So many buyers just look just at unit or dollar movement, and delist products based on those parameters. Recent SKU rationalization missteps at some of the nation’s largest grocery retailers should serve notice about the folly of this train of thought. The key to any new product is incrementality – how much incremental sales and profit will it generate for the category. Research has shown that new products that offer new to the world packaging, flavor, or preparation innovation tend to drive the most category growth. As an example, the frozen pizza category was considered a flat, commoditized category until rising crust pizzas were introduced in the 1990’s. This revolutionary product innovation, significantly closed the quality gap between frozen, store bought pizzas and delivery pizza. Furthermore, Bertolli’s also did a wonderful job of delivering a premium quality, frozen Italian entrée that stole usage occasions away from Italian restaurants. Delist the redundant flavors, crust/bread types, and package forms despite the fact that they may have higher sales volume than more unique, niche items.
What are some other key measures to consider?
It is important to review a manufacturer’s past track record on new products. Has the manufacturer consistently brought new and exciting products to the category, or have they been merely imitations of other competitive items? How effective have their consumer and trade marketing programs been? Have they followed through on account specific programs? Do they closely monitor the progress of their new items and provide additional support if the product gets off to a slow start? It shouldn’t be about just the slotting dollars, but look at the total investment and resulting incremental sales and profits that the manufacturer provides for your category.
“How to Spot Blue Chip New Products?” series…
- Part 1 – What do best in class manufacturers do to develop winning new products?
- Part 2 – What should I be looking for in a new product?
- Part 3 – What should I delist to make room for new products?
- Part 4 – How can I get manufacturers to bring innovation to my Private Label business?