Customer needs are shifting at a faster pace than ever before. Technology brings with it huge disruption as more information, ways of shopping, categories and solutions become available to consumers. The barriers to entry for new food manufacturers are low – it’s never been easier to create a new brand. You can design and publish a website to sell a new product in hours without spending a single dollar. Competition through new, innovative brands able to tap into their target market is putting pressure on a supply chain burdened with old technologies and teams lacking the capability to keep up. Marketing has become increasingly automated and sophisticated (and black box). It’s almost impossible for most executives to understand how it works. Many of those with data and analytics capability have left the grocery industry to follow their dreams in industries where data is understood and salaries are hard to match. But for those who know how to wield it well, data can hold the key to predictable outcomes and consistent outperformance versus peers.
Brands that want to win in category are finding ways to drive quality through the product lifecycle by taking a leaf out of the Total Quality Management (TQM) approach. Traditional research methods have evolved and technology is making the options to learn from the mobile shopper more accessible than ever before. New products fail at an astonishing rate. Those who repeatedly buck this trend do so with science, not intuition.
A nod to Sir Edmund Hillary
No-one’s ever reached the summit of Everest without a serious amount of planning in advance. Lots of people have tried, but most have failed. But with the immense draw of the challenge came the innovations that helped make it more accessible to more people, and success rates started to improve. The thermal technology, the weather forecast accuracy, the equipment and supplies and the sharing of knowledge all improved. In 1990 just 18% of people attempting the summit made it. By 2012 that was more than 50%. This is a testament to mankind’s ability to innovate technologies that create an edge. It’s still hard work to scale Everest, but the odds are now just about in your favour if you plan well and have a bit of luck, too.
Designing success into your brands should be no different.
Slow and steady wins the race?
There’s a complex set of supply and value chains that sits between your great product idea and getting it into the hands of your target market. Because it’s complex and highly competitive, most new products fail within 9 months (statistics on the exact figure vary greatly between categories, brands and across retailers but it’s pretty daunting when you look at the data that’s out there. The fact is, it really doesn’t matter whether it’s 50% or 90% – it’s too high).
This means that the domain of new product development (NPD) for grocery manufacturers and retailers is expensive. It’s usually planned as a volume play – most brands recognise (much as in the pharmaceutical industry) that for every successful brand or product group we’re likely to see whole rafts of products that aren’t a hit with the market and that are dropped from ranges fast. Some of these product families are sustained outside of mainstream distribution to satisfy the accountants with improved manufacturing resource utilisation. The rest are simply pulled from stock and cast aside. This is the category manager’s nightmare and the manufacturer usually bears both the financial and reputational brunt.
So, bigger brands and manufacturers assign pretty large budgets to develop new products and employ a lot of science to try and reduce failure rates. Large Usage and Attitudes (U&A) studies are performed every few years to understand the consumer and then, on the back of these long and expensive exercises, brand strategies are cemented. This drags out their NPD processes and means their products often lack the cutting edge that can come from small brands with a single focus or USP. Glow performed a study with the Australian Food and Grocery Council (AFGC) in 2016 which explored this in detail – the consistent of absence of sufficient insights capability across all sizes of manufacturers is surprising. There isn’t enough good data to support decisions. Where there is data, there’s too much of it or it’s too old to rely on given the speed of change society is experiencing today.
In contrast, smaller brands and manufacturers don’t usually assign much to research or data budgets. It’s not that they don’t want to do it, but they know it’s hard to justify the ROI for a time-consuming exercise that doesn’t guarantee success when the product hits the shelf and where the data isn’t used to its fullest extent due to talent or capability gaps. Research isn’t just costly, it’s complicated. You need to know your planned outcomes up front and avoid dangerous pitfalls such as question bias and population sampling calculations.
Smaller brands often have a competitive advantage by being agile, responsive and passionate about their story. They tend to have leaders who know their domain and can see the gap, then act quickly to fill it. They are proactive and they shoot from the hip. They give consumers what they want, quickly. They feel approachable and their values stack up. On the down-side, they often lack insights and sometimes struggle to meet the retailer’s demands for evidence-based storytelling and risk mitigation. This can result in one-sided deals where the manufacturer owns most or all of the risk. Being people that like to shoot from the hip, they often take the risk and go for it. Sometimes it works out. Other times, the ecosystem unnecessarily loses a potential star to the wasteland of broken brands.
Big, slow – but smart
Bigger (international or category-leading) brands tend to have more resources and capability, but as the corporate matures it can become slow and bureaucratic. It’s dangerous to see a product from concept to launch only for it to fail. Innovation feels risky but we’re told it’s important. Not just for the organisation, but for the individual in the hot seat. There’s a lot of reputation on the line. This is where research has traditionally played a key role – it helps people make sure they’re setting their brands up for success in the long term by designing quality into their products. It just takes too long to execute so it’s not designed into enough processes.
Corporate sales teams are adept with knowing how to do a deal that supports the category manager’s goals. They have better understanding of data and can speak the same language. This is important for the relationship because it makes life easier for the buyer in a complex, dynamic retail environment. Often though, the focus is commercial rather than the needs of the end customer (shopper and/or consumer). This can manifest itself in the form of a less inspirational salesperson who contributes to tactical performance rather than long term strategic growth. As a retailer, this person is easy to deal with. I feel comfortable here, says the retailer. I did a great deal, says the salesperson. Nothing much changed for me, says the shopper. I still dip in and out of category, drawn in by tactical deals that only erode long term value.
Small, nimble – but risky
The SME manufacturer often makes up for a lack of commercial and business process maturity with passion and wonderful, inspiring stories. Stories about their brand, their growth, their following. About how the brand started. About what its ambitions are. (This is important. When someone’s passionate about something and they are able to articulate their passion, it’s quite addictive. It makes you want to spend more time with them as a human being.)
However, in the high pressure major retail setting, where the next promotion is driven by category profit performance and year-on-year growth, brands really need to know their numbers to show buyers they’ve done their homework and are driving the growth agenda. Telling the retailer how many followers you have on Facebook or showing them numbers from a survey you sent to a handful of people that’s full of poorly-worded questions just won’t cut it any more. This is problematic, especially if you have plans to extend your range beyond its initial sweet spot. Will the brand stretch that far? Will shoppers really get it? This becomes increasingly difficult as you enter more categories and you need more science to tell your story from a brand perspective. No longer will retailers take your word that your brand can stretch that far without some evidence to back it up. We’ve seen this first hand with our manufacturing clients and, 100% of the time, those that use multiple data sources to back up their story gain a significant upper hand with the retailers.
Bang for buck with quality and agility is not make-believe
Traditional approaches to market research are more manual and slow-moving than they need to be. The research process requires a lot of skill and training and the results are about clearly defined outcomes that minimise decision risk. The best research agencies have started to use technology to give their clients more bang for their buck and increased agility, but there’s still a long way to go in terms of speed to insight. We’ve seen clients achieving 2-300% improvement in process efficiency in their research projects which means they can listen at more points throughout the product lifecycle. This is in line with the Total Quality Management (TQM) approach where quality is designed into all processes and fast systemic feedback drives huge performance benefits and continuous improvement is second nature. It used to be expensive to adopt a TQM mindset through the product lifecycle, but technology means it doesn’t need to be any more. Compared to the failure rate data, this approach is significantly underutilised by the industry. There are a wealth of options out there to get closer to the shopper and consumer – most of them are simple and inexpensive to try.
Want results? Put yourself on the other side of the table
Humour me for a second: put yourself in the buyers’ shoes. You meet suppliers all day, entertaining a variety of pitches and discussions with a number of competing brands. You see deck after deck with 2-3 year old second-hand data. You see the same sales data every day (you probably produced it in the first place). In between supplier meetings you’re checking daily category performance and fighting supply fires. One day though, an emergent brand arrives that has been testing a new innovation in your category. You’re keen to meet them, but you’ve been down this road before. You’ve seen it go awry in terms of the deal and execution. You’ve watched bright brands launch and fail within 12 weeks because of a combination of activation failures. So again this time you’re rightly concerned about the category fit and the commercial risk. You’re worried about their business, too – you don’t like to see suppliers fail. You love success stories, but you know how much your business expects and the pressure that creates for new entrants. They have just 12 weeks to hit a stock turn target.
The supplier arrives and confidently presents a structured pitch containing both category research and primary market research from people exposed to their own brands. They talk to you about how they developed the concept with their early adopters and found out what people wanted to buy. They found out where they shop, why they shop there and who they shop for in the household. They explain that their consumer research extends beyond NPD processes through launch, and then further – beyond activation. This helps them finalise their marketing strategy and drives continuous improvement through their product, meaning they will always be striving to lead the category’s innovation agenda. You, the buyer, are beyond impressed.
This is a true story
A recently-listed client recently attended such a meeting armed with a story like this and the national retailer they met loved the approach, was captivated by the brand and bought into the sophisticated story they were hearing. The data confirmed hunches the retailer had never been able to prove in the past. The manufacturer was able to talk about their vision for the category of the future and, in just six months, the market cap of that business has grown by over 400%. This was predominantly driven by their inquisitive mindset, their focus on quality and their inspired listener-storyteller approach. Before the meeting they were ranged in just 8 stores in Australia. Now they have ranging contracts across more than 800 outlets with the retailer considering stretching the brand to four additional sub-categories. They achieved all of this on a budget of under 10% of their NPD and baked quality in from concept to pitch to launch to activation.
Sales and category teams should demand access to insights that prove new products are credible, that inspire listeners to believe in the opportunity and allow them to cover their own backs by doing the due diligence for them. Insights teams should plan analysis right through the lifecycle, then push them in bite-sized format into the inbox of those who really need data to be able to tell a story that oozes sophistication and quality.
Total Quality Management is a Mindset
Total Quality Management is a mindset. It’s a desire to systematically design-out defects and use data to identify opportunities at all times. It focuses on quality throughout the value chain which, along with clearly-articulated brand values and vision, results in higher levels of end customer satisfaction and retention. It means that people become more ‘sticky’ with brands that adopt it. It empowers both internal and external stakeholder groups to be involved in the development of the brand, to be listened to throughout. It allows a shift from boardroom-focused decision making to a more humble, market-driven mindset.
In an operating environment with tight margins and where failure is rife surely it’s got to be time to make the science of research more accessible and agile than it’s been in the past? If we want to boost our economies and drive efficiency into innovation then now is the time to act. If product innovation is our Everest, then it’s time we innovated ways to boost our success rates.