THE HIGH COST OF INNOVATING QUICKLY NOT WISELY

Today, fast-moving consumer goods (FMCG) manufacturers are under enormous pressure to innovate faster. Whether it's to improve category sales, capitalize on trends or defend market share, Nielsen's State of Innovation Survey found that 84% of FMCG professionals say they feel more pressure to bring products to market faster today than they did five or 10 years ago.

 

As a result, manufacturers are cutting corners in an attempt to adopt a more agile innovation process at the expense of valuable consumer feedback and opportunities for refinement—and, in many cases, it's taking a toll on their in-market performance.

SO, WHY DO MARKETERS FEEL MORE PRESSURE TO MOVE QUICKLY?

SO, WHY DO MARKETERS FEEL MORE PRESSURE TO MOVE QUICKLY?
64%

Pressure from senior leadership to launch more quickly

Senior Leadership
63%

Desire to capitalize on emerging consumer trends

Consumer Trends
63%

What was the other top-cited reason?

Top Reasons

What was the other most selected reason?

Shrinking launch windows for selling into retailers

Shrinking launch windows for selling into retailers

Need to defend share against smaller players and other new entrants

Need to defend share against smaller players and other new entrants

Existing products aren't meeting velocity requirements / are being delisted

Existing products aren't meeting velocity requirements / are being delisted

Source: Nielsen State of Innovation Survey, June 2017; “Which of the following are some of the biggest reasons you feel pressured to get to market faster?” (n=249 NA CPG professionals)

IT'S TRUE... SMALLER PLAYERS ARE DISRUPTING THE CPG LANDSCAPE

IT'S TRUE... SMALLER PLAYERS ARE DISRUPTING THE CPG LANDSCAPE

The need to defend against small players is real. Though the top 10 manufacturers generated 31% of overall sales in the past year, they're responsible for only 2% of growth. Compare that to the smallest manufacturers—who generated 19% of sales, but drove more than half of growth. 

SHARE OF DOLLAR SALES

chart

SHARE OF GROWTH

chart
chart legend
Source: Nielsen Answers on Demand, Total U.S., 52 weeks ending April 15, 2017, UPC-coded; Largest = rank 1-10, medium = rank 11 – 115, smallest = rank 116 and below.

TO KEEP UP, MARKETERS ARE CUTTING CORNERS

TO KEEP UP, MARKETERS ARE CUTTING CORNERS

Many manufacturers are feeling they need to get products to market more quickly to keep up with the pace of innovation. This often translates to making more decisions based on less insight. 98% of marketers say they spend less time than they should on at least 1 phase of the innovation process when speed is a priority.

What percentage of CPG professionals say they spend less time than they should on at least three phases of the innovation process when speed is a priority?

98%

15%

15%

31%

31%

58%

58%

77%

77%

Source: Nielsen State of Innovation Survey, June 2017; “When speed to market is critical, which (if any) of the following phases does your team/company tend to spend less time on than perhaps it should?” (n=294 NA CPG professionals).

WHICH STEPS DO MARKETERS SKIP THE MOST OFTEN AT DIFFERENT STAGES OF INNOVATION?

WHICH STEPS DO MARKETERS SACRIFICE MOST?

Click below to reveal the phases that CPG professionals skip when speed to market is critical.

Decide

When marketers DECIDE on growth strategies they skip...

Identifying opportunities

Innovation

When marketers DISCOVER a compelling proposition they skip...

Testing and refining the concept

Product

When marketers DEVELOP the winning execution they skip...

Testing and refining the product experience

Library

When marketeres DEPLOY their innovations they skip...

Optimizing the line-up and interaction with portfolio

Source: Nielsen State of Innovation Survey, June 2017; “When speed to market is critical, which (if any) of the following phases does your team/company tend to spend less time on than perhaps it should?” (n=294 NA CPG professionals).

...BUT THIS APPROACH ISN'T WORKING

...BUT THIS APPROACH ISN'T WORKING

Despite launching $70B in new products over the past 5 years—the largest manufacturers have only seen a $3.6B gain in total dollars. It suggests that there’s a lot of churn. Overall, these companies are putting new products on the shelf at about the same rate that they’re taking them off. There are a lot of launches that just aren’t winning with consumers.

SALES FROM INNOVATION & TOTAL GROWTH IN BILLIONS (2012-2016)

manufacturer sales
Source: Nielsen Answers on Demand, Total U.S., 52 weeks ending December 29, 2012 and December 24, 2016; UPC-coded, all outlets including convenience. Does not include private label sales.

MOST OF THE TIME, FASTER PROCESSES AREN’T PRODUCING BETTER PRODUCTS

MOST OF THE TIME, FASTER PROCESSES AREN’T PRODUCING BETTER PRODUCTS

To corroborate the in-market data, we asked clients who have implemented faster processes over the past few years about the benefits. The most common upside we heard was “we’re launching more products”—more, but not better. Only 13% felt that the changes to their innovation process yielded better products. This is consistent with the churn problem we discussed on the last page.

Interestingly, what percentage of CPG professionals felt that their faster process had no clear benefits (other than speed)?

5%

5%

16%

16%

37%

37%

50%

50%

WANT TO LEARN MORE ABOUT INNOVATING IN A SMARTER, MORE AGILE WAY?

WANT TO LEARN MORE ABOUT INNOVATING IN A SMARTER, MORE AGILE WAY?

Nielsen has identified the biggest opportunities to provide more focus and accelerate processes where possible. Speed up time to market, but without sacrificing quality data and consumer feedback that can make an enormous difference for new product success.

market trends

Identify market trends faster

return on innovation

Prioritize and optimize your return on innovation

optimize launches

Optimize launches quickly on the fly

Fill out the form to learn more about how your business's innovation strategy can become more agile.