THE HIDDEN COST OF LAUNCHING LESS-THAN-THE-BEST INNOVATIONS

THE HIDDEN COST OF LAUNCHING LESS-THAN-THE-BEST INNOVATIONS

To save money and shorten launch timelines, some companies are scaling back on consumer research for new products. As a result, they're investing more marketing dollars to support these weaker innovations in market—but how much more? New Nielsen data has the answer.

The Big Squeeze on Consumer Learning

Many CPG marketers are feeling the pinch of decreased budgets and shorter launch timelines, so they're having to launch more innovations with less consumer insight. In a recent Nielsen survey, marketers admitted that they test 25% fewer innovations than they should due to time and budget constraints. 

25% fewer
What percentage of marketers say they wish they could test more ideas, but don't have the budget for it?

23%

23%

44%

44%

65%

65%

79%

79%

Innovations Are Missing The Mark

Without the resources to make their innovations as strong as they can be, marketers are forced to launch products that aren't quite on the money. In fact, forecasting data reveals that more than half of innovations fall short of their minimum sales requirements for launch.

50% of innovations miss the mark
How far below its target does the typical innovation fall?

10%

10%

19%

19%

28%

28%

34%

34%

A Tale of Two Cookies

A Typical Innovation Story
Let's say two companies are developing new types of cookies. Both have a first-year sales goal of $30 million, and an advertising budget of $5 million.
COMPANY A launches cookies with an AVERAGE proposition and product experience.
COMPANY B launches cookies with an ABOVE AVERAGE proposition and product experience. 
Sales Goal $30M

Buying Growth is Costly

Unfortunately, COMPANY A missed the mark by $10 million. It now has a choice: accept the loss, or invest more in advertising and promotions to drive trial and close the gap. While "buying growth" in this way can be effective, it comes at a steep cost.

How much more would COMPANY A need to spend on advertising to earn the remaining $10 million dollars in sales?

$2 million

$2 million

$5 million

$5 million

$8 million

$8 million

$12 million

$12 million

The Staggering Efficiency of Building Strong Innovations

All marketers know that a sharp value proposition reels more people in, and a truly exceptional experience keeps buyers coming back again and again—but many don't realize just how much of an impact these factors can have on the bottom line.

 

Building strong innovations by using consumer insight tools such as concept optimization and product testing yields significant returns at a relatively low cost. By contrast, launching below average (or even just average) innovations leaves a lot of money on the table. 

FIRST-YEAR RETAIL SALES FOR A TYPICAL PRODUCT LAUNCH

Concept and product performance

Read as: There is a strong positive correlation between concept and product performance and forecasted sales. 


Forecasted data is based on 400+ concepts and products in each category evaluated through Nielsen Innovation testing. "Food" assumes a typical item from the food product category. 1 SKY. $3.30 retail price, 68% year-end distribution, $5MM advertising spending. average trade/consumer promotion and no competitive order of entry effects. "Beverages" assumes a typical item from the beverage product category. 1 SKU, $3.14 Retail Price. 59% year-end distribution. $10MM advertising spending, average trade/consumer promotion and no competitive order of entry effects. Database ranks assume purchase intent, value, claimed units, and claimed frequency all fall in these respective quintiles. "Average" performance equates to database ranking in the 50th percentile.

Want to Maximize Your Innovation Potential?

Did you know... product concepts optimized by Nielsen generate an average 38% lift in forecasted sales revenue compared to non-optimized concepts?

 

Nielsen provides a range of tools to help companies make the most of their research budgets and timelines—allowing them to explore more innovation ideas, launch better products, and consistently maximize their returns in market