Ready, Set, Launch: How to Simulate the Sales of Your New Product
While new products can be vital for profitable growth, anyone in the Fast-Moving Consumer Goods (FMCG) industry knows that a lot goes into planning a new product and its subsequent launch.
Launching for success
Whether it is a completely new product or an old one that has been modified slightly (with changes such as flavor, color, sizing, or even packaging), novelty products are an integral part of any consumer goods company’s offering.
Over the last three years, it has been made extraordinarily clear how consumer behavior is changing rapidly. Thus, another major reason for the creation of novelty products is the need to match consumers' ever-changing needs. Whichever the reason may be, they are a critical part of any product portfolio, and the volume might be large.
Catalina discovered that a shocking 80% of new products in the FMCG industry fail. On top of the high rate of failure, it was discovered in their study that only 0.7% of consumers are responsible for 80% of the success of new products. That means only 1 in 143 consumers drive the success or failure of a new product. On top of that, their study revealed that only 11% of new product consumers remained engaged after 52 weeks (or 12 months) and 76% of brand loyal consumers will not even try their brand’s new products.
Trade promotions are a central element of introducing new products, especially considering that starting and keeping customer engagement high is vital to their success. Getting the launch of a novelty product right is essential for it's long-term success. When planning these promotions being able to forecast the novelty product’s potential and long-term success is particularly important. So, how well will the product actually sell?
History can unlock the future
Not only is managing the launch of novelty products tricky and time-consuming but so is managing their promotions. It is also extremely difficult without the proper knowledge to simulate or predict a novelty product's future since they lack any form of sales history. This is where a reference product enters the arena.
A reference product is a product that has been previously launched and which historical data is used for simulating the sales of a novelty product. By using a reference product, it is possible to realistically estimate the potential lift of a novelty product and analyze it thoroughly.
Now you know how, do it better
Below you will find six insider tips on how to use a reference product more efficiently and effectively to simulate the sales of new products:
It’s all about attributes
- Look for old products that match the attributes of the novelty product closely, and search for products that the consumer will view as similar. (Characteristics such as brand, size, color, flavor, and use).
One of these things is a lot like the other
- Look at similarities in other features such as pricing, innovation, and seasonality for example.
Newer really is better
- Consumer behavior changes, it's a fact. So for better accuracy select a more recently launched product when possible.
Trust your gut (for expert use only)
- If there is absolutely nothing that fits into the categories above, then find the most similar product and use your gut instinct to give a manual estimate and how much more or less you consider the new novelty product will outperform the selected one.
The more the merrier
- You can use multiple reference products to get the best average and the novelty sales estimates will be based on features from all of them using the average.
Wallet size does matter
- Don't forget to take into consideration the marketing investment related to the launch of a reference product. If the investment is not aligned, you might want to trust your instinct here as well and fine-tune the estimation manually.
Taking advantage of these tips, you can simulate the potential of a novelty product better than ever before.
Get started with a ground-breaking solution
In the latest release of A² Trade Promotion, we have added the possibility to use a reference product to simulate the potential lift of a novelty product in different phases of a product launch. Once the reference products have been selected, you will have the possibility to see the impact of different actions on sales forecasts. For example, how much more will the product sell if you adjust the pricing, timing, or duration of the campaign or choose a different campaign space. This advanced model takes into account both the launch success of the reference product and also the current demand reflecting consumer behavior. The user’s insight in combination with AI and analytics creates a ground-breaking data simulation.
Our Director of Revenue Growth Management Concepts, Elina Rajanen, notes that “One of the best things about this release is that it combines not only the hard data, but also allows the user to have input about the novelty product life cycle, launch date, and product details. Combined with hard data this allows for a thorough analysis of the potential of the novelty product.”
One of the best things about this release is that it combines not only the hard data, but also allows the user to have input about the novelty product life cycle, launch date, and product details. Combined with hard data this allows for a thorough analysis of the potential of the novelty product.
This combination of the best of both user knowledge and hard data strengthens the ability to simulate new products accurately and discover if they are going to pay off. To learn more about how A² Trade Promotion can help you better analyze and simulate trade promotions visit here.