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Joe
Wilke
President
ACNielsen BASES
Nick
Sorvillo
Senior Vice President
ACNielsen Homescan U.S.
Big
Stakes
In the marketing world, there are few jobs as daunting as
that of launching a new product. It’s risky business
and the stakes are high. About 80% of new products will fail
within the first three years of introduction. Hundreds of
thousands of dollars are invested yearly to develop, design
and market new products in a saturated environment with short
purchase cycles and selective consumers. Why then are so many
new products introduced?
The answer is simple. While new product development is costly,
it continues to be a necessity for marketers. For manufacturers,
new product success grows sales and share, it enhances margin
structure and it also defends strategic positioning. Likewise
for retailers, new products help to grow overall category
sales and profits. They improve customer satisfaction, and
importantly, they broaden the share of customer spending.
Most Likely Candidates
The success of a new product is often determined early in
its introduction. Sub-optimal marketing can kill a new product
idea before it has a chance to thrive. It is therefore critically
important to gain a pulse on how a new product is faring in
the marketplace early in the process. There are two principal
consumer groups in the marketplace: those who are eager to
try a product with unknowns (Early Adopters) and those who
prefer to wait until others have tried the product first (Later
Adopters).
The Early Adopters provide significant insights into overall
consumer acceptance and are the most likely candidates to
determine a new product’s success. Early Adopters tend
to communicate their likes and dislikes with others and they
adopt new products quickly. Feedback from Early Adopters helps
marketers address business opportunities and fine-tune strategies
early in the process in order to achieve maximum success in
the marketplace. New products have the opportunity to be new
with the consumer only once, which is why an early understanding
of consumer adoption is critical in driving business optimisation.
Given the leadership that Early Adopters represent, they often
act as a barometer and are critical to a brand’s long-term
viability and overall success.
The Premise
ACNielsen and ACNielsen BASES, the largest supplier of new
product forecasting in the world, developed new research to
identify potential Early Adopters of a new product and what
differences exist between Early Adopters and Later Adopters
with regard to elements such as risk, change and influence.
The research further evaluated whether these differences are
revealed in their purchase behaviour and the attitudes they
exhibited.
Two key data sets were employed to validate the premise. First,
two years of purchase data were evaluated for new product
introductions across five different product categories: ready-to-eat
cereal, cookies, low-price shampoo, toothpaste and premium
shampoo. Second, 10 attitudinal survey statements were fielded
among the entire Homescan consumer panel. Early Adopters,
identified from Homescan’s new product purchase database,
were linked with the attitudinal questions. The Early versus
Late Adopter groups were compared to the actual new product
purchasing records to assess the quality of prediction.
What Makes Early Adopters Tick?
Who are Early Adopters? What makes them different? What compels
them to purchase new products? Can we identify them? ACNielsen’s
new research showed that Early Adopters exhibited behaviours
that put them in a desirable class of ‘optimal’
consumers for both manufacturers and retailers. In other words,
these are the consumers who are critical to new product success.
The behaviour revealed from the study is significant. Of the
attitudinal questions fielded, the strongest response across
all product categories came from the statement, “I usually
try new products before other people do”. This highlights
the Early Adopters’ tendency to be more likely to experiment.
A strong split was
also noted in response to the statement, “I often try
new brands because I like the variety and get bored with the
same old thing”. Early Adopters seem to be energised
by discovering new product ideas, while Late Adopters tend
to be more comfortable with the familiar, sticking with the
brands they usually buy. Note to marketers: Keep it fresh!
Other notable behaviours include the fact that Early Adopters
tend to look for what is new and believe they usually find
out about new products before other family members. They also
like to tell friends and family about the new products they
have tried. They see themselves as ‘opinion setters’.
Early Adopters also want incentives to try new products.
Early Adopters are more likely to be heavy category buyers.
They purchase significantly more of the category than non-adopters
and tend to get ‘hooked’ on the category early
on. Of the five categories studied, Early Adopters purchased
almost double the amount of Later-Adopters. Interestingly,
demographics are not a factor in determining the difference
between Early and Later Adopters. Little difference among
geography, gender, race, age of household head or household
size was noted [See Chart 1 above].
So Who Are They?
Understanding what makes this key consumer segment tick is
only one part of the battle. Even more important is finding
out who they are. In an attempt to identify Early Adopters,
ACNielsen designed a model to identify Early Adopter groups,
eliminate non-adopters and evaluate the correctness of the
predictions.
Each member of the 61,500-household U.S. Homescan panel was
assigned into one of two groups: those who tried the product
during the time period (the Early Adopters) and those who
did not (Later Adopters). In addition, each household was
given a score or probability of belonging to the Early Adopter
group. The model deployed attitudinal and previous purchase
dynamics to determine the household’s level of adoption
of a new product in each category.
For the toothpaste category, the early adoption model was
driven by the following key variables:
- Attitudinal questions
- Category usage prior to product introduction
- Propensity to purchase brand
- Propensity to purchase form (gel, paste, liquid gel, etc)
- Propensity to purchase particular enhancement (whitening,
mouthwash, etc).
Findings from the
study were overwhelmingly positive. The model predicted correctly
87% of the households that had adopted new products over a
year’s time span for toothpaste. The model also accurately
identified 65% of the non-trier group. The overall classification
for the model was 70% correct. Similar findings among all
five category models provided similar predictive capabilities
[See Chart 2].
Implications
Early research shows significant promise. Attitudes linked
with previous purchase behaviour represent breakthrough opportunities
to better understand the dynamics of a potential new brand
franchise prior to a national and even test-market launch.
The use of attitudinal question sequences significantly enhances
a marketer’s prediction of who is likely to purchase
their brands.
In addition to identifying key target groups, the ACNielsen
| Homescan consumer panel can help marketers track trial and
repeat purchases among Early Adopters and help pinpoint where
to make changes in order to optimise a new product launch.
Given that many retailers give new products a six-month evaluation
window for success, it is critical for a brand to make an
impact quickly. For a slow starter, it is difficult to recover.
Helping to identify the consumers willing to take a chance
is critical for a new product if it is to be one of the 20%
that survives in today’s retail environment.
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