Similar principles guide npd in recession as in normal economic times, says Nielsen’s latest Consumer Insight (CI).
That’s one of the key messages from Nielsen’s latest Consumer Insight (CI) reports.
It claims consumer habits are slow to change and their purchase interest in everyday goods is relatively stable over time regardless of macroeconomic conditions.
However, there are important clues on how to think differently about innovation when times are tight, says Nielsen.
Launching new products is always tricky, it says, but recessionary environments pose their own set of challenges and the margin for error declines.
“Investments receive more scrutiny and priorities shift from more “normal” times. The temptation to view new item innovation as a discretionary expense can be strong,” say report authors, Mike Asche and Rob Mooth, vice presidents of client consulting, The Nielsen Company.
And, while some changes in marketing activity are necessary when the economy is slumping, Nielsen argues the rationale for strategic choices during these times should have more to do with a clear view of the fundamentals than with fear of failure and uncertainty.
The research company has mined insights from about 35 new product launches in a variety of packaged goods categories in the US.
It found most of the launches are proceeding as expected. Of the initiatives being tracked, about three in four showed no unusual patterns in sales and little evidence economic conditions were negatively impacting sales.
When it comes to everyday goods, consumer habits are slow to change, says Nielsen. This mirrors the research company’s findings over years of testing new products in the BASES system — consumer purchase intent and value perceptions are relatively stable over time regardless of macroeconomic conditions.
“The mantra for these times is this: guide the ship with a steady hand, but don’t over-steer,” say researchers. “If a fundamentally sound innovation process has shown results during “normal” times, then the right principles are likely in place. The same principles that guide innovation decisions during normal economic times are relevant during recessionary times too.”
Premium priced products are performing surprisingly well, Nielsen adds. Over half of the items that Nielsen is tracking are priced at a premium to their parent brand and/or their respective category and are also performing as expected. According to Nielsen, this shows even higher-priced items can succeed during recessionary times if the fundamentals are right.
While purchases of expensive “intermittent” luxuries like holidays or cars might be delayed or cut altogether, everyday affordable indulgences can still play a role in consumers’ lives, it says.
Nielsen reports that a number of brands that are currently underperforming are attempting to stretch into pricing territory that is outside their historical comfort zone with consumers.
If the core brand is standard or value-priced and doesn’t have a clear differentiating element, this may not be the time to attempt an extension into a more premium space, says Nielsen.
Brands that are more price-driven may experience better return on investment by building on the core brand rather than extending into higher price tiers.
Clearly state the “why to buy”
For premium-priced products, the unique benefits must be clearly positioned with consumers, says Nielsen. One of the pitfalls it has observed with premium products currently struggling in the marketplace is unclear differentiation and a lack of clear consumer rationale for why to buy.
When premium initiatives lack a clear reason for their higher price, they struggle to make it off the shelf and into a basket.
For further information and insight visit http://www.nielsen.com/consumer_insight/ci_story1.html