Innovate or die: what the FMCG sector tells us

Innovate or die: what the FMCG sector tells us

by HENRI-JACQUES LETELLIER

“We face a number of dangers, including a tendency to confuse novelty with innovation, and failure to perceive added value.”

 

Henri-Jacques Letellier, Analytics & Insights Director – Procter & Gamble, Co-founder of Insights Hub and Team Leader for Data, Insights and Foresights at UDA. Forged his career at Procter & Gamble, starting out in Product Supply, then alternating roles in Consumer and Market Insights and Sales and Marketing for specific countries and categories as well as on the European and Global levels. Other roles include Global Integrated Business Optimization and Marketing Mix Modeling.

 

INNOVATE OR DIE: WHAT THE FMCG SECTOR TELLS US

 

After 32 years at Procter & Gamble, I could not be more convinced of the need to innovate. Innovation is essential – whether it’s brand innovation (an innovative product can have a big societal impact), business innovation, organisational innovation, in-store innovation — or innovation in the way consumer research is conducted.

Innovation is the lifeblood of competitiveness, constantly reminding us to be attentive to the needs and expectations of our consumers, our distributors, our employees and our influencers if we want to remain competitive.

A look at product innovations over the past five years shows us that since 2013, P&G France has had five innovations in the Nielsen Top 20: Ariel 3 in1 Pods, Dash 2 in1 Pearls, Pampers Baby Dry Pants, Ariel Simply and Oral B Pro Expert.  These disruptive innovations have contributed to the growth of their brand as well as to the growth of the market.

Moreover, we can see that French consumers have a particular fondness for innovation: 23%
of French shoppers today systematically look for innovations on the shelf (a 10% increase over 2014, greater than the increases seen for our European neighbours). Nevertheless, France is a bit of a special case in terms of how quickly certain innovations – the “true” innovations – are adopted: the curve being at first slower than in other European countries, then accelerating and peaking extremely quickly.  The current trend for naturalness, health and transparency is an example of this.  In this respect, P&G’s role – and the role of any leader who wants to remain one – is to anticipate trends in order to maintain the same lead on all segments.

We face a number of dangers, including:

  • A tendency to confuse innovation and novelty — some talk about genuine innovations and false innovations.
  • Failure to perceive new product benefits or emotional benefits.

Introducing novelty freshens up our communication and keeps our advertising from becoming stale (and therefore ineffective).  This novelty could be a line extension with a new fragrance or a new formula.  It generally brings additional satisfaction to the consumer who chooses / uses the product.

Innovation, on the other hand, changes the way the consumer uses the product.  A new product format (an example being the pre-measured capsule format of Ariel Pods) addresses consumers’ need for convenience.

… Swiffer proposed a new way of doing housework …Then came Swiffer WetJet, which spared the consumer from having to deal with disgusting mops … The introduction of diaper pants was an innovation that liberated parents … Then came moisture locking technology (for a thinner diaper offering the functional benefit of greater freedom of movement for the child, as well as the emotional benefit of reducing the number of trucks needed to transport the products).

In the words of Jack Henry, founder of P&G’s Market Research department: “Marketing is simple, it’s understanding what the consumer wants and giving it to him or her”.  But, as more and more innovations are introduced to address consumers’ needs, subsequent innovations will probably be increasingly difficult to add and will also be increasingly marginal … Technology considerably expands the scope of potential innovations, but the consumer knows little about them and thus cannot really verbalise them.  So whereas consumers knowhat they want, they do not know the extent of the possibilities and are therefore not able to express concretely what they would like to have.   It is therefore up to us to anticipate, to move forward on our own, to stimulate the consumer with proposals / prototypes and measure how much excitement they generate.

The way a company manages innovation is also an important factor in its success or lack of success.  When we are working on an innovation, we must maximise our chances of success: We assign the best managers to the project, and they seek to develop their project’s potential by making sure the innovation has maximum consumer appeal and a substantial marketing budget … while forgetting that human and financial resources are finite.  When you’re not starting from scratch, you end up borrowing human and financial resources from existing business.  We do not look closely enough at an innovation’s incrementality, but instead focus on its absolute magnitude.  We do not adequately consider its incremental penetration (except in the case of a deliberately polarising proposition), so we end up creating communicating vessels and the result is cannibalisation.

Of 30,000 new products launched between 2011 and 2014, 17% did not survive the first year and 37% did not make it past the second year (Byron Sharp – Ehrenberg- Bass Institute).  Either an innovation fails to deliver product benefits and emotional benefits at a price the consumer is willing to pay, or management is somewhat blind and (unconsciously?) ignores the signs suggesting failure.  This no doubt has to do with personal projection.  Substantial investments have been made, and there is a need to see a return on these investments.  It is therefore understandable that after years of work it is difficult to go to one’s top management and tell them it might be better to give up.  Convincing everyone that you’ll get there in the end is a much better look!  Because it is human nature to want to project oneself in a more positive future.

Lastly, it is interesting to note that product innovation remains more gratifying than excellent in-store execution – despite the fact that more resources are required to launch a new product than to completely overhaul a shelf. Indeed, “restaging” a product generally results in a smaller increase in incremental sales (5%) than a project to improve the experience in the store / at the shelf (7%).

Innovation makes it possible to maintain superiority – in terms of product benefits or emotional benefits — and consumers will reward you (or not) for staying that one step ahead.  Innovation enables a brand to withstand the test of time, which the consumer perceives as a strength, a sign that the brand can be trusted.  Not innovating means that to come back into fashion you have to wait for a cycle to pass and another to begin.  Today, we are seeing the resurgence of heritage brands whose old-fashioned formulas are considered more natural.

There is an adage that says, “If you’re not going forward, you’re going backward”.  I say, “If you’re not innovating, you’re dying”.