Looking for the ONE
Ah, love. When you have it, life can be blissful. But when you don't, it can be heartbreak. And when you're looking for it, it's all a game. And love in the world of consumer packaged goods (CPG) can be all of that rolled into one, especially when you're talking about getting innovative new products onto retail shelves.
That dating game is not for the faint of retailer hearts.
One, because new products hit the market in a seemingly endless loop, sure, but that doesn't mean they're innovative.
"Retailers have been starved for the ideas that will dramatically change the category. They're not seeing the iPods and iPads of the early 2000s," says Joy Peters, a partner with Chicago-based AT Kearney.
And two, even if they are innovative, that doesn't mean they're a love match for the retailer.
But that doesn't mean that the perfect product to grace a retailer's shelf isn't out there. It just means that finding that love match is a process, and one that must be conducted carefully, or risk the pain and sorrow of a broken heart.
Different facets will make different innovations attractive to different retailers, but at the core there are four traditional factors to evaluate, Peters says. What consumer need does this new product fulfill? Will it drive traffic to the retailer? Will this new product feed excitement in the category? Is this new product sustainable, and does it have scale overall?
There are a bevy of permutations and considerations around those four questions, he adds, and while these factors are important, a fifth question for retailers must also be considered: What are the economics around the consumer value proposition? Peters gives the example of Walmart–when deciding to bring on an innovative new product, the retailer must consider how that product would fit into its overall persona of being a low-cost leader.
Adding an innovative new product to store shelves is not to be taken lightly by the retailer. Not only do the products have to fit with the retailer's personal brand, but they also have to be on trend and fit with what consumers are demanding.
"In a retail environment consumers expect certain things from retailers," says Jon Weber, managing director and partner at Boston-based LEK Consulting. "If you're offering them products and services that aren't what they're looking for, and you're not meeting their expectations, ultimately the customer is not going to be satisfied and won't continue to come to your retail environment."
But conversely, catering to what consumers want could be detrimental for a retailer, and it goes back to the golden rule of both dating and retail: Know thyself.
If a retailer takes on a product that is new or novel but isn't what the consumer is looking for–maybe it's too unique, or it is too early in terms of technology, or it could be right for the consumer base, but they're buying the product at other retailers–the retailer is ultimately inconsistent with the value proposition it serves in the marketplace, Weber explains.
"You want to find those products that add to your value proposition, and add value to your merchandising given who you are as a retailer, [the] customer base you attract, and the role you play for the consumer in meeting those needs," Weber says.
PULSE ON THE PIPELINE
When courting, there's something to be said for having a wingman in the process. In dating lingo, that means having someone at your side who really knows you, can speak to your best qualities, and helps spotlight what you've got going for you when you are trying to woo the attractive person on the other side of the room. In retail terms, this translates into having a strong collaborative partnership with a CPG manufacturer, one that is going to have the retailer's interest in mind, really knows the retailer's brand, and can help that retailer shine in the eyes of its consumers.
But what if a retailer doesn't have a partnership with a CPG manufacturer? What if there is no CPG wingman to help navigate the wild world of innovative products? Are retailers destined to be lonely hearts until their expiration date?
Not necessarily. Even if they're flying solo, retailers can still find attractive and innovative new products. While they might want to enter into a collaborative partnership with one retailer for exclusive innovations, they might also be willing to play the field a little bit. And so long as the retailer is open and honest and keeps a good working relationship with the vendors it's seeing, there's a good chance they'll still have access to those new products that will work best for their store.
"Retailers rely upon their vendors to bring to market best products and demonstrate to them why in a given season or selling period their products will drive increased sales," LEK's Weber says. A retailer must cultivate relationships with vendors, and treat them well, if they want those innovations to keep coming their way. Because if you're not, Weber adds, you may not get their best products.
"Vendors are asking themselves which of their products should go in different channels," he notes. "It doesn't mean every channel gets every product. If it's a premium product, a vendor will want to put it in those channels that fit the product's dynamic. And if you're on the wrong side of that as a retailer, you're not going to get access to the products that are best for you."
Weber continues that the best way for a retailer to stay in a vendor's good graces is to pay attention to the ones that have consistently delivered on products appropriate for your store, or even to other retailers in the marketplace, whether or not you've gotten those same products. Ensure that you are well aligned with that vendor so when they bring out their new line of products, you're in line to receive them.
Smart retailers also know that keeping the innovation pipeline primed is as easy as tapping into the knowledge right at their fingertips.
"Retailers can leverage the rich data they have about customer preferences and what's selling in their stores to demonstrate the success of specific products to the CPG company," says Gary Ambrosino, president and CEO of Tewksbury, Mass.-based TimeTrade. That data can then be used to target specific CPG companies that would fit well with the retailer's brand.
Ambrosino points to Target's "Made to Matter" collection of products. The company found that 97 percent of its customers were already buying at least some natural, organic, or sustainable products in the store, he explains.
"Armed with this data, Target was able to land exclusive deals with several CPG companies, bringing innovative products to its stores that would sell," Ambrosino says.
Additionally, combining traditional measures for evaluation with more modern ones can help retailers stay on top of trends that could be valuable to their stores. For example, it could pay to see how new products play out on social media.
"Looking at the velocity of the product as it is launched and goes through its cycle is one measure," says AT Kearney's Peters, "but seeing how it goes on social media overall, and the excitement around it is another. You can use social media to predict if that product will grow, or if there is an issue with the product that will curb potential growth going forward."
That combination of real time and preemptive measures is a measure that both manufacturers and retailers are employing to mitigate issues. Both are using the traditional measures of what a good product launch for a specific category would look like, as well as how it trails through the years of its life cycle. And both, Peters says, can use that information to establish where the products should go and how it can be improved.
LOVE IN THE TIME OF NOW
Love is won and love is lost, and when it's lost it can be challenging to stay positive and focused on finding your perfect match. But that right match is out there, for lovebirds and retailers alike. The thing to remember is not to give up, and most important, remember who you are, what it is you want and need, and who your consumers are and what they need.
"When new, innovative products hit store shelves, sales associates should be prepared to answer the questions shoppers will naturally have about the product's capabilities, pricing, and features," says TimeTrade's Ambrosino. "Store associates must become product experts who are able to give consumers the guidance they need before they're ready to buy. Hands-on, comprehensive staff training should happen before new products are introduced to the market."
Further, while instinct often dictates retailers to be cautious with new products, retailers need to know when to risk that space for a potential match. Less traffic in stores, says LEK's Weber, has made retailers wary of taking on too many new products, lest they end up with mass quantities in the clearance bin. But by the time a retailer waits for a proven track record, the product is already out in the mainstream, and consumers, Weber explains, will go elsewhere to buy the product where they can find it cheaper or where it's more convenient for them to purchase.
To combat that, it comes down to differentiation.
"Retailers need to differentiate their product offerings, their store environment, their level of service in their store," Weber explains. "A lot of retailers are open to the role the assortment plays, and the role the innovation and new products play in differentiation, and how that can help them grow and mature."
Differentiation can be a struggle, but retailers have the tools to make it happen through segmentation and tapping into the consumer trends that have expanded taste profiles in recent years. The traditional shopper segmentations of gender, socioeconomics and other standard measures have been segmented further, allowing retailers to know their customers that much better. So the mom who shops at a certain time and has a certain amount of money becomes the mom who has a job and shops to cook a meal at home, with limited time. The retailer in turn, for example, might place a heavier emphasis on ready-to-go meals.
"Retailers realized they need to look at segmentation in a more granular fashion," Peters explains. "Profit pools are not just at the intersection of trends, they're also very targeted at select segments within their shopper base, and some have tremendous profit potential, or open up other opportunities in the store."
As retailers navigating this tricky dating game, don't give up hope. The broken heart from the broken promise of a new product stings, but time heals all. And if it doesn't, there's another innovation around the corner.