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Markets reward growth. Afterall, growth can be quite the virtuous cycle. Brands that outgrow their categories attract more investments; they are seen as vibrant enough to fuel future growth.
Marketers would be quick to point out that generating demand becomes easier if their brands are seen as vibrant as well. To do so, marketers have long relied on either innovation or renovation. Renovation is relaunching a brand while innovation entails introducing new variants or lines. The classic marketer's dilemma is balancing resources for both.
Innovation tends to glorify a brand manager's career. But there are about 14,500 new products launched annually in the FMCG sector alone, and Nielsen has found that only 0.2 per cent succeed. For some of the larger FMCG players, the hit rate has been one out of 20. It is also important to call out that for many large FMCG players, less than 5 per cent of their business comes from recent launches. What matters more is how healthy core business is.
Renovation could be a restaging of the brand positioning, pricing, packaging or product formulation. The objective is to refresh the core and keep it contemporary. Renovations generally tend to have more at stake given that you are rolling the dice with your core brand. They also require an in-depth understanding of current consumers their motivations, and an honest assessment of what your brand can and cannot do.
We looked at 25 recent renovations and innovations, each, across shampoos, skin creams, and toilet soaps. We then tracked the performance of the parent brand one year out to gauge the overall impact on key indicators for the franchise. In our limited experiment, renovations provided better results in the medium term.
Renovations generated higher growth for the parent brand versus those which just focused on innovation (20 per cent vs 16 per cent). The restaged parent brands also had better in-store sales (10 per cent vs 5 per cent per dealer). There was no inherent advantage when it came to achieving better distribution. In the medium term, renovations had a greater impact on sales at the parent-brand level for the three categories we studied. Marketers, then, please think about how you could keep your core brand relevant to the changing needs of your consumer base.
Four steps to renovations:-
1. Do not alienate current buyers: Remember, repeat buyers of your current franchise are there for a reason - they like what you offer today. Winning renovations ensure this buyer base is retained and look to address gaps that would increase current buyer acceptance.
2. Work to recruit new consumers: Renovation allows your brand to appeal to newer (sometimes more profitable) consumer groups. If done right, it can recruit a new set of consumers to the brand or even category.
3. Limit confusion@ switchover: Renovations call for operational swiftness, especially when the relaunch entails a packaging or product reformulation. In fragmented markets like India, situations where both the old and restaged product are available in the same store could lead to confusion, could even lead to losing the consumer to competition. Old stocks should be replenished as quickly as possible and buyers should know what to pick up.
4. Spur future innovation: New launches riding on a more relevant, restaged core brand would have a better shot at succeeding. Consumers would generally be open to new products from a brand that is contemporary.
Happy co-existence
When faced with a choice to renovate or innovate, pick both. Innovation tends to be the more attractive option for a blue-eyed brand manager but renovating your brand periodically helps you protect your core and build sustainable platforms for future growth. Successful innovation and renovation, both require a visceral understanding of the consumer and a clear evaluation of their unmet needs.
The author is vice-president, Nielsen India
