The appeal of “newism” is on the rise around the globe, and brands are eager to engage with consumers who are seeking the latest products and experiences. Malaysians are no different, but manufacturers are largely missing the mark with their product launches.
In aggregate last year, just under 10% of the new products that were launched resulted from innovation. Unfortunately for the brands that launched them, these 769 new products accounted for just 0.5% of sales, highlighting a notable disparity between product innovation and meaningful sales results.
While the aggregate results were lackluster, there were some bright spots. A few new products in the shampoo category, for example, enjoyed up to 1.8% share of sales just three months after launch. Comparatively, innovations in snack foods failed to deliver on their initial promise, as each new product captured an average share of only 0.01%. And given the aggregate results of all of the new product innovations, there were far more launches that didn’t deliver than those that did.
So the question is, what can FMCG manufacturers do to ensure that their new concepts enjoy greater success in the market?
Provide Ample marketing support
Consumers need to know about new products to be successful. This might sound obvious, but a Nielsen BASES review of 600 product launches across multiple markets and categories found that one-third failed because of insufficient marketing support.
Distribution and on-shelf visibility are also key. In Malaysia, it’s critical that new innovations be widely available and visible. Distribution needs to be very strong in the first quarter of launch. Importantly, the distribution rates for impactful innovations are 3x higher than those that are less impactful. Therefore, brands should first identify the right stores in the right channels, and ensure that their products are on those store shelves.
As important as distribution is however, it alone cannot guarantee a product’s success. Brands also need to invest in media to raise awareness and keep their products fresh in consumers’ minds. So in that regard, marketers should be prepared to provide ample support in year one so products have a chance to compete and grow in the market.
develop products with broad appeal
Introducing new products does not guarantee incremental sales. This is particularly true for products that don’t deliver on a broad consumer need. Globally, only 5% of concepts that lack broad appeal will deliver above-average incremental sales to the brand or category. Conversely, products with universal appeal are 3x more likely to deliver high brand and/or category incrementality.
So how can brands identify a product’s worthiness to maximise the opportunity in-market? Firstly, brands should perform quantitative testing that leverages predictive analysis in order to identify the potential of new concepts. They can then complement quantitative testing with focus groups interviews and analyses of past launches to further assess the probability of success before launch.
Once a team knows there is demand for a product, they must identify the target market for the product. From there, they must clearly define how the product addresses the needs of the targeted consumers.
The success of kurma (date) flavoured milk is a great example in the Malaysian market, which was introduced a number of years ago to cater to Malay consumers during the fasting month of Ramadan. Today, more than 10 brands have kurma liquid milk in their portfolios, and sales of this flavour are growing at +55% year-on-year. Sales even once surpassed strawberry liquid milk as the third biggest flavor of the month.
The price needs to be right
Malaysians are price-sensitive shoppers. Our recent Global Loyalty Survey showed that nearly half of Malaysians (49%) are always swayed to try a new brand or product if it demonstrates value for money, while 47% will switch because of price reductions or promotions.
A majority (69%) of new launches in 2019 were priced at least 20% above category averages. These new premium products were introduced across all super categories, particularly powdered milk and snacks/confectionaries, where they constituted more than 80% of all new product launches.
Premium milk powders, which promote higher nutritional value were able to grow their sales beyond their first quarter in the market despite their higher price point as they were targeted at increasingly health conscious Malaysians. More expensive snack products, on the other hand, did not do as successfully.
This demonstrates that premium products, when appropriately targeted, represent a significant opportunity in Malaysia. According to our 2019 global premiumization study, Malaysians are willing to pay higher-than-average prices for products that demonstrate superior quality and safety standards, those that provide superior function and performance, as well as those that are organic or contain all-natural ingredients.
Ultimately, product experience is key to long-term success. If the experience doesn’t justify the value, consumers won’t likely make repeat purchases. In fact, only 5% of new premium-priced innovations remained impactful (contributed to more than 0.5% share of the category) six months after being launched.
Therefore, manufacturers should determine a category’s price sensitivity beforehand and identify the closest potential competitor’s pricing, sensitivity and promotional frequency. Through the effective use of analytics, brands can continuously build and test new concepts in order to successfully cater to the needs of the new-seeking Malaysian consumer.