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Chance of success for innovations in FMCG. Nine frequently asked questions

Zit u op ja-knikkers te wachten? Nee toch.

Inflexible buyer structures frustrate the acceptance and distribution process in FMCG.
Today, indifference retailers show for introductions is severe. Eight out of ten introductions and re-introductions aren't welcomed with applause. Manufacturers and retailers in FMCG present each other annual rewards for ''successful introductions and cooperation'' but does this reflect reality in any way?
In most product categories today, the retailerís view is fixed more on rationalizing and de-listing than on extending. This is paired with a severely pragmatic trend in the commercial relationship as the retailer dictates the cooperation rather than the manufacturer.
Retailers emerge ever more as customer oriented, versatile innovators with relevant customer information at their disposal, ready and able to develop and quickly market new products. In comparison, the manufacturerís product development is a slow and tedious process. And thatís how the A-brand is outstripped left and right by the private label and by the retailer.

On this page you will find nine questions we frequently get asked. About presentations of introductions on head office level. About new angles to break persistently inflexible buyer structures.

1. What are the the prime pitfalls frustrating the chance of success for innovations?
One of the worst is "doing your home work routinely while being oblivious to this routine." Assuming that the approach which has succeeded for years to bring forth the retailer's acceptance and entry in the retailer's assortment will still work today. Unprepared to change or not knowing how to change. Forget it. Today, you don't stand a chance this way!

    Lots of market research in innovation projects is really only done to corroborate newly developed ideas instead of it being a critical test. Consumer acceptance has to score at least a 7.5 because the project needs approval by management.
    The pile of research -the number of reports tells you more about the lack of confidence within the organization than about the chances of success- is often a compilation of compromises and misinterpretations. So there are no spectacular innovations in the pipeline. The consumer isn't waiting for the next new "me too" and neither is the retailer.
    Quit those tomes full of facts, is our advice. No more meaningless noncommittal reports prone to misinterpretation in any direction, ready for the garbage can. Concentrate on the interpretation of the data and hire the consultants who overlook the entire haul -including every pitfall. From "newly developed idea all the way through to the presentation of a catchy category view on head office level."
    "What can you expect to find on your way there. Where are new opportunities and challenges?" We change your way of thinking and your view.

2. Are your viability studies based on quantitative or qualitative data?
The viability studies on the chances of success for new products that we execute primarily commissioned by A-brand manufacturers, are based on qualitative data.
In these studies the main question is always if a new concept has a chance of success and how results can be optimalized. And if the newly introduced concept doesn't work, what are the causes and which measures need to be taken to make sure the introduction will be successful after all. So qualitatively.

3. Who are approached for your research on trade level?
The reseach method involves research through single in-depth interviews with buyers, category managers, unit managers and shop floor. In Food Retail, Drug, Out of Home.
The level above these -the unit manager on head offices- is also taken into account for our analysis. Also because decision making about introductions is ever more frequently a group decision and no longer the exclusive domain of the buyer or category manager.
And more often than not, the opinion of retail management is of overriding importance. For instance in strategic product groups like cheese, vegetables/fruit and bread. And in decisions involving cooperation with multinationals, usually a category where one wants to be in control directly.

All major, medium sized and small retail organizations are involved in our analysis. "Weighted" we cover 95%. On retail level and for every category there are an average of 80-100 decision makers of influence on the products in the assortment. This important group, usually keeping a low profile, is at times overlooked by manufacturers. One assumes that 5 or 6 retail organizations do 90% of all the business and that therefore only 5 or 6 buyers make the decisions leading to admission to the assortment. Wrong. The influential group is much bigger.
The process of acceptance and distribution can be influenced and accelerated very well, but in order to do this you need to approach all decision makers in the category. And preferably in another way than the obligatory trade journal campaign.

4. How about the depth of your research?
Bierman focuses on:

This is a usual pattern. Every introduction has its supporters, opponents and retailers neither pro nor contra, who postpone taking a standpoint until after the first results of turnover come out.
A retailer/buyer or unit manager is for or against an introduction regardless of his organization. One organization can have opponents as well as supporters.
The scope of the sample survey is determined together with the client. Partly based on our counsel. We know the managers in the trade, we have access to all retail organizations and all levels and we usually know who can be approached best for the research at hand.

5. Crucial.
Crucial in viability studies is the assessment of the qualitative data provided by the sample survey. That is exactly the reason why Jos Bierman himself executes the field work, without deploying others for this task. It is the most vital part of the work to be done. Interpretation and recommendations are also provided by Jos Bierman.

6. Which main issues are involved in your assessment study on the viability of new products?
Manufacturers and trade marketeers researching the retailer encounter 7 important clusters: assortment, presentation, logistics, cooperation, the consumer, promotions, instore marketing.
What's the retailer's view on these clusters and what moves him in the process of cooperation with the manufacturer and his opponents. We map this. Bundled, these fields of interest form the category management of the retailer for the given product group. For our client, this provides a strongly condensed but highly effective catman approach supporting the introduction on Head Office level.
By the way, collecting relevant retail data is not trivial. The data provided on retail level is often contradictory. Even within one retail organization it's possible to find opposing stand points. How do you assess information that's squarely opposing. For marketeers and for Sales this is tricky territory, but fundamental. It needs to be covered in order to properly estimate the chances of success for introductions. That's why we won't leave field work and interpretation to others.

7. Do you need a ready-to-launch innovation to assess its chances?
No. The innovation could be in the rough-draft stage, requiring research to be fully enhanced, it could be a finished product ready for launching, or any stage in between. We deal with all stages.

8. What is your input for implementation on head office level?
Usually, if a category analysis has preceded the introduction and our findings have been translated into a categoryview, we are also involved in the presentation at head offices. We uphold the findings from our research and we present the caterogyview. The Sales manager presents the cooperation plan.
Today, the entry of a new product is no longer a matter of course. Not even for A brand manufacturers. The increasing restraint of [major] retailers demands the most powerful communication.
These days, successful introductions can only be successful if the introduction is a process fully controlled by the manufacturer in such a way that buyers/ category managers can't back out. We know this process and we frequently take part in presentations on head office level.

9. The success of introductions is partly determined by the commercial atmosphere.
What are the prospects in 2014?

The atmosphere is rather bleak right now. Dominance of retailers and the industry's dependence are increasingly felt. The handful of retailers left in the field don't fail to notice the great concern of the introducing manufacturer. Retailers lay down high demands. As a consequence, the industry is left wondering "how can I still make some money these days." Manufacturers may manage to get their new products on the shelf but how can they make sure that some profit is made somewhere along the line when one is forced to pay for all the ideas creative retailers may have. The cooperation brings even the major A brand manufacturers and multinationals in a tight spot. The industry's call for 'more cooperation' is symptomatic.

    Manufacturers are eager to promise growth for the category through their introductions. They provide retailers with market analysis, shoppers research and space managementadvice. Meanwhile, the facts are different. How many innovations are really able to make the category grow? Take an honest look at your own commercial performance. What is the added value of Nielsen, GFK and the umpteenth shopper research when retailers have more qualified data at that.
Interested manufacturers can call us for an exploratory exchange of ideas. About custom made growth strategies. About the right [category] analysis as one of the fundamentals for innovations. And about the most urgent question in the industry today: "How do I achieve distribution in a fully saturated market and in the shortest possible time."

See: the three crucial moments during the launching process.

The advice. The implementation
Bierman's consultancy doesn't stop at providing advice. Translating the findings into practice and supporting Sales and Marketing is part of our core activitities. At the request of our clients we frequently participate on head office level. And we have a view. Sometimes we have a dissenting view. Top management does not need yes men. Top management is looking for creative, innovative solutions for issues that can be complex.

FMCG-nieuws "on line"
"Trends in Distribution and Food Marketing" is a publication of Bierman distributed free of charge via e-mail. Our newsletters are based on information gathered by us during our daily contacts with retailers. They are distributed to manufacturers in FMCG. Publication is infrequent: only when there's something to report. Subscription is possible through an e-mail to josbierman@fmcg.nl with the text "free subscription" in the message header or message body.

To move fast in FMCG
you need to know best practice

P.J. Bierman
telefoon: 0315-24.34.94
Email: (<josbierman@fmcg.nl>)