New product launches fail because they aren’t given the time to grow

If you read the recent article from Ehrenberg-Bass revealing the extent of new product launches that fail, you were probably shocked by the stark statistics, but perhaps not that surprised

I have spent a career launching new products in the soft drink category. In fact, I met Byron Sharp at the UK launch of How Brands Grow whilst working at Britvic, having just completed a study into the success rate of soft drink new product launches.

The findings very much concur with this study. I looked at 10 years’ worth of soft drink data and identified what made new product launches work. The findings were both sobering and, in some cases, surprising.

Looking at the success of the launch year revealed the majority of the top 20 launches were in fact brand extensions, with Coke Zero topping the list. They all had the benefit of leveraging the mental and physical availability of the parent brand and the considerable resources of the Coke system. In fact, Coke managed to establish 95% distribution with Coke Zero within just eight weeks from launch. At the time I had never seen anything like that.

But what happened the following year? Coke Zero sales were down. Some of that was thanks to my colleagues on Pepsi Max executing a fabulous response to the launch, but it was more fundamental than that. If I look at the entire top 20 list, which are the top 1% of all new product launches, 50% of the list declined in year two.The road to innovation is paved with abandoned products – don’t let yours be one of them

So why did this happen? There are a couple of reasons that explain it.

Firstly, any readers of Clayton Christensen’s The Innovator’s Dilemma will be familiar with the challenge that large corporate organisations face with innovation. In the short term it is always more attractive to back the established brand than the relatively small brand. I witnessed this time and time again. The ‘biggest new product launch ever’ would be quickly replaced by a ‘return to the core’, because it didn’t make financial sense to back a much smaller product.

Secondly, retailers compete with each other for new product launches. In the annual agreements between supplier and retailers, known as joint business plans, there is usually a commitment to launch a set number of new products each year. However, once the launch has happened, everyone moves on to the next one. After all, it’s not ‘news’ anymore, is it?

Can anyone remember Pepsi Raw? It was a wonderful ‘natural born cola’ and, based on the research, should be dominating the world of soft drinks by now. I had the rather less glamorous task of removing it from the market. After a half decent year one, it lost distribution and brand investment was cut significantly. I still remember a colleague saying: “One week of Pepsi promotion in Tesco could beat a year of Raw sales.”

So what about pure new brand launches?

Well, going back to my top 20 list, the largest by far was Minute Maid. How many of you woke up this morning with a glass of Minute Maid? That didn’t last long either. In fact, a year after its launch in 2005 it was being significantly de-listed across the UK.

Minute Maid may not have been on your breakfast table, but their famous carafe bottle may have been. That’s because Coke re-launched it under the Innocent brand a few years later, which leveraged the mental availability of a much better know British brand.

Perhaps the question to ask is not what your new product innovation will be for next year, but how you might innovate your organisational design and re-set the timelines for how you measure success.

I looked at the data again, but this time reset the parameters to see which new products were most successful over a five-year period. This is where things get interesting.

Very few of the year one successes remained on the list after five years, Coke Zero being the notable exception after enormous investment. So which brands did appear? The largest were Innocent, Fever-Tree, Monster and J20, none of which made the year one list.

This is where there is some nuance to the assumption that brands should maximise physical and mental availability from day one. In each example, the brands focused on a sub-channel first. Innocent focused on cafés and Monster on petrol stations, where they over-invested. After all, how many of us have the financial resources to go mass market from day one?

If you look at the sales and distribution of these brands, it wasn’t until around year seven that they reached the kind of scale that might resemble ‘over-night success’. That brings us back to our friend Clayton and a very important lesson about innovation. In those examples, what makes them stand out is that they were managed separately to the main organisation. Innocent remains an independent operation even under Coca-Cola’s ownership, Monster was launched from a shed by a small team of renegades, Fever-Tree remains solely focused on mixers, and J20 was for a time exclusive to the on-trade team at Britvic.

Perhaps the question to ask is not what your new product innovation will be for next year, but how you might innovate your organisational design and re-set the timelines for how you measure success. If we did that, we could cut down on the massive waste and distraction of failed new product launches.

Although I will admit, it may not make for such an interesting ‘product of the year’ award.

Perhaps we should launch a ‘product of the decade’ instead.