InsightsNow!

by Alec Maki, Product Marketing Manager

The Consumer Packaged Goods (CPG) industry has reached a fork in the road.  As discussed in the October 2010 article, Paradox of Progress – Product Line Optimization, the Status Quo is Broken, the joy ride of the last 40 years has ended. 

Dr. Andrew Grove, Co-Founder and Former CEO of Intel once said, “Sooner or later, something fundamental in your business world will change.”  In his book Only the Paranoid Survive, Andy Grove discusses his greatest concern in the business world: inflection points.  An inflection point occurs when the old strategic picture dissolves and gives way to another.  For a business, that change can mean an opportunity for even greater success.  But it may just as likely signal a descent into corporate purgatory.

So what does this mean?  CPG brands have reached an inflection point.  They are moving into an uncertain future, like Alice stepping through the looking glass.  And, on the other side, the world is different.  The recent Great Recession has changed the market scope.  Consumers are more fickle, more informed and more frugal.  With too many “me too” products on store shelves, consumer choice has become a commodity.  Brand loyalty is eroding.  Private label brands have over 17% share with double-digit growth projected.

One has to ask, “How do brands succeed in this environment? How do they avoid fading from relevance?”

CPG companies must shake off the inertia of the last 40 years.  Moving forward, brands must act boldly to deliver compelling, relevant and meaningful consumer experiences.  The industry must rethink the front-end of innovation and redefine market opportunities from the vantage of consumer behavior.  Too many products today compete on sensory or functional benefits alone, contributing to the glut of “me too” mediocrity.  To elevate consumer value, brand teams must also purposefully deliver against psychological and social benefits.

In the same vein, brands need to reassess product line performance.  Typically, the Purchase Intent measure and TURF (Total Unduplicated Reach and Frequency) analysis have been used to make product line decisions.  As discussed in The Paradox of Progress, these have inherent limitations.  The reach value of TURF, which measures how well a line of products reaches unique consumers, poorly discriminates between different options.  The Purchase Intent (PI) measure is a poor approximation of what really happens at the point-of-sale.  Intention does not put a product into a shopping cart.  Choice does.  As we cross the inflection point, the traditional tools of TURF and PI are no longer sufficient to effectively manage product lines.

Moving forward, product line performance should account for consumer usage (i.e., to what extent does the product line deliver against usage occasions), consumer choice and competitive context.  Doing so addresses the realities of a post-inflection economic landscape.  Product lines must connect with consumers in meaningful, relevant ways.     

InsightsNow has developed a suite of product line optimization tools that go beyond Purchase Intent and TURF to incorporate usage, choice and competition.  Designed to work with the messiness of the
“real world,” these tools are designed for flexibility as they can incorporate multiple, holistic measures. 

Here are some features:

• Competitive Context:  Get a better sense for “share of wallet” by seeing how product line alternatives compete against in-market products.  This can be as simple as comparing against a consumer’s most preferred product or as complex as incorporating the full category.  Either way, the goal is to understand how the full product line moves the dial of purchase behavior.
   
• Consumer Choice:  Studies can be designed to use forced-choice tools such as Tournament or Max-Diff.  Incorporating choice better approximates the buying experience and provides greater discrimination than simply using Purchase Intent alone. 
   
• Consumer Usage:  Products are used within the context of consumer life.  Research can be designed to ensure a product line reaches across the full range of relevant consumer usage occasions (e.g., special occasions, every-day usage, on-the-go, at work, etc.).
   
• Product Availability:  Due to uncontrollable issues, such as the supply chain problems, out-of-stock merchandise, R&D challenges or retailer preferences, companies can never be certain which parts of the product line will be on-shelf at any given time.  Thus, the goal should not be to identify the best overall lineup, but the best lineup given uncertainty.  Shapley Value Analysis provides a robust way to do just that.

If you are faced with product line challenges, we would love the opportunity to learn about your challenges and explore whether our product line optimization suite of tools would be a good fit.  Should you have questions, please reach out to info@InsightsNow.com or call 541-224-0974.

Categories: Research Methodology