Product Overload?

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Why can't I buy just plain hand lotion anymore? Everything is new and improved, with more and more features I don't want," says Jill Horwich, a legal assistant in Chicago. "I can't stand going to the supermarket," she says. "There are so many new products, I can never find what I want. In the end, I just buy the basics-store-brand olive oil or corn flakes-because I don't have the time to sort through all the new products to see if they're what I'm looking for."

It's no wonder some consumers view a food shopping trip with trepidation. While the grocery stores of the 1950s stocked about 3,000 items, the supermarket of the 1990s can easily display ten times that number. But for every shopper who feels bewildered by product choices, there is another who actually enjoys trying new products. And in some cases, it may be the supermarkets themselves, not the shoppers, that can't keep pace with the 34 or so new food products launched every day.

"The issue of variety versus duplication of existing products is a big one for retailers," says Don Stuart, partner of Cannondale Associates, in Wilton, Connecticut. "In fact, in our most recent survey on trade practices, retailers list it as their third-biggest concern, behind labor cost and margin erosion. Seventy-one percent of retailers saw it as an important or extremely important issue."

Retailers are trying to come to terms with the flood of new products they encounter weekly. "There are a number of things that retailers are doing," says Stuart. "When the manufacturer controls the space, retailers rely on the manufacturer's recommendation on the use of that space. In essence, the manufacturer dictates what will fill that space. If, however, the space is controlled by the retailer, some of them are drawing a line in the sand. They will say, for example, 'I will only stock products that will satisfy 80 percent of the marketplace. I won't put in anything that doesn't please that percentage.'"

LESS IS MORE New consumer packaged-goods product introductions were down in 1997, according to Lynn Dornblaser, publisher of New Product News, a trade magazine that tracks new products in the United States. There was a 26 percent decline in new food offerings between 1995 and 1997, a drop Dornblaser attributes to market saturation and a decrease in shelf space. "Supermarkets can only stock so many products," says Dornblaser. "Slotting allowances, the fees manufacturers have to pay to put their products in the supermarket, are a big issue, as is the issue of shelf space."

The problem is that supermarkets cannot get any bigger and maintain their return on investment; the median store size was 38,600 square feet in 1996. The Food Marketing Institute (FMI) predicts that the store size in 1997 will not be much larger. Stores are about as big as they can be and still remain profitable, according to an FMI spokesperson.

In order to deal with shelf space and product clutter, some manufacturers have considered decreasing the variety of products they offer or melding two brands into one. In 1996, Procter & Gamble, one of the largest players in the consumer packaged-goods industry, began a program to simplify its product offerings, reducing the number of Crest toothpaste and Head & Shoulders shampoo varieties. Instead of 30 shampoo packages, it now offers only 15. This reduces the number of extraneous sizes, flavors, and other variants, making it easier for consumers to find what they want. At the same time, the manufacturer can have more of its allotted space in the store filled with its best-selling products. Shoppers have less choice, but they are less confused, and the manufacturer makes more money.

FEWER, BIGGER, STRONGER, FOREVER "The age of disposable brands is over," says Larry Light, a brand management consultant with Arcature, LLC in Stamford, Connecticut. "We are in a new era when manufacturers are realizing that the return on investment lies in better brand management." Light explains that the marketing strategy of owning shelf space and filling it with as many stock-keeping units (SKUs) as possible was wrong, and this was proved both by the manufacturers themselves and by consumers.

"Manufacturers learned that 20 percent of their SKUs accounted for only 5 percent of sales. For the first time, they began to cull products instead of introducing new ones. This was a sea change in marketing philosophy; manufacturers began to introduce line extensions instead of new brands. And they were surprised to learn that by reducing SKUs, they did not see a reduction in sales."

Light maintains that sales increased rather than dropped when SKUs were limited. "There were two surprises when manufacturers cut SKUs. First of all, sales forces found it more effective to sell fewer products. The problem before was that sales people had a limited time to talk about too many things. With fewer items in their repertoire, they could sell more effectively. Secondly, consumers liked it better. With fewer choices, they were able to see the differences between brands. Customers are more sophisticated and better educated than ever before, and they want to make intelligent choices, but with too many choices, they can't."

WHAT'S THE DIFFERENCE? "It's not really a question of product overload, but of confusion," says Britt Beemer, president of America's Research Group in Charleston, South Carolina. "Look at laundry detergent. There are six or eight different sizes of boxes. Why? There are too many choices, and it takes too long to sort out the best value." Beemer says that most consumers are not choosing between Product "A" and Product "B" when they shop. Instead, they are spending their time trying to figure out which size box of Product "A" is the best value. And that's where the confusion may lead to product resentment. "That's a poor use of their time, and they may not appreciate it," he says.

Larry Light agrees. "The new customer currency is time, not money. Manufacturers have to make it easier for consumers to choose, not harder." And Brian Wansink, professor of marketing and director of the Food and Brand Research Lab at the University of Illinois (Urbana-Champaign) points out that customers can actually make poor decisions if they are faced with too many products. "It depends on the consumer shopping cycle," he says. "At the start of the cycle, a shopper faced with too many products will not make a careful choice because he or she is too bewildered. It is not until the shopper is comfortable within the category that he or she can make good product choices."

In some categories, differences may be too obscure for consumers to recognize. "Take bottled water," says Laurie Tema-Lyn, of Practical Imagination Enterprises in Carlisle, Massachusetts. "For many consumers, there is no meaningful difference between one bottle of water and the next. They don't taste the difference, and they don't see the difference. They go by price or by brand recognition. How can new products stand out?"

In other categories, the bewilderment lies in the vast differences between products. There are hundreds of mustards on the market. Having to choose between champagne mustard, Dijon mustard, honey mustard, and all the other varieties is too time consuming. Shoppers may reach for the tried and true. "Brand loyalty is still very strong, especially in some categories," says Britt Beemer. "That's one of the main deterrents to trying new products-brand loyalty often wins out."

MORE IS MORE "Brand consolidation is easy for the big players like Procter & Gamble," says Lynn Dornblaser. "But the second or third in a category is not going to followsuit." A customer may be brand loyal but not want too many size choices. In that case, it is sensible to consolidate, she says. But that is not the only issue.

The most important driver behind the new-product introduction is the fact that consumers love to try new things. "Consumers have no upper limits," says Christopher W. Miller, a founding partner of Innovation Focus, a Lancaster, Pennsylvania, innovation company. "They love new colors, new flavors, and just about anything else."

"Americans love new products, but they also have short attention spans," says Robert McMath, director of the New Products Showcase & Learning Center in Ithaca, New York. "They're always anxious to jump on what I call 'trend wagons.' The problem is that even though there are so many new products launched every year, very few of them are really new. Instead, there are too many 'me too' products out there."

McMath estimates that only 6 percent of new products launched last year were really innovative. The rest were line extensions (variations of a previously established product) or products that offered little difference from what already existed on the shelves. "The category of liquid body soap is proliferating," says McMath, "but there is little to distinguish one liquid body wash from the next. It's just too much of the same thing."

Larry Light disagrees. "The strength for many manufacturers lies in brand extensions. Marketing theory used to downplay the importance of line extensions, but most line extensions, if well managed, make the brands stronger. That's because a brand makes a promise to consumers, and every time the consumer has the opportunity to see these promises fulfilled, it increases the chance that consumers will continue to believe in the brand."

YOU GOTTA TRY THIS! Trying a new product is one thing; sticking with it and making it a success is another. "Consumers love to try things," says Lynn Dornblaser. "When it comes to new foods, the impetus is really there. For a very small investment, they can experiment. It's not like buying a new pair of shoes or a new car. Instead, it's a cheap way of seeing if that something new is worth having."

But when it comes to sticking with something new, there are two reasons new products succeed. "Consumers are driven to try new products if they meet a need better or solve a problem better than the products that are currently available," says Abbie Griffin, professor of marketing at the University of Illinois, Urbana-Champaign. "An example is Oscar Mayer's Lunchables, a meal-in-a-box that parents of school-aged children love. It solves the parent's problem of what to make for lunch everyday. Its success, in fact, can be measured by the number of imitators that now offer similar products."

"The second reason people try new products is if the product adds variety to the current selection of products on the market," says Griffin. "Once again, Lunchables owes its success to providing an expanded choice of lunch items. The product started with deli meats and cheeses and has expanded into sandwiches, tacos, and pizza."

"For a new item to succeed, it has to be relevant. At the same time, it must also have differentiation," says Larry Light. "Relevance means 'does it help the target audience?' And differentiation means 'is it better, different, or cheaper' than anything else out there?"

LOOK AT THIS On an average shopping trip, a consumer is confronted by so many items that her eye lingers for only about 2.5 seconds on each product, according to Robert McMath. "The look of a product has to capture people's eyes," he says. "Arizona Ice Tea is a product that is so well designed that people buy it just for the bottle. Each variety is anxiously awaited by collectors. The Republic of Tea's product line is attractive and the product is of high quality so that even in a relatively busy category, the items stand out."

Most products and many packages simply copy each other, says McMath. "And it's not just good enough to print 'new' on the old product label," he says. "Americans love 'new,' but they are not fooled. There's nothing wrong with new, as long as it's really new. It's got to have imagination."

The only consumer packaged-goods category to show growth in 1997, according to New Product News, was candy/gum/snacks, which posted a 2 percent gain over 1995. "Consumers love candy," says Lisbeth Echandia, publisher and editor of Confectioner, the trade magazine for candy retailers. "It's a category with a lot of excitement, and one in which there is a lot of room for new and different."

Candy, of course, is a product with a huge child following. "Children are very fickle," says Echandia. "They are always anxious to try new things. And unlike adults, they are very willing to move on to the next thing. At the same time, there is always a new crop of kids coming up. For example, sour-flavored candy appeals to a certain age group. As those kids grow up and lose their taste for it, there are new kids wanting to try it."

But children can also be tough consumers. "You have to keep the flavors current for them," says Echandia. "You have to keep finding new ways of presenting things. With kids, you also have to be aware of what else is out there."

One example of keeping up with kids involves licensing products. "Kids know what's cool, and that's what they want," says Echandia. The highly successful characters of Nickelodeon's Rugrats cartoon find themselves on everything from T-shirts to candy and gum products. Amurol Confections, a candy company in Yorkville, Illinois, licenses the characters, and has already launched one successful Rugrats gum product. Two more will debut in the spring. "We are introducing two gum products based on the Rugrats characters," says Bruce D. Thompson, vice president of marketing for Amurol. "We had so much success with the first product (a collectible comic-and-gum book) that we feel it is time to put out other licensed items."

EXPENSIVE INTRODUCTIONS New-product introductions may be fun for consumers but very expensive for manufacturers. "That may be the reason some companies are slowing down the rate at which they are putting products out into the marketplace," says Eric A. Majewski, business intelligence analyst in the consumers products group of the Battelle Institute in Columbus, Ohio. "They are more cautious because it is simply too expensive to launch new products that might fail."

New-product research and development costs can vary, depending on the product. "If it is a low-value-added product, such as a new color for an existing item, costs can run as low as $100,000 to $200,000. But launching an altogether new product, like a new high-tech item, can cost millions of dollars," he says.

"And that's just to launch the product. That doesn't include the investment of material and personnel to guarantee that the product actually makes it to the shelves and stays there. That's why many companies are going slower and why it is taking longer to launch new products. They're doing a lot market research, focus groups, and consumer testing before launching a product."

Another reason that new-product introductions are slowing down is the number of mergers and acquisitions in the consumer packaged-goods industry. "When a division from one company is sold to another, there is a period of settling in," says Lynn Dornblaser. "It is slow to start up again because both companies are too busy learning their way around the new organization. That's really slowed down launches over the past few years."

When a company doesn't do its research, the end result can be financially devastating. University of Illinois professor Abbie Griffin compares the launch of Apple Computer's Newton with USRobotics' Palm Pilot. "The Newton was supposed to be the hand-sized computer of the future that would help consumers keep themselves organized. But the developers didn't do their research, and they didn't really understand what consumers wanted. The product failed miserably and cost the company millions of dollars. On the other hand, USRobotics understood the needs of consumers for a hand-held organizer that would integrate with desktop computer systems and provide a way to keep busy people organized. It worked-the positive proof is the number of Palm Pilot imitations in the marketplace."

THE LIFE CYCLE OF PRODUCTS While they may be slowing down, manufacturers realize that new product launches are still essential to their businesses. "They need to keep growing their businesses, and they can't do that by reengineering or reducing costs. Instead, the only way to grow the business is to sell new products," says marketing professor Griffin.

"There are two approaches: to broaden their product line to meet the needs of new customers, and to deepen their offering to their existing customers. To reach new customers, manufacturers must take their current products and modify them, or diversify their current line. To keep their current customers satisfied, they must come up with new categories or new sizes within their current lines. Both approaches are necessary to keep up profits," she says.

But Griffin also points out that manufacturers keep making new items because all products have lifecycles. As older products decline in popularity, manufacturers have to be introducing new products that will start to grow and gain among consumers. "All products have an initial bump of popularity. Then they reach a more or less even level of consumption, and eventually taper off," she says. Manufacturers have to find a way to revitalize a product or find new products to take the place of the ones on the decline.

Griffin cites Spam as an example. The venerable luncheon meat used to be very popular, but it has almost completely disappeared, except as a novelty product. Another product is milk. "Milk consumption has been in a long-term decline, and even though there has been energetic advertising, there has been little growth. Now, the Dean Food Company has introduced a new package concept. Instead of the small, square cartons available in most areas, single servings are packaged in attractive, small plastic bottles with screw-on caps, called Chugs. Chocolate-milk consumption is increasing where this package is available. It is the packaging that stimulates sales, because it solves a problem and revitalizes the category."

OVERLOADED? Most consumers simply do not tire of new products. And in some categories, such as apparel and automobiles, they anxiously await the introduction of new products and new styles. "We are always looking to try something new," according to Britt Beemer. "Our surveys found that 69 percent of consumers say that if they see a sign announcing the arrival of new apparel in a clothing store, they immediately check it out."

Other industries are also ripe for increased new-product introductions. "The home-improvement category is the next fertile area for new products," says Beemer. "It's an area that moved slowly in the past but is increasing." A quick look at paint illustrates Beemer's point. Beside the ubiquitous Glidden and Sherwin Williams, hardware stores now stock Martha Stewart and Ralph Lauren.

As long as manufacturers can keep finding new products, consumers will keep trying them. Some new products will quickly become indispensable-disposable razors are about as ubiquitous as a product can be. Others crash and burn shortly out of the starting gate and are relegated to the shelves of Robert M. McMath's New Products Showcase and Learning Center. This center is a collection of more than 60,000 once-new consumer products, many of which failed, and many of which cost manufacturers hundreds of thousands of dollars to launch in the first place.

But as long as manufacturers keep making products that answer consumer needs, there will always be someone to try them. "Consumers will accept products that answer their needs and help them," says Larry Light. "The products that won't last long are those that have no reason for being in the first place."

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