Louise Hawley, Account Director and Russia Region Manager, Nielsen BASES
Russia is a huge economic powerhouse with significant room to grow. Its growing middle class, high education level and developed technology infrastructure make it ripe for opportunity. But innovation myths about Russia are impacting full growth realization. The way to achieve new product success in Russia is to break down the myths and shed light on the facts:
Myth #1: Russia is not innovative.
Innovation in Russia is growing rapidly. In fact, in terms of new product investment, Russia is ranked in the top 10 countries for innovation testing. On average, 20 percent of the products in a given category are new launches, with over 100,000 new UPCs coded in 2010. However, this plethora of choice can cause confusion, with consumers, retailers and brand managers alike, and can in itself even stunt innovation, and result in a lack of focus on what consumers actually want.
Myth #2: New product launches = guaranteed success in Russia.
As the largest country in the world, covering 17.1 million square kilometers and spanning eight time zones, one might think that there are surely enough people to make any new product launch successful. The truth is, less than one in five new launches succeed in market. And even the most successful will only achieve volume share in the 0.6 to 0.7% range. In fact, the success hurdle in Russia is higher than other markets due to a highly fragmented retail trade environment and intense competitive pressure.
Myth #3: Russia is different from other countries.
While it may be true that Russia is different from other countries culturally, the ingredients behind innovation success are common across markets. Looking at the characteristics that explain new product survival across markets we see the same pattern: the need for strong product delivery, adequate levels of marketing support, underlying appeal of the concept idea and purchasing dynamics. The key differences are in terms of what relevant, appealing and differentiated innovation means to Russian consumers, and also in terms of making new products available to them, given the challenges of the retail environment which is critical for sales.
Myth #4: Speed is of the essence.
It’s not necessarily the first mover that wins, and if you can truly own a category you can make yourself untouchable. However, it’s not guaranteed and over time, the offering that best meets consumer needs will come out on top. Understanding consumer needs, setting the entry barrier high and providing a unique solution is a sure way to guarantee success. By quickly building strong awareness and accessibility and taking the time to educate consumers, long-term investments will be sustained.
Myth #5: International brands = success.
While multinationals can take advantage of being global, true success will be found by thinking global, but acting local. The Russian population is diverse and requires precision targeting. Know your consumer and their unique needs, and make sure that your offering speaks to them. Leverage perceptions of brands with Russian heritage, as well as international prestige. Draw on the somewhat contradictory demands of being traditional as well as forward thinking. Recognize the differences for Russian consumers and embrace what makes their demands difference from those in other markets.
Myth #6: Price is king.
Don’t be intimidated by charging a premium price if the benefit is justified. There are many ways to make your price accessible to consumers and by doing so, justify even a premium price. Consider strategies such as changing your competitive set, offering size variations (up-size to take advantage of a lower cost per use, or down-size for a lower cost outlay), and offering new benefits over and above current offerings and consider appealing to a different target audience as well as explicitly communicating price discounts.
Myth #7: You only need to do one thing right.
Successful innovation is not just about coming up with good ideas. It requires a deep understanding of local market knowledge, consumer understanding and category insights, together with organizational processes that support and encourage innovation. If you don’t have this, the best ideas will not translate to the best launches.
The opportunity to grow in Russia is huge and growing. Keep in mind a few important take-aways:
For those willing to take the challenge, the rewards are enormous. Don’t let your competitors beat you to it!