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WHY YOUR CONSUMER RESEARCH DECISION MIGHT BE COSTING YOU REVENUE

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When it comes to product innovation, starting off in the wrong direction can be tragic for a brand—and expensive. So when it comes time to get started, it’s no surprise that companies looking to innovate often first turn to their consumer research departments for key insights and direction.

But with sluggish sales growth across the consumer goods landscape, brands know that they have to innovate better—and make every dollar count. And as more C-level executives scrutinize their consumer research investments—knowing that less than 1% of new products deliver $50 million in revenue in their first year—they’re asking some key questions about what they should expect to get back in return. The bottom line in all of those questions is simple: What is the impact of consumer research on innovation?

To find out, Nielsen recently tested the effectiveness of evolutionary optimization, a common method for evaluating new product ideas. For the studies, which sought to understand the method’s impact on revenue, Nielsen put 20 randomly selected new product initiatives to the test. The results found that, on average, evolutionary optimization identified concepts that yielded 38% more in forecasted revenue than concepts selected using other methods. That percentage represented $13 million more for the brand.

In other words, brands that do not use evolutionary algorithms to optimize their concepts sacrifice roughly one-third of their potential revenue.