metrics for new product success? an investigation across...
TRANSCRIPT
Metrics for New Product Success?An Investigation Across Products and Countries
Katrijn GielensJan-Benedict E.M. Steenkamp
Presentation at the MSI Conference “Does Marketing Measure Up?”
June 2004
ERASMUS UNIVERSITY ROTTERDAM
All rights are reserved. Members of MSI and academic researchers may make limited copies of this presentation, electronically or in print, solely for their internal, non-commercial use. Any other use of this presentation—including reproduction for purposes other than those noted above, modification, distribution, or republication—without prior written permission of the Author is strictly prohibited.
Innov-Europe.ppt 2ERASMUS UNIVERSITY ROTTERDAM
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Two CaveatsReliance on new product introductions strategy is:
• Very riskyWhat are the drivers of new product success?
• Very costlyGeographical extension a necessity. Which NP success factors are generalizable across countries? Which factors work out differently, and should be part of local adaptations of NPI strategies?
Innov-Europe.ppt 3ERASMUS UNIVERSITY ROTTERDAM
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Source Model
Metrics for New CPG Success
• Intensity first-year purchases• Trend first-year purchases
Competitive Environment
•Concentration•Price competition•Non price competition- innovation- advertising
Consumer
• Dispositional innovativeness
• Sociodemographics- age- size household- urbanization
Product-Strategy
• Marketing resources• Launch strategy• Brand reputation• Newness
Innov-Europe.ppt 4ERASMUS UNIVERSITY ROTTERDAM
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DataPurchase data
Number of household purchases of respectively 104, 67, 56, and 74 new products introduced in France, Germany, Spain and U.K. on quarterly basis until 12 months after new product introduction. Samples consist of respectively 3,446, 4,111, 2,473 and 4,581 households.
Product-strategy variablesMarketing resources: Proxy: market share manufacturer within category.Launch: Dummy; 1 if NP was introduced in another country before, 0 else.Brand reputation: Extent to which the brand is high quality on 5-point scale. Ratings provided by category management experts of Europanel (GfK-TNS).Newness: Extent to which product is new and unique on 5-point scale. Ratings provided by category management experts of Europanel.
Innov-Europe.ppt 5ERASMUS UNIVERSITY ROTTERDAM
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Data (cont’d)Competitive environment variables
Concentration: Sum of market shares of top 3 brands in category.Non-price competition- Advertising Advertising-to-sales ratio, measured at category level.Non-price competition- New product activity: Number of new SKUs introduced in category relative to total number of SKUs in category.Price Competition: Percentage of volume sold on deal within category.
Consumer variablesDispositional innovativeness : Based on special questionnaire administered to 16,000+ household panel members; 8 items from Steenkamp and Gielens (2003).Socio-demographics : Age: Number of years ; Household size: number of members in the household; Metropolis: dummy, 1 if the respondent lives in the country’s major metropolis, 0 else.
Innov-Europe.ppt 6ERASMUS UNIVERSITY ROTTERDAM
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Measuring Dispositional Innovativeness
When I see a new product on the shelf, I'm reluctant to give it a try. (*)In general, I am among the first to buy new products when they appear on the market.If I like a brand, I rarely switch from it just to try something new. (*)I am very cautious in trying new and different products. (*)I am usually among the first to try new brands.I rarely buy brands about which I am uncertain how they will perform. (*)I enjoy taking chances in buying new products.I do not like to buy a new product before other people do. (*)
(*) indicates reverse scored item. Items were scored on a five-point scale ranging from completely disagree (=1) to completely agree (=5).
Innov-Europe.ppt 7ERASMUS UNIVERSITY ROTTERDAM
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METHODLEVEL 1 : Growth model
log(λtij, k) = π0ij,k + π1ij, kTimetij,k
LEVEL 2: Effect consumer variables
π0ij,k = β00j,k + β01j,kINNOVi,k + β02j,kAGEi,k + β03j,kSIZE_HHi,k +
β04j,kMETROPi,k + r0ij,k
π1ij,k = β10j,k + β11j,k INNOVi,k+ β12j,kAGEi,k + β13j,kSIZE_HHi,k +
β14j,kMETROPi,k
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METHOD (cont’d)LEVEL 3: Impact of product strategy and competitive
environment
β00j,k = γ000,k + γ001,kMSHAREj,k + γ002,kSEQUENj,k + γ003,kBr_REPj,k+ γ004,kNEWj,k+
γ005,kNEW2j,k+ γ006,kSEQUENj,k*NEWj,k+ γ007,kCONCENj,k+ γ008,kPROMINTj,k+
γ009,kPROMINTj,k*NEWj,k + γ0010,kNPIj,k +γ0011,kNPIj,k*NEWj,k + γ0012,kADVINTj,k +
γ0013,kADVINTj,k *Br_REPj,k + γ0014,kPOWERNBj,k+ γ0015,kHOUSEHj,k+
γ0016,kPERSCAREj,k + γ0017,kQUALGAPj,k+u00j,k
β10j,k = γ100,k + γ101,kMSHAREj,k + γ102,kSEQUENj,k + γ103,kBr_REPj,k+ γ104,kNEWj,k+
γ105,kNEW2j,k+ γ107,kCONCENj,k+ γ108,kPROMINTj,k+ γ1010,kNPIj,k+
γ1012,kADVINTj,k + γ1014,kPOWERNBj,k+ γ1015,kHOUSEHj,k+ γ1016,kPERSCAREj,k +
γ1017,kQUALGAPj,k
β0qj,k = γ0q0,k for q = 1,…,4
β1pj,k = γ1p0,k for p = 1,...,4
Innov-Europe.ppt 9ERASMUS UNIVERSITY ROTTERDAM
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RESULTS: Product-strategy Variables
yes
yes
yesweak in U.K.
yes
TrendIntensity.TrendIntensity
∪
+
+
+
Newness
Brand reputation
Sequential roll-out
Marketing resources
yes∪
yes+
yesweak in U.K.
+
yes+
Supported across all 4 countries?Expectation
Innov-Europe.ppt 10ERASMUS UNIVERSITY ROTTERDAM
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1
1.5
2
2.5
3
3.5
1 1.5 2 2.5 3 3.5 4 4.5 5
Newness
purc
hase
rate
3M 6M 9M 12M
RESULTS: Product Newness in Europe
Innov-Europe.ppt 11ERASMUS UNIVERSITY ROTTERDAM
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RESULTS: Product-Strategy Variables
yesexcept U.K.
+*Rollout
yes
yes
yesweak in U.K.
yes
TrendIntensityTrendIntensity
∪
+
+
+
Newness
Brand reputation
Sequential roll-out
Marketing resources
yes∪
yes+
yesweak in U.K.
+
yes+
Supported across all 4 countries?Expectation
Innov-Europe.ppt 12ERASMUS UNIVERSITY ROTTERDAM
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RESULTS: Product Newness*Seq. RolloutEffect after 1 year
France: Effect newness after 1 year with and without a sequential rollout strategy
0.5
1
1.5
2
2.5
3
3.5
4
1 1.5 2 2.5 3 3.5 4 4.5 5
newness
purc
hase
rate
without sequential rollout with sequential rollout
Germany: Effect newness after 1 yearwith and without sequential rollout strategy
0.5
1
1.5
2
2.5
3
3.5
4
1 1.5 2 2.5 3 3.5 4 4.5 5
newness
purc
hase
rate
without sequential rollout with sequential rollout
Spain: Effect newness after 1 year with and without a sequential roll out strategy
0.5
1
1.5
2
2.5
3
3.5
4
1 1.5 2 2.5 3 3.5 4 4.5 5
newness
purc
hase
rat
e
without sequential rollout with sequential roolout
U.K.: Effect newness after 1 year with and without a sequential rollout strategy
0.5
1
1.5
2
2.5
3
3.5
4
1 1.5 2 2.5 3 3.5 4 4.5 5
newness
purc
hase
rat
e
without sequential rollout with sequential rollout
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RESULTS: Competitive Environment
yes
TrendIntensityTrendIntensity
-Concentration yesexcept Germany
-
Supported across all 4 countries?Expectation
Innov-Europe.ppt 14ERASMUS UNIVERSITY ROTTERDAM
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Private labels / ALDI - long-term development in Germany
0
5
10
15
20
25
30
75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 '00 '01 '02
private labels total/ALDIprivate labels total/ALDI
18,3 18,2 18,1
12,9 13,1 13,3 13,614,5
15,8
18,3 18,9 18,8 19,0 19,1 19,3 19,520,2 20,5 20,7 20,9 21,3 21,6
23,224,8
29,0
18,918,9
11,7
source: GfK household panel ConsumerScan, west, 17 categories, always Jan-Novmarket share value in %
9,510,6
5,9
7,7 8,1 8,57,3
11,1 10,9 11,1 11,412,1 12,7 12,7 13,0 13,1 13,4 13,5 13,6 13,4 13,0 13,1
14,015,3
17,9
12,2 12,6 12,8
ALDIALDI
5,0 5,2
7,2 7,3 7,0 6,9 6,8 6,6 6,4 6,35,15,2
5,45,65,8
6,2 6,2 6,3 6,4 6,8 7,0 7,1 7,58,3 8,5
9,2 9,511,1
private labelsprivate labels
Innov-Europe.ppt 15ERASMUS UNIVERSITY ROTTERDAM
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RESULTS: Competitive Environment
yesyesyes
--+
Price competitionPrice promotion Int.*Newness
yes
TrendIntensityTrendIntensity
-Concentration yesexcept Germany
-
Supported across all 4 countries?Expectation
Innov-Europe.ppt 16ERASMUS UNIVERSITY ROTTERDAM
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0.7
0.8
0.9
1
1.1
1.2
Q1 Q2 Q3 Q4
time
purc
hase
inte
nsity
Newness high Newness low
Impact Product Newness at High Price Promotion Intensity (top 25%) in Europe
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RESULTS: Competitive Environment
-+yes
??+
Non-price competitionNP intensity*Newness
yesyesyes
--+
Price competitionPrice promotion Int.*Newness
yes
TrendIntensityTrendIntensity
-Concentration yesexcept Germany
-
Supported in all 4 countries?Expectation
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Impact Product Newness at in Categories with much New Product Introduction Activity in Europe
Overall: New product intensity high
1
1.2
1.4
1.6
Q1 Q2 Q3 Q4
time
purc
hase
rat
e
new ness high new ness low
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RESULTS: Competitive Environment
yes+*Brand reputation
yesyesexcept Germany
--Adv. intensity
-+yes
??+
Non-price competitionNP intensity*Newness
yesyesyes
--+
Price competitionPrice promotion Int.*Newness
yes
TrendIntensityTrendIntensity
-Concentration yesexcept Germany
-
Supported in all 4 countries?Expectation
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Impact Brand Reputation at High Advertising Intensity in France, Spain, and the U.K.
Overall: Advertising intensity high
0.5
0.7
0.9
1.1
1.3
1.5
Q1 Q2 Q3 Q4
purc
hase
rate
brand reputation low brand reputation high
Innov-Europe.ppt 21ERASMUS UNIVERSITY ROTTERDAM
©20
04 p
rese
nted
by
J.B
. Ste
enka
mp
at th
e C
onfe
renc
e C
onfe
renc
e: D
oes
Mar
ketin
g M
easu
re U
p? P
erfo
rman
ce M
etric
s
Pra
ctic
es a
ndIm
pact
s , j
oint
ly h
oste
d by
the
Mar
ketin
g S
cien
ce In
stitu
te a
nd th
e Lo
ndon
Bus
ines
s Sc
hool
hel
d on
Jun
e 21
–22
, 200
4 in
Lon
don,
Eng
lad.
Impact Brand Reputation at High Advertising Intensity in Germany
Germany: Advertising intensity high
0.50.70.91.11.31.51.7
Q1 Q2 Q3 Q4
purc
hase
rate
brand reputation low brand reputation high
Innov-Europe.ppt 22ERASMUS UNIVERSITY ROTTERDAM
©20
04 p
rese
nted
by
J.B
. Ste
enka
mp
at th
e C
onfe
renc
e C
onfe
renc
e: D
oes
Mar
ketin
g M
easu
re U
p? P
erfo
rman
ce M
etric
s
Pra
ctic
es a
ndIm
pact
s , j
oint
ly h
oste
d by
the
Mar
ketin
g S
cien
ce In
stitu
te a
nd th
e Lo
ndon
Bus
ines
s Sc
hool
hel
d on
Jun
e 21
–22
, 200
4 in
Lon
don,
Eng
lad.
RESULTS: Consumer Factors
no
yes
yes
yes
TrendIntensityTrendIntensity
+
+
-
+
Metropolis
Size household
Age
Dispositional Innovativeness
yes+
yes+
yes+
yes-
Supported in all 4 countries?Expectation
Innov-Europe.ppt 23ERASMUS UNIVERSITY ROTTERDAM
©20
04 p
rese
nted
by
J.B
. Ste
enka
mp
at th
e C
onfe
renc
e C
onfe
renc
e: D
oes
Mar
ketin
g M
easu
re U
p? P
erfo
rman
ce M
etric
s
Pra
ctic
es a
ndIm
pact
s , j
oint
ly h
oste
d by
the
Mar
ketin
g S
cien
ce In
stitu
te a
nd th
e Lo
ndon
Bus
ines
s Sc
hool
hel
d on
Jun
e 21
–22
, 200
4 in
Lon
don,
Eng
lad.
Conclusions and Implications1. Reliance on NPIs is a risky strategy: How can
the company reduce risk of failure?Avoid intermediate newness; high product newness offers best prospects for sustained growthPulse strategy of major innovations followed by incremental improvements and line extensions
Innov-Europe.ppt 24ERASMUS UNIVERSITY ROTTERDAM
©20
04 p
rese
nted
by
J.B
. Ste
enka
mp
at th
e C
onfe
renc
e C
onfe
renc
e: D
oes
Mar
ketin
g M
easu
re U
p? P
erfo
rman
ce M
etric
s
Pra
ctic
es a
ndIm
pact
s , j
oint
ly h
oste
d by
the
Mar
ketin
g S
cien
ce In
stitu
te a
nd th
e Lo
ndon
Bus
ines
s Sc
hool
hel
d on
Jun
e 21
–22
, 200
4 in
Lon
don,
Eng
lad.
Pulse strategy of major innovations followed by incremental innovations
Innov-Europe.ppt 25ERASMUS UNIVERSITY ROTTERDAM
©20
04 p
rese
nted
by
J.B
. Ste
enka
mp
at th
e C
onfe
renc
e C
onfe
renc
e: D
oes
Mar
ketin
g M
easu
re U
p? P
erfo
rman
ce M
etric
s
Pra
ctic
es a
ndIm
pact
s , j
oint
ly h
oste
d by
the
Mar
ketin
g S
cien
ce In
stitu
te a
nd th
e Lo
ndon
Bus
ines
s Sc
hool
hel
d on
Jun
e 21
–22
, 200
4 in
Lon
don,
Eng
lad.
Conclusions and Implications1. Reliance on NPIs is a risky strategy: How can
the company reduce risk of failure?Avoid intermediate newness; high product newness offers best prospects for sustained growthPulse strategy of major innovations followed by incremental improvements and line extensionsFocus on consumers high on dispositional innovativeness in R&D
Innov-Europe.ppt 26ERASMUS UNIVERSITY ROTTERDAM
©20
04 p
rese
nted
by
J.B
. Ste
enka
mp
at th
e C
onfe
renc
e C
onfe
renc
e: D
oes
Mar
ketin
g M
easu
re U
p? P
erfo
rman
ce M
etric
s
Pra
ctic
es a
ndIm
pact
s , j
oint
ly h
oste
d by
the
Mar
ketin
g S
cien
ce In
stitu
te a
nd th
e Lo
ndon
Bus
ines
s Sc
hool
hel
d on
Jun
e 21
–22
, 200
4 in
Lon
don,
Eng
lad.
Conclusions and Implications1. Reliance on NPIs is a risky strategy: How can the
company reduce risk of failure?Avoid intermediate newness; high product newness offers best prospects for sustained growthPulse strategy of major innovations followed by incremental improvements and line extensionsFocus on consumers high on dispositional innovativeness in R&DDevelop appropriate marketing strategy:– High marketing resources and extension of reputable brand help!– Sequential rollout strategy helps for major innovations - but much
less so in the U.K. may act as lead country– Simultaneous roll-out helps for incremental innovations– Targeted marketing efforts: Focus on high prospect segment in first
year– Higher product novelty overcomes barriers to entry
Innov-Europe.ppt 27ERASMUS UNIVERSITY ROTTERDAM
©20
04 p
rese
nted
by
J.B
. Ste
enka
mp
at th
e C
onfe
renc
e C
onfe
renc
e: D
oes
Mar
ketin
g M
easu
re U
p? P
erfo
rman
ce M
etric
s
Pra
ctic
es a
ndIm
pact
s , j
oint
ly h
oste
d by
the
Mar
ketin
g S
cien
ce In
stitu
te a
nd th
e Lo
ndon
Bus
ines
s Sc
hool
hel
d on
Jun
e 21
–22
, 200
4 in
Lon
don,
Eng
lad.
2. Reliance on NPIs is a costly strategy, increasingly necessitating international expansion: Are there cross-
national rules for NP success?
High degree of cross-national generalizations across 4 EU countriesPan-European segmentation scheme is feasible. Ideal prospect consumer is relatively high on dispositional innovativeness, larger household, younger, metropolitan.But there are also important cross-national differences:- Germany, France and Spain can benefit from sequential roll-out strategy, but much
less so not the UK- Concentration and advertising competition exhibit different effects in Germany
Innov-Europe.ppt 28ERASMUS UNIVERSITY ROTTERDAM
©20
04 p
rese
nted
by
J.B
. Ste
enka
mp
at th
e C
onfe
renc
e C
onfe
renc
e: D
oes
Mar
ketin
g M
easu
re U
p? P
erfo
rman
ce M
etric
s
Pra
ctic
es a
ndIm
pact
s , j
oint
ly h
oste
d by
the
Mar
ketin
g S
cien
ce In
stitu
te a
nd th
e Lo
ndon
Bus
ines
s Sc
hool
hel
d on
Jun
e 21
–22
, 200
4 in
Lon
don,
Eng
lad.
2. Reliance on NPIs is a costly strategy, increasingly necessitating international expansion: Are there cross-
national rules for NP success?
High degree of cross-national generalizations across 4 EU countries.Pan-European segmentation scheme is feasible. Ideal prospect consumer is high on dispositional innovativeness, larger household, younger,metropolitan.But there are also interesting cross-national differences:- Germany, France and Spain can benefit from sequential roll-out strategy, but not the
UK- Concentration and advertising competition exhibit different effects in Germany
- A given category has often a different score on competitive environment variables, leading to different impact for a given NPI across countries
Innov-Europe.ppt 29ERASMUS UNIVERSITY ROTTERDAM
©20
04 p
rese
nted
by
J.B
. Ste
enka
mp
at th
e C
onfe
renc
e C
onfe
renc
e: D
oes
Mar
ketin
g M
easu
re U
p? P
erfo
rman
ce M
etric
s
Pra
ctic
es a
ndIm
pact
s , j
oint
ly h
oste
d by
the
Mar
ketin
g S
cien
ce In
stitu
te a
nd th
e Lo
ndon
Bus
ines
s Sc
hool
hel
d on
Jun
e 21
–22
, 200
4 in
Lon
don,
Eng
lad.
2. Reliance on NPIs is a costly strategy, increasingly necessitating international expansion: Are there cross-
national rules for NP success?
High degree of cross-national generalizations across 4 EU countries.Pan-European segmentation scheme is feasible. Ideal prospect consumer is high on dispositional innovativeness, larger household, younger,metropolitan.
- The retail environment is still very different
But there are also interesting cross-national differences:- Germany, France and Spain can benefit from sequential roll-out strategy, but not the
UK- Concentration and advertising competition exhibit different effects in Germany
- A given category has often a different score on competitive environment variables, leading to different impact for a given NPI across countries
Innov-Europe.ppt 30ERASMUS UNIVERSITY ROTTERDAM
©20
04 p
rese
nted
by
J.B
. Ste
enka
mp
at th
e C
onfe
renc
e C
onfe
renc
e: D
oes
Mar
ketin
g M
easu
re U
p? P
erfo
rman
ce M
etric
s
Pra
ctic
es a
ndIm
pact
s , j
oint
ly h
oste
d by
the
Mar
ketin
g S
cien
ce In
stitu
te a
nd th
e Lo
ndon
Bus
ines
s Sc
hool
hel
d on
Jun
e 21
–22
, 200
4 in
Lon
don,
Eng
lad.
EXPLORATORY RESULTS: RetailerFrance
0
50
100
150
200
250
Auchan Carrefour Champion Systeme U Leclerc Geant
Effe
ct re
lativ
e to
Car
refo
ur
Spain
0
50
100
150
200
250
pryca alcampo elcortes eroski capabro mercadona
effe
ct rel
ativ
e to
Hyp
erco
r
U.K.
0
50
100
150
200
250
asda boots coop tesco sainsbury safeway somerfield budgens
Effe
ct re
lativ
e to
Tes
co