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New, Improved, Out of Stock

china business - mr. miguel p. suterio Apr 25, 2010

(New-Product Distribution Failure)

How many times have we seen a great ad on TV of a wonderful new product that gets us all worked up and raring to rush to the shelves of our local supermarket, only to find it, disappointingly, nowhere in sight?

That’s what industry insiders call New Product Introduction (NPI) Failure. It’s a problem that has continued to haunt many Fast Moving Consumer Goods (FMCG) companies, large or small, costing millions of pesos each year.

In today’s competitive market, the growth strategies of many FMCG companies are highly dependent on the success of NPIs. A great deal of resources are invested in the research and development of new brands, new products, new variants, or even new pack sizes.
On top of this, huge investments are also made in terms of advertising, promotions, and trade support. The point is to bag shopper awareness through mass media, make him see it in trade, make him want to purchase it, be totally delighted, and continue purchasing the product forevermore.
Recent excellent examples of NPIs would be Unilever’s Clear Shampoo, Coca-Cola’s Coke Zero, and Minute Maid Pulpy Orange. These NPIs create a big bang in the marketplace and media. Even the in-trade hype these new products created was truly inescapable.

But not all NPIs are as well planned and executed. Many new products today are actually quite lucky to be accepted in the trade at all. In today’s trade environment, there are eight critical factors that will determine if new products will ever see the light of day in trade.

Solid Consumer Value Proposition

There must be a compelling reason why consumers will part with their hard earned cash to buy a new product at its sticker price. This may involve brand strength, uniqueness, being first, efficacy, and stacked benefits, among others.

Solid Customer Business Proposition

Why should traders invest their resources and energy in selling your new product? They will consider elements like traffic count, transaction value, and gross profit margin.

Realistic Category Story

There should be a realistic discussion on how a new product will eat into other existing products, both competing and non-competing, and why it should not be a problem to the retailer if this happens. That is, given the retailer is looking after the welfare of the entire store and not just of individual products or brands.

Decent Trade Investment Plan

There must be a justifiable level of manufacturer investment in the trade for traders to list a new product, distribute it, merchandise, and promote it well. This is not only intended to provide returns on a trader’s investments nor defray cost but, more importantly, invest in programs to enhance a product’s future performance in-store for mutual manufacturer-retailer gain.

Solid Awareness and Trial Generating Plan

There must be a solid plan to generate trial both inside and outside the premises of the trade. This is where Above the Line (ATL), Below the Line (BTL), and Point of Purchase (POP) activities become critical

Practical Old Product Depletion Plan

If the NPI is intended to replace an older version, then there must be a practical depletion plan that is synchronized perfectly to the entry of the NPI.

Precise Pipe-filling Plan

Ensuring a precise Pipe-filling Plan incorporates three aspects: a) Grassroots computation of exactly how much stock is needed to maintain the normal trade inventory holding levels; b) Inventory needed for the dynamic flow of goods through the trade; and c) Precise timing of the flow of new products through the entire trade based on the supply infrastructure.

Aligned Extended Supply Chain

The Pipe-filling Plan must be supported by a precisely synchronized Extended Supply Chain, meaning from raw material procurement all the way to national and regional distributors, key accounts, wholesale, and finally to the retail trade.

In summary, the key to NPI success lies entirely neither in the hands of R&D nor Marketing. Neither does it lie entirely with Trade Marketing nor Sales. NPI success lies in the whole organization working together seamlessly with a foundation of solid consumer and trade understanding behind it.

If NPI is an integral part of your company’s growth strategy, then aside from investments in research, product development, advertising and trade support, what will spell the difference between NPI success and failure is your company’s investment in building your entire organization’s skill in managing NPIs.

With an up-skilled organization, hopefully your NPIs will now be ‘new, improved, and in stores nationwide!’

(China Business Philippines 04/10)