Executive Briefings

With All the Research, Innovation at Hand, CPG Companies Largely Clueless Which Products Will Succeed

Consumer packaged goods companies have a big problem: They have almost no idea which of their new products will end up being popular with consumers. Despite big data, despite a decade of heavy investment in innovation, despite chief innovation officers and efficient R&D, failure rates for new products have hovered at 60 percent for years. Two-thirds of new product concepts don't even launch.

One reason is that the retail environment has become far more complex. E-commerce continues to upend long-established business models, and consumers are shopping less at supermarkets and hypermarkets and more in convenience stores, at discounters and online.

What’s more, although CPG companies are extremely good at the early stages of innovation—identifying promising areas of growth and creating new product ideas in those areas—and at the later stages of testing concepts and commercializing them, there’s a conspicuous hole in the middle of the process. They don’t have a clear grasp of which combinations of features, packaging, price and even labeling will persuade consumers to make a purchase. They’re like triathletes who are world-class at swimming and running, but terrible at cycling.

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One reason is that the retail environment has become far more complex. E-commerce continues to upend long-established business models, and consumers are shopping less at supermarkets and hypermarkets and more in convenience stores, at discounters and online.

What’s more, although CPG companies are extremely good at the early stages of innovation—identifying promising areas of growth and creating new product ideas in those areas—and at the later stages of testing concepts and commercializing them, there’s a conspicuous hole in the middle of the process. They don’t have a clear grasp of which combinations of features, packaging, price and even labeling will persuade consumers to make a purchase. They’re like triathletes who are world-class at swimming and running, but terrible at cycling.

Read Full Article