Creating new markets for consumer products is extremely difficult. According to IRI, less than 25% of new brands in the United States earn $7.5 million in Year One sales, and less than 2% earn $50 million. Overwhelmingly, the big winners tend to be brand extensions, rather than products creating fundamentally new categories.
It is very hard to change engrained consumer behaviors. New brands can also struggle to fit into existing merchandising schemes at retail - the Colgate Wisp single-use toothbrush, for example, was stocked initially in both oral care and confectionary. Moreover, brands have become increasingly fragmented, making it harder for new introductions to stand out. Again according to IRI, over the last decade the percentage of brands earning $20 million has shrunk from 13% to 7% in food, and in non-food from 22% to 5%. It only adds to the challenge that private label has become extremely fast at knocking off successful new products - occasionally even beating brands to achieving national roll-out.
And yet new markets are absolutely fundamental to growth in this industry. For most brands, extensions can only go so far before they devolve into a confused morass of SKUs that drive high costs and cannibalization. New flavors and assortments are important to growth, but so too is creating the next Febreze or Red Bull.
New Markets studies what underlies big wins in consumer products. It is certainly not necessary to have a totally new brand name, but winners need to find a unique niche in the market. There are a handful of plays that the winners run, including:
- Target an awkward workaround that people have always taken for granted (Swiffer)
- Bring an established proposition to a new situation (Gatorade A.M.)
- Think holistically about the experience of using the product vs. simply its function (Target's intuitive way of labeling medicines)
- Re-orient a familiar product with a fundamentally new value proposition (V8 as a way to get your required servings of vegetables)
- Address a newly relevant need (Ped Egg allowing people to bring the luxury of a pedicure into the home at a fraction of the price)
- Leverage distribution to dominate an emerging category (Danone with Stonyfield Farm)
It is also useful to look within individual categories to discern patterns of success and failure. In home diagnostics, for example, there have been only three big winners - pregnancy, ovulation, and blood glucose tests. Why? All three shared common traits: results were immediate and unambiguous, there was a clear occasion calling for use of the test, the tests might be re-purchased many times, etc. Seen through this lens, it is clear why many attempts at entering this category, such as home cholesterol tests, have struggled.
Critically, many successful new brands do not start as obvious winners. Swiffer failed its BASES test. Red Bull got its first foothold in a small market segment. Creating a new brand is not just about finding a great idea (although that is of course helpful, and something in which we have much experience), but also about testing the proposition in a way that is appropriate to concepts that might initially strike many consumers as odd. Sometimes these tests can be quite out-of-the-ordinary.
We will be happy to share a presentation outlining our thinking if you complete our short form.