Innovation is at the core of a multibillion-dollar battle currently being waged for consumers’ hearts and minds. In fact, over the last five years, $18 billion in market share has shifted from the 25 biggest consumer brands to smaller brands offering authentic experiences and more exciting alternatives to long-languishing categories like fast-food and personal care items, according to CircleUp.
It has never been easier for startups and new product concepts distributed through many unique vehicles or mediums to find a consumer base ready to wear, taste or try new ideas and products. This is resulting in a big hit to market share and revenues for the largest CPG and fashion players.
HEY, BIG CORPORATIONS … WHAT’S THE PROBLEM?
The challenge is that successfully innovating is an elusive target. For years, 50% to 60% of new product introductions have failed, leading to staggering costs for the brands that launched them. Plus, there seems to be no real advantage from or correlation between multimillion-dollar R&D budgets and significant spend and new product success. Goliath companies like Procter & Gamble and others have long realized that a gap exists between the innovation present in startups or “lab” environments to what is produced in large corporate R&D departments.
Although companies like Shinola, MeUndies and Blue Apron each have radically different business models and channels, they have all found a way to tap into unmet needs through unique channels, distribution models and killer offerings.
Enter Kurt Salmon’s approach to innovation: getting close to consumers, recognizing trends and quickly responding to their specific needs.
TECHNOLOGY IS FINALLY HERE TO HELP
For years, product lifecycle management (PLM), product data management (PDM) and even product portfolio management (PPM) have attempted to correlate technology implementations and advancements with improving innovation and product success. They never quite achieved the desired results, but, thankfully, things are changing.
Today, technology and predictive analytics are a tremendous help in picking tomorrow’s winning concepts and ideas. The ability to classify consumers by recognizing trends and their fashion preferences and shopping habits helps brands predict future success. This feedback and analysis can help improve pricing effectiveness and cull losing products early. Plus, these predictive tools can help companies understand which new categories represent the best opportunities for additional products or line extensions. Another huge benefit: The technology investment is minimal and leverages many of the tools and data streams already owned by most corporations.
Kurt Salmon is partnering with First Insight to help companies innovate for tomorrow. Defining the appropriate parameters, the solution gathers and analyzes tens of thousands of consumer insights within 48 to 72 hours and weights the opinions of consumers who have selected winners in the past to help predict future successes. The result includes a list of products, ranked from potential winners to likely losers, and provides specific feedback on each design or product attribute, identifying opportunities for improvement.
Using this tool, one of the nation’s largest specialty retailers increased its rate of picking new product winners from 25% to 70%. Other benefits include better forecasting, minimized testing and the ability to price products more effectively, which reduces markdowns. The tool can also help rationalize an existing product portfolio, reducing low performers by 20% and then reinvesting those inventory dollars back into the top-performing 80% of items. One company’s results: a 10% increase in sales and an 11% increase in overall product margins.
GETTING THE RIGHT PRODUCT, FASTER
In today’s retail environment, consumers change their minds constantly and expect retailers to keep up. Once consumers have voiced their preferences through technology such as First Insight, it’s important to act quickly to stand out from the competition and to capitalize on the right product. Streamlined processes and reduced calendars focused specifically on bringing new products to customers faster allow retailers to incorporate the latest market intelligence into their designs. Speed should no longer be viewed as an ad hoc activity to respond to one-off product opportunities, but it should rather be a formalized approach built into the seasonal process.
Kurt Salmon recently worked with a $1 billion footwear wholesaler to identify $8 million to $10 million in incremental sales by combining consumer feedback with speed. The company was able to produce products in only 30 to 75 days, adding additional units of existing product and introducing new colors, materials and trends where needed to effectively capitalize on a winner.
Discerning—and rapidly following—consumers’ changing preferences is the only way to find retail success in today rapidly changing environment.
SIDEBAR: KURT SALMON'S EXPERTISE
Kurt Salmon brings decades of retail and consumer industry expertise to improving or redesigning product innovation processes and leveraging technology to achieve true and lasting business value. We can help create a startup mentality within large corporations to improve product success and strengthen revenue streams.