve category growth, and an examination of those successful product innovations provides five guiding insights to help achieve true category growth from new products.

Five Paths to Driving Category Growth

  1. Remove Category Barriers

    Sometimes, consumers don’t shop within a category because of specific (but not insurmountable) barriers, such as a perceived lack in quality or inconvenience. In personal care categories, some new products successfully drove new consumers to the category by eliminating unfavorable side effects or providing better methods for administering the product. Similarly, some food products were able to draw new consumers into the category by eliminating some of the taste or quality barriers that existed in the category.

    Call To Action: Invest in understanding the barriers to purchasing in your category. By understanding why consumers do not buy or buy infrequently in your category, you can develop new products that can attract these consumers and drive category growth.

  2. Add Benefits to the Category

    Augmenting products with additional benefits can sometimes attract new consumers into a category and/or entice buyers to spend more within the category. Adding convenience benefits and portability or fortifying foods with healthy ingredients and supplements can drive greater volumes.

    Call To Action: Understand what meaningful value added benefits can be brought into your category. Typically the successful value added benefits align with consumer trends in lifestyle and health; thus, understanding these macro trends can enhance your chances of bringing a meaningful category enhancement to market.

  3. Draw Purchases from Outside the Store

    Think beyond the closest competitor on the shelf and, instead, expand your competitive set. Packaged food producers have driven category growth by offering consumers meals previously considered restaurant options, and cosmetic companies are seeking to place department store-quality products on grocery and drugstore shelves.

    Call To Action: Examine what consumers are buying outside of the traditional CPG retail outlets to satisfy their needs. For example, if you are a manufacturer focused on household care, explore what kinds of things consumers are doing to upkeep their home and consider your options for developing a more convenient or cost effective solution.

  4. Dramatically Enhance Product Performance

    Significant and breakthrough product enhancements can command a premium and expand category spends from consumers already buying within the category—“category expansion.” But, the product innovations must offer dramatic improvements to truly command a sustainable premium and upsize enough consumers to have a meaningful impact on the category.

    Call To Action: When charging a significant premium, have a very high standard for product performance. When launching a product with true breakthrough performance, manage the price point carefully to ensure that you are not leaving money on the table.

  5. Tap Latent Consumer Demand

    Creating altogether new categories by serving unmet consumer demand is one of the most rewarding, if challenging, paths in the category growth game. While energy drinks and instant hand sanitizers are recent examples, many companies are leveraging social media intelligence to open new consumer demand pools.

    Call To Action: Have sophisticated approach to analyzing consumer demand that incorporates macro trends, the market landscape, and consumer attitudinal segments. Use this platform to identify untapped places in the market and stretch your innovation efforts to fill these needs.