Metrics for New Product Success? An Investigation Across ...mktg.uni-svishtov.bg/ivm/resources/Metrics_for_NPD_ppt.pdf · Metrics for New Product Success? An Investigation Across

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?


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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


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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.


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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.


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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).


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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


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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


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1

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2

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Newness

purc

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3M 6M 9M 12M

RESULTS: Product Newness in Europe


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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+



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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

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2

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4

1 1.5 2 2.5 3 3.5 4 4.5 5

newness

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without sequential rollout with sequential rollout

Germany: Effect newness after 1 yearwith and without sequential rollout strategy

0.5

1

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2

2.5

3

3.5

4

1 1.5 2 2.5 3 3.5 4 4.5 5

newness

purc

hase

rate


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

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rat

e



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RESULTS: Competitive Environment

yes


-Concentration yesexcept Germany

-



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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


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yesyesyes

--+

Price competitionPrice promotion Int.*Newness

yes



-



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0.7

0.8

0.9

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Q1 Q2 Q3 Q4

time

purc

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Newness high Newness low

Impact Product Newness at High Price Promotion Intensity (top 25%) in Europe


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-+yes

??+

Non-price competitionNP intensity*Newness

yesyesyes

--+


yes



-

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

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new ness high new ness low


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yes+*Brand reputation

yesyesexcept Germany

--Adv. intensity

-+yes

??+

Non-price competitionNP intensity*Newness

yesyesyes

--+


yes



-



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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

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brand reputation low brand reputation high


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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

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brand reputation low brand reputation high


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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


+

+

-

+

Metropolis

Size household

Age

Dispositional Innovativeness

yes+

yes+

yes+

yes-



©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


©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


©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


©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


©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


©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.



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


©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.



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


©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

Documents

Metrics for New Product Success? An Investigation Across ...mktg.uni-svishtov.bg/ivm/resources/Metrics_for_NPD_ppt.pdf · Metrics for New Product Success? An Investigation Across