A new analysis from Nielsen, a leading global provider of information and insights into what consumers watch and buy, shows that only 0.2 percent of 14,500 fast-moving consumer goods (FMCG) products launched in 2011 are considered to be breakthrough innovations.
“India may be viewed as a hub for innovations, but success does not come easy,” said Ranjeet Laungani, vice president, Innovation Practice, Nielsen India. “While India’s FMCG innovation success rate mirrors global averages, India is a unique market. With a retailer landscape of 8.4 million traditional trade outlets, distribution is just one of the many challenges that companies face when trying to meet the needs of more than one billion consumers.”
Nielsen highlights five things that set breakthrough winners apart in India:
1. Price Higher Than the Category Average
Breakthrough innovations were priced 1.7 times higher than the average category price. Innovations focused on premium offerings are meeting the needs of many consumers who are eager to upgrade their shopping baskets.
2. Leverage the Power of Modern Trade
Breakthrough innovations launched in 2011 sold in modern trade outlets saw value growth that was seven times more than all other innovations. While modern trade represents only 6 percent of the retail landscape, it tends to attract a more affluent demographic and a more experimental shopper profile.
3. Maximize the Metro Opportunity
Breakthrough innovations distributed through big cities grew sales seven times faster and sold three times as much as all other innovations. Money spent in metropolitan areas account for three out of every 10 Rupees spent on fast-moving consumer goods in India, and breakthrough innovations maximized reach and velocity in these top cities.
4. Focus on the North Too
While companies tend to prefer launching their innovations in the west and the south regions of India, they also banked heavily on success in the north region, and breakthrough innovations there delivered value growth that was four times higher than all other innovations in this region.
5. Invest Well Into the Second Year
Breakthrough innovations that focused on building demand and supporting the product in the store in months six through 18 delivered cumulative sales growth of 41 percent, compared with 11 percent for all other innovations. Breakthrough innovations were actively supported well into the second year.
Is India Poised for Innovation Success?
Nielsen’s information shows that adequately investing in the end-to-end innovation process and a strong post-launch follow through can be the difference between success and failure. A Nielsen survey of 90 innovation industry professionals from across sectors in India found that one in three (32%) Indian companies spend less than 5 percent of their revenue on research and development. One in five will launch more than 25 percent of the concepts they generate, and 53 percent said that conflict between short-term priorities and long-term thinking is the biggest innovation barrier. What’s more, only one in 20 said they take feedback from retailers and partners while developing innovations, and almost half (46%) of those surveyed in the fast-moving consumer goods sector said they deem a launch a success or failure within 12 months of launch.
“Successful innovation is not formulaic, but there are patterns and behaviours that winners share,” said Laungani, “Breakthrough innovations cut through the clutter because they address an unmet consumer need with a distinctive market-ready offering.”
“India is capable of scripting many more breakthrough innovation success stories, continued Laungani. “To shift the innovation odds in its favour, companies in India should listen more acutely to partners and retailers, embrace more risk in the early stages of the innovation funnel, leverage the power of modern trade as an experimental laboratory for innovation, launch fewer innovations that are bigger and bolder and support innovations well into the second year.”
Nielsen Holdings N.V. (NYSE: NLSN) is a global information and measurement company with leading market positions in marketing and consumer information, television and other media measurement, online intelligence and mobile measurement. Nielsen has a presence in approximately 100 countries, with headquarters in New York, USA, and Diemen, the Netherlands. For more information, visit www.nielsen.com.