Innovation provided a strong underlying thread of discussion at Nielsen’s Consumer 360 event in India. Mitchell Habib, Nielsen’s operations and innovation chief, told attendees that disruptive innovation was critical to lasting business success and outlined ways it could open new markets in emerging economies. Deepak Gulati, CEO of Tata Docomo, and Banoja Acharya, Nielsen India’s VP, Client Services, shared specific examples and innovation strategies for India.

Launching New Products in India is a Long-Term Play
To succeed in India’s dynamic market, fast-moving consumer goods companies (FMCG) are investing in innovation to take advantage of the rapidly evolving retail landscape and the changing purchasing behavior of consumers.

While new consumer product launches and innovations have proliferated in India over the past decade, FMCG companies can better ensure successful launches with three-to-five year launch plans. “The truly innovative products, have a longer gestation period, need significantly higher investment and usually guarantee slower, but higher returns in the long run,” said Acharya.

Logistical Challenges
Distribution logistics in India hamper first-year sales, as availability levels to Indian consumers are between 75–200 percent lower than in fully developed markets. And, significant marketing support is required, as product launches in India generally require sustained high levels of advertising spending to reach the necessary threshold number of consumers for ROI targets.

After year one, and into years two, three, four, and beyond, however, successful new products and categories reach an inflection point when sales and volume start to rise exponentially. While it takes time to achieve inflection points, the benefits of waiting are certainly sweet—especially once new launches reach their maxima.

However, not all categories are alike. A Nielsen analysis of 100 new product launches shows that the growth curve is different across categories. New launches in the impulse food category have a shorter purchase cycle and typically generate higher interest among consumers. As such, they reach their point of maxima fastest—in as little as three–to–four months. Loyalty plays a big part in personal care products as consumers are less willing to switch brands. These products take the longest to develop—anywhere from seven to 24 months depending on the category. And household care products reach their maxima somewhere in between as these products are driven largely by benefit rather than emotion.

A Different Kind of Competitive Advantage
A unique phenomenon exists in a consumer-driven market like India where competition is not necessarily bad for new brands within the same category. “If multiple brands are introducing similar products with proper marketing support, the new category experiences a larger share-of-voice in the minds of Indian consumers,” said Acharya. “When this occurs, the category—and all the brands within it—can reach the inflection point much quicker on the product launch timeline.”

For example, as several brands entered the anti-aging category, ad spends combined to create a multiplier effect in share-of-voice, significantly boosting sales volume for the category and all the brands in it.

Serendipitous competition will not always be the case, and even when it exists, the product innovation timeline in India takes longer than in developed countries. To compete in India, FMCG companies must plan their launches and marketing budgets accordingly, availing themselves of all available tools to ensure their products—whether food/beverage, household, or personal care products—resonate for the long term.

Play to Strengths – Don’t Ignore Weaknesses
Whether launching a new product in India—or anywhere else in the world—you are only as strong as your weakest link. Based on Nielsen research and development over a five-year period of new product launches, there are 12 things that every new product must do to succeed. And while a product does not need to exceed expectations across all factors, it must do well enough on all to ensure success.

1. Offer true innovation
2. Get noticed
3. Land your message
4. Communicate with focus
5. Be relevant
6. Be better
7. Be credible
8. Limit the battles
9. Be in the right places
10. Win the value equation
11. Deliver on product promises
12. Be strong in the long run

Given the opportunity that India’s burgeoning middle class represents for both local and multinational FMCG operations, the strategic planning, marketing commitment, and patience required for new product success are surely worth the efforts and expenditures.

The recent passing of Arthur C. Nielsen, Jr. filled me, and all of us at Nielsen, with a profound sense of loss. Those of us fortunate to have known and worked with Art will remember him not only as a technology pioneer and measurement science innovator, but also as a witty and wise mentor, a generous community philanthropist and a remarkably inspiring leader.

Like many from the greatest generation, Art served bravely in World War II, returning in 1945 to propel his father’s company into a new era of innovation and consumer insight. He spent his entire career with our great organization, leading it successfully for nearly two decades. In doing so he helped to build more than just the world’s leading market research business, he helped transform the way global businesses think about media and consumer behavior.

As a man of remarkable integrity, Art placed a premium on giving back to the communities in which he lived and worked. Throughout his career, Art gave generously to numerous causes held dear, like the Chicago Food Bank. He founded the A.C. Nielsen Center for Marketing Research at his alma mater, the University of Wisconsin, and co-founded the Museum of Broadcast Communications in Chicago, where he also served as chairman emeritus. The list of community, university-based, and corporate boards on which he served is long and impressive – yet another inspiring aspect of his remarkable life.

During my last visit with Art in February, I was honored to present him with the first Nielsen stock certificate shortly after our public offering this year. His modesty, humor and sage advice that day and over the years will remain with me for many years to come.

The Nielsen name commands respect because of Art and his father’s incredible hard work, their vision and their tireless commitment to innovation and growth. Art’s passing reminds me of the great responsibility we carry as a company that bears his name: we know our actions will be part of the astonishing legacy he leaves behind.

The best way for us to honor Art is to continue to place innovation and integrity above all else as we serve our clients and our communities.

Germany consistently ranks as one of the top four leading countries to conduct innovation testing with Nielsen. Last year Nielsen coded over 100,000 new items in its German databases. But are the innovations matching what consumers actually want?

The fact remains that only few new products succeed in market. However, the notion that German consumers are not interested in innovation is simply not true. Actually, German consumers are just as interested to try new products as their British and French neighbors. “Germans like innovation, but expect value for money,” says Ben Schubert from Nielsen. “This especially applies for the premium price sector.”

With limited space on store shelves, only the very best will survive. “About one-third of new product launches manage to grow beyond year one”, adds Ben Schubert. “Here also Germany is on the same level as France and the U.K. – it is not necessarily more difficult to be successful in Germany with new products.“

A Better Way Forward
New product success must be built on a strong foundation of meeting critical consumer needs. From developing a unique value proposition and creating clear messaging to gaining credibility and delivering on the promises made, Nielsen’s 12 factors for success help to assess the chances of a successful launch. But you are only as strong as your weakest link. Even one risky factor can seriously derail the success of the launch.

Nielsen’s research shows that the likelihood of success can be improved dramatically when an innovation performs on all the 12 factors for success. The “wheel of success” provides a critical roadmap to help navigate the right course for any new product innovation and it can significantly improve the chances for success.

Based on tracking 600 product launches and testing 20,000 concepts, Nielsen outlined a 12-step process with specific recommendations on what companies should change before a new product launch in order to increase chances of success. The process identifies, measures and predicts success spanning five stages: Salience, Communication, Attraction, Point of Purchase, and Endurance.

1. Distinct Proposition
   Your product must offer true innovation; it must be something that people will actually want. What is its value? The first step is really evaluating if the product occupies a distinct niche.
2. Attention Catching
   No matter how innovative and productive the item is, it needs to garner attention in order to be sold. Companies need to be focused on interest and recognition.
3. Message Connection
   When the consumer is at the shelves deciding what to buy, the product needs to be able to market itself. Make your labeling/packaging create a kind of “mission statement” which will have the consumer clear on what the product does.
4. Clear Concise Message
   People will not want to take too long to read your product’s label; therefore, you must create and convey a message that is short, sweet, and to the point.
5. Need/Desire
   Especially with people tightening their belts in a recession, it is of the utmost importance for the product to serve a real consumer call for the product. Convenience, and ease of use are some of the more important attributes of a successful product.
6. Advantage
   Explain why your product will continue to be different. In a store where a consumer has multiple similar choices, the advantage needs to be as clear and enticing it can be.
7. Credibility
   Packaging, ads, and coupons can say virtually anything, but a consumer has to believe what they are reading and the product is worth their money. Where does your credibility come from? Do they trust your brand? Are consumers in your niche willing to trust a new brand?
8. Acceptable Downsides
   Virtually every product has its downsides. Identify them, and make sure that you are ahead of them before the consumer has to point them out to you, and make sure that the downsides don’t hinder the success of the product.
9. Findability
   The product can be the most innovative product the world has ever seen, but unless the consumer can see it, they won’t know. How visible will the product be? Who is your audience and what is the best way to put your product in their line of sight?
10. Acceptable Costs
    Similar to accepting downsides, the consumer must feel comfortable with the cost of purchasing and using your product. The cost in this sense can be anything from the actual retail price at which it is listed to the more obscure attributes like a calorie count, something you would only find out after having to look for it.
11. Product Delivery
    After the consumer is exposed to, and even believes, your ad campaign and message, the product must deliver on its promises. Companies need to take the time to make sure their product will deliver results at least as well as the ads state.
12. Product Loyalty
    Many companies can, and have, had a “one-hit-wonder” product, but in order to sustain the success of the product over a long period of time, companies need product loyalty. Even if the product delivers on its promises in the beginning, complacency will allow your competition to come back. Build loyalty to your product by continuing to stay ahead of the competition and you will find that a new household name will be very familiar to you.

The Bottom Line:
Companies need to understand that all 12 steps weigh equally on their chances at a successful launch. The age-old saying that you are only as good as your weakest link is true. Even one risky area of the launch process can seriously detract form the value of the product.

The biggest advantage of the system is gaining a more accurate estimate of the product’s chances of success so companies can set action standards, like choosing only to launch a product once it has achieved an overall probability of success higher than 65 percent.

For more insight, download the complimentary webinar: Innovation Revelation.

Lutz recalled that problems at GM increased when finance was moved to the same space as operations and began to overshadow the engineering and operational departments. In perhaps the snappiest line of the session, Gladwell floated the idea of a “bean counter island” where finance departments of every company could be kept far away from the innovation teams.

Lutz and Gladwell were in agreement more often than not, especially when it came to branding and customer value. Lutz noted that many cars in the luxury category were basically constructed of the same material as lower priced vehicles, but the true differentiator was brand value and perceived customer value. That “intangible thing” (as Gladwell called it) that separates brands tends to be the domain of the creative and Lutz agreed, noting that when you want to elicit an emotional response with the buyer, that’s where you defer to the creative types. The emotional distinction is also notable when it comes to research. Lutz relayed anecdotes of GM research, downplaying instances where they asked consumers about their preferences and favoring research that measured consumer responses against the competition. The visceral response of a consumer, especially when it came to perceived price, was incredibly valuable, and often the most accurate according to Lutz.

Updated 10/20/11: This post has been revised to provide updated data relative to sales figures.

Retailers and manufacturers are caught between shrinking margins due to rising commodity costs and price sensitive consumers. In this scenario, retailers and manufacturers need to collaborate and find creative ways to spend promotional dollars that result in true market expansion and category growth.

“Establishing a disciplined approach to pricing and promotions is key to maximizing returns during a dynamic business cycle,” commented Dennis Moore, SVP Analytics, Nielsen at Consumer 360 in Florida. “This can be enabled by manufacturers and retailers collaborating to think of creative ways to drive true growth and market expansion. This consciousness itself can reduce economic waste.”

While the worst of the recession has past, retailers and manufacturers are still operating in a challenging environment. Consumers in the U.S. remain frugal when it comes to price, and the retail landscape offering is as competitive as ever. The fact that commodity prices have spiked and are returning to record highs only increases pressure on retailers and manufacturers. Increasing commodity prices coupled with cautious consumers squeeze profits and impede growth.

In tough economic times, consumers gravitate towards value: they decrease discretionary spending, dine out less and buy more on promotion/sale. Consumer packaged goods (CPG) companies and retailers cannot afford lost sales. Smart and efficient planning on pricing and promotion is one of the best ways to achieve market expansion and growth—despite the commodity squeeze.

Pricing and Promotion Strategies and True Market Expansion
In 2010, 63 percent ($243 billion) of U.S. retail dollar sales were spent on non-promoted products at regular prices.

Promotions and sales on certain products lead consumers to merely switch stores and purchase their preferred product in a different retail outlet more than usual. While this benefits the winning retailer, it does not actually benefit the manufacturer—who would have profited from the sale in any location. On the other hand, promotions on other types of products cause consumers to “brand-switch,” or purchase a brand in a store that they usually don’t buy. This is a true win for the winning brand, but it does little for the retailer who would have made the sale no matter which brand it was.

While these types of promotional sales have their respective benefits, they don’t represent true market expansion because they are not actually satisfying new consumer demand or increasing total consumption.

In the demand framework, promotions that lead to actual market expansion for both retailers and manufacturers are the true winners. Nielsen’s research shows that promotions on products such as coffee, laundry detergent and paper towels – non-impulse-buy items that consumers (plural) can use more sparingly as budgets become stretched – are the most likely products to lead to this true market expansion.

In thinking about growth through innovation, Kelley kept it simple saying there are really two big lessons.

Become an anthropologist: While data is incredibly important, “it’s not just about the data,” Kelley said. Kelley encourages clients to observe the world continuously: try to find out where consumers get lost or fall down and then say, “Hey, can we work on that?”

Think verbs not nouns: Kelley noted that marketers often focus on the physical product they ship, but for customers, it’s not really about the nouns/products; it’s about the verbs, the experience.  Consumers want to know – how hard is it to sign up, opt out, what is the customer service like. The consumer is looking at the sweep of their experience.

Attendees at Linkontro met to discuss how to focus on innovation against a backdrop of low consumer confidence, ongoing political instability and expansive bureaucracy.

With more than 600 of Italy’s leading executives in the retail, manufacturing and media industries gathered for the event in Sardinia, off the coast of mainland Italy, speakers wasted no time in identifying points of concern that may lead to opportunity.

• Nielsen Country Manager, Roberto Pedretti, opened the event by reminding attendees that the traditional neighborhoods they had served for centuries were forever changed by the digital habits of young consumers. Pedretti painted a picture of media habits of a typical Italian 18-year-old and urged manufacturers and retailers to immerse themselves in the lives of the modern consumer. He encouraged brands to focus on delivering authentic messages and to become a natural part of the modern consumer’s day.
• During a panel session examining where new development should begin, Franco Pugliese, General Manager of Conad, one of the largest supermarket chains in Italy, said Italy sometimes appeared to lack the confidence it needed to drive change.
• Attendees heard from the panelists that Italy appeared to have lost its place in the world and that the primary commercial mission of Italy had been lost. They agreed that for Europe to recover from tough times, it was also important for Italy to win.
• Giuseppe Lavazza, Vice President of Lavazza, said Italians were good at entrepeneurship and innovation but had also gotten good at “creating obstacles” in the regulatory world. He cited labor, tax, health and safety laws as examples.

For faster change, the panel urged a move away from the red tape plaguing new and established businesses. They warned that investors would avoid Italy in favor of countries with more favorable environments for growth.

Academic Michele Boldrin, of Washington University in St. Louis, said as an Italian looking in on his home country from the United States, he saw “crazy public debt” and a labor market riddled with high costs. Boldrin said it was imperative for Italy to create comparative advantages over other countries in Western Europe. He also cited an ongoing brain drain because talented young people found it difficult to penetrate the hierarchy of businesses in Italy.

Facebook Country Manager, Luca Colombo pointed to opportunity with digitally active Italians. In a session that included Google and the Internet Advertising Bureau (IAB), attendees heard that the digital economy (in terms of ad sales) was only 2 percent of Italy’s GDP, leaving significant room for growth, particularly in the largely nascent area of online transactions.

Other sessions during the three days pointed to foreign retailers who had penetrated the Italian market in their stalwart fashion segment. Zara and The Gap are now common sights in Italian cities, a trend that came about with marketing campaigns that drove trust amongst Italian consumers, attendees heard.

On the third day of sessions, Nielsen’s European President, Christophe Cambournac, urged attendees to listen and act upon the “need states” of consumers or there was a danger they would lose them.

Linkontro was held from May 26 to 28. The event has been held for almost 30 years.

Myth #1: Russia is not innovative.
Innovation in Russia is growing rapidly. In fact, in terms of new product investment, Russia is ranked in the top 10 countries for innovation testing. On average, 20 percent of the products in a given category are new launches, with over 100,000 new UPCs coded in 2010. However, this plethora of choice can cause confusion, with consumers, retailers and brand managers alike, and can in itself even stunt innovation, and result in a lack of focus on what consumers actually want.

Myth #2: New product launches = guaranteed success in Russia.
As the largest country in the world, covering 17.1 million square kilometers and spanning eight time zones, one might think that there are surely enough people to make any new product launch successful. The truth is, less than one in five new launches succeed in market. And even the most successful will only achieve volume share in the 0.6 to 0.7% range. In fact, the success hurdle in Russia is higher than other markets due to a highly fragmented retail trade environment and intense competitive pressure.

Myth #3: Russia is different from other countries.
While it may be true that Russia is different from other countries culturally, the ingredients behind innovation success are common across markets. Looking at the characteristics that explain new product survival across markets we see the same pattern: the need for strong product delivery, adequate levels of marketing support, underlying appeal of the concept idea and purchasing dynamics. The key differences are in terms of what relevant, appealing and differentiated innovation means to Russian consumers, and also in terms of making new products available to them, given the challenges of the retail environment which is critical for sales.

Myth #4: Speed is of the essence.
It’s not necessarily the first mover that wins, and if you can truly own a category you can make yourself untouchable. However, it’s not guaranteed and over time, the offering that best meets consumer needs will come out on top. Understanding consumer needs, setting the entry barrier high and providing a unique solution is a sure way to guarantee success. By quickly building strong awareness and accessibility and taking the time to educate consumers, long-term investments will be sustained.

Myth #5: International brands = success.
While multinationals can take advantage of being global, true success will be found by thinking global, but acting local. The Russian population is diverse and requires precision targeting. Know your consumer and their unique needs, and make sure that your offering speaks to them. Leverage perceptions of brands with Russian heritage, as well as international prestige. Draw on the somewhat contradictory demands of being traditional as well as forward thinking. Recognize the differences for Russian consumers and embrace what makes their demands difference from those in other markets.

Myth #6: Price is king.
Don’t be intimidated by charging a premium price if the benefit is justified. There are many ways to make your price accessible to consumers and by doing so, justify even a premium price. Consider strategies such as changing your competitive set, offering size variations (up-size to take advantage of a lower cost per use, or down-size for a lower cost outlay), and offering new benefits over and above current offerings and consider appealing to a different target audience as well as explicitly communicating price discounts.

Myth #7: You only need to do one thing right.
Successful innovation is not just about coming up with good ideas. It requires a deep understanding of local market knowledge, consumer understanding and category insights, together with organizational processes that support and encourage innovation. If you don’t have this, the best ideas will not translate to the best launches.

The opportunity to grow in Russia is huge and growing. Keep in mind a few important take-aways:

• Keep a global perspective, but local expertise.
• Set appropriate expectations.
• Don’t overreact to changes in the marketplace but stay flexible and adaptable.
• Understand how to optimize your process.

For those willing to take the challenge, the rewards are enormous. Don’t let your competitors beat you to it!

China is currently the third biggest market in the world for FMCG new product testing.

There are perceptions held by some that business success in China is based solely on the vast size of the marketplace and that Chinese companies can not effectively compete with foreign firms.  At the Nielsen China Forum, Mitch Barns, president of The Nielsen Company, Greater China, debunked the eight most common myths about the role innovation plays in the Chinese consumer products sector and discussed how innovation is the engine of business success.

8 Most Common Myths:

• China is not innovative
• Innovation is easy and guarantees success
• Innovation in China means something different than in other countries
• Innovators are always more successful than followers
• Multinational corporations drive innovation in China
• Local companies are not innovators
• Local brands cannot compete in premium categories
• Big research and development spending guarantees innovation success

“Companies and people who believe these myths are ignoring what is happening in China today as opposed to ten or twenty years ago. Today’s China is as innovative – or more so – as any other country.  The numbers of patents issued continues to grow each year and major global corporations have invested millions of dollars to open R&D centers in the country. The fact is, China ranks as the third largest market in terms of new fast moving consumer goods product testing – besting countries such as Germany, Japan and Australia – and is expected to place second next year, supplanting the United Kingdom,” said Barns.

“But those who think innovation in China is easy based on little more than the size of the marketplace are making a big mistake: based on Nielsen experience, only 2% of new product ideas reach success in the market. Mega brands require the same long-term commitment to and investment in establishing themselves in China as they do elsewhere,” said Barns.

Ben Wilson, Marketing Director China for Reckitt Benckiser said the processes of large multinational companies could sometimes get in the way and the he believed local companies often had the advantage of being more nimble. “Multinationals have a lot to learn from the guys here (China),” Wilson said.

Lynn Chu, Director of Nielsen China, agreed. She said Chinese companies often chose to bet big on a new idea and if the idea didn’t work, they didn’t get stuck trying to make it work; they moved on to the next big thing.

Barns also waded into the common debate regarding the superiority of foreign brands over local offerings: “To date, multinationals have tended to import brands from other markets and tailor them to China or acquire local brands. Properly done, this provides a good way to get into the market. But there are few true China-specific innovations from multinationals, and local companies are stepping up their innovation game thanks to a superior understanding of the consumer. This deeper knowledge about the consumer has led to local company success in the premium segment, once solely the domain of multinationals.”