Making It in the Marketplace

Driving business with new products is hardly a novel idea, but it’s also one that convenience store retailers rarely use to their advantage, said David Bishop, a partner with research and consulting firm Willard Bishop in Barrington, Ill. When retailers actively participate in the process of bringing a new product to the marketplace by helping manufacturers gain a broader understanding of consumers’ preferences, they are more likely to enjoy the benefits new products bring earlier in the game.

"The bottom line is that retailers should be helping suppliers drive new products and business," Bishop said, a concept with which most manufacturers would heartily agree.

Two excellent examples of manufacturer-retailer cooperation in driving new products are the aluminum beer bottle Anheuser-Busch reportedly developed using feedback provided by 7-Eleven and Chelada, the brewery’s new Clamato and beer drink.

"We encourage retailers to work with our sales team and local wholesalers to implement the right marketing programs designed to promote products that will appeal to customers at each retail location," said Joe VonderHaar, A-B’s vice president of national retail sales for convenience store sales.

 

Retailers Have Wider Point Of View
Anecdotal evidence is that retailers, especially convenience store operators, were the first to notice that their Hispanic customers frequently bought beer and Clamato separately with the intention of mixing them together. Delivering premixed versions using Bud, Bud Light and Clamato then became an A-B marketing focus. "Latinos, specifically those of Mexican descent, have been mixing beer with Clamato for years. Budweiser, Bud Light & Clamato Chelada offers the same recipe in a convenient single-serve package," VonderHaar said.

Bishop noted that manufacturers typically look only at their own categories. But retailers’ greater exposure to marketplace behaviors tends to give them a more holistic perspective. "When you look at it that way, you can trip over an innovative marketing opportunity that would otherwise have been missed because of all the preconceived ideas and biases we would have put on it either because of what we believed about the business or because of what we didn’t know," he said. "A-B would be looking at beer data—the idea that they would buy juice data is pretty hard to imagine."

Bishop’s comments underscore the point that manufacturers who really want to create what Harvard professor Clayton Christiansen calls a "disruptive innovation" by successfully bringing a new product to market must approach the product development process from more than one angle. A good one to add is finding ways of cooperating with retailers to learn what consumers are buying and why they are buying it.

 

More Retailers Becoming
Brand Marketers
GazZu Energy drink illustrates the point that more retailers are becoming true brand marketers, and, in doing so, are developing many of the same skills and capabilities of a traditional national brand marketer, which wouldn’t have been the case years ago. Developing a private label allows retailers to promote aggressively yet still enjoy a significant margin and leverage their negotiations with suppliers.

"To successfully enter the fast growing energy drink segment, we realized that GazZu had to have a unique approach, different from the typical macho look, feel and taste. We wanted broad appeal," said Russ Kidd, senior category manager of packaged beverages for Circle K Southeast.

An important component of any product’s marketplace performance is how consumers feel about it. Kidd points out that consumers are looking for beverages that will satisfy a specific "need state" and that manufacturers need to focus on what that need state is and the kinds of consumers who experience it.

When Circle K developed its rapidly expanding GazZu Energy line in conjunction with BooKoo Energy, it avoided giving it a macho name similar to Red Bull because it wanted the drink to appeal to older adults, especially women, Kidd said.

Packaging also played an important role in the new drink product’s development. The GazZu logo and design combines a high-tech look with a retro feel to appeal to hip energy drink consumers, both male and female. The GazZu tagline, "Give me a G," provides a call to action and a flavor-customizable slogan.

When asked why Circle K wanted to develop an energy drink at all when so many were already in the market, Kidd urged companies need to respond to consumer demand with products that fill a need. Plus, energy drinks are fastest growing segment of the drink market, growing at 70% over the past five to six years. "We just didn’t think there were any really good energy drinks in the market," he said.

 

Strong Collaboration
Sped Up Process
In fact, suppliers seem to welcome collaboration when it comes to bringing new products to market, especially if it means getting the product right. Circle K’s commitment to partnering with the manufacturer is what helped the companies rollout GazZu so quickly, according to BooKoo President Dan Lee. "The fact that they were so involved in the concept, research, development, marketing and throughout the creation of GazZu reinforces the strength of the partnership," he said.

The process of bringing GazZu to market took just 15 months from start to finish, Kidd said. It was hastened by using an outside marketing firm to conduct the consumer research panels that tested taste and brand profile using more than 400 Southeast residents ranging in age from teenagers to senior citizens who tested 12 flavor profiles and selected Citrus, Orange-Mango and Cherry flavors as their top three picks.

Sampling, Kidd noted, is the primary marketing key to any energy drink success. "We committed 10% of the GazZu marketing budget for sampling at local Saturday afternoon college games and we sponsored a Friday evening high school football TV program in Augusta, Ga.," he said. Circle K also ran a "buy one, get one free" promotion through the end of last year and supported the new product in-store with displays, storefront banners and primary positioning in energy drink door.

 

Points Retailers Should Remember
Though new products and line extensions account for at least 60% of growth, only about 33% of new products are considered marketplace successes two years after they launch—about the same amount of time it takes for warehouse-delivered products to reach 80% distribution—and c-stores are notoriously slower to put new products on their shelves than are other retail channels.

Unfortunately, retailers’ efforts to benefit from new products are usually hampered by the sheer volume of new products put into the marketplace every year—a volume that typically exceeds stores’ shelf space.

Add to that the fact that identifying which products will succeed is frequently as much of an art as a science and you have a real conundrum. So the big question is: "How should retailers choose what to stock and why?"

Understanding how manufacturers support new products is an important component of developing successful retailer-manufacturer collaborations, Bishop said, but there are other steps c-stores need to take to be certain that the products to which they give precious shelf space will reward them with increased traffic and more sales.

C-store owners must identify which new products to sell, get those products to the shelves quickly, optimize their use of manufacturer support and capably manage out-of-stocks. To do these things efficiently, they should make a point of:

Comparing new products. Focus on new products within the same segment or category using a scorecard approach that quickly shows the benefits each product offers. Focusing on "driver" manufacturers. Another benchmark retailers can use is focusing mostly on products made by manufacturers who help drive the category’s or segment’s sales because these companies are the most likely to invest more promotional dollars that promote products and lower retailers’ advertising costs.

While it’s important to review other products in order to ensure that regional and local tastes references are met, focusing on the major contributors narrows the field swiftly and reinforces retailers’ ties with their key business partners.

Find space for new products by getting rid of what isn’t selling. This ought to be obvious, but many stores don’t take the time to do it. Studies show that 50% of all consumer-packaged products convenience stores carry generate 90% of in-store dollar sales. Clearly, 50% of the products on most c-store shelves aren’t paying their own way.
Furthermore, analyzing the bottom 20% of products shows that one out of five has multiple facings. Getting rid of such duplications and products that are not selling substantially increases the probability of increasing profits from new products.

Monitoring and measuring. The old adage that "what gets measured gets managed" is especially applicable to new products. Retailers need to develop a process for monitoring new product introductions and measuring store performance that improves managing new product sales. CSD

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