How CPG analysts can cut launch failures and accelerate innovation

For CPG brand analysts, stakes couldn’t be higher. Some of the current challenges they face include: 

• Very high launch costs and failure rates

• Shifting consumer preferences

• Supply chain disruptions

• Economic uncertainty

Analysts have some options, though. Here, we look at how they can: 

• Accelerate concept creation from months to minutes

• Test and optimize packaging, pricing and messaging early

• Get mixed-method insights to understand why consumers make the choices they do

• Build a continuous learning loop that reduces failure rates across every launch

Let’s dive in.

Innovation is necessary, but it’s also risky. And in the high-stakes CPG environment, risk isn’t well-tolerated. Given that the cost to launch a new product often runs into the millions of dollars, the risk is substantial and the lack of tolerance understandable. Yet, without innovation and new products, CPG brands become outdated and profits decline. 

The most commonly cited statistic about product failure is that 85% of CPG products fail, which comes from the Nielsen Breakthrough Innovation Report - Europe in 2014. A more recent study analyzed 83,719 stock-keeping units (SKUs) in CPG categories over eight years and found 25% of new SKUs are gone within one year, and 40% were no longer sold two years after launch. If the decline continues each year thereafter, the 85% failure rate from Nielsen is likely still a good guesstimate, signaling the need for innovation insights. 

Incremental, breakthrough and sudden shifts

Forbes describes the types of innovation used by CPG brands as either incremental or breakthrough. Incremental innovation has to do with tweaking, refreshing and making small changes. 

The second type of innovation, breakthrough, is certainly riskier because brands have to identify what does not yet exist. Discovering unmet needs, designing products to fill them and then making sure people are aware both that they have this unmet need and that this new product can help—all of which is very expensive and difficult to predict. But, if a breakthrough innovation works, the result can disrupt an entire category. 

Regardless of which type of innovation is under consideration, what customers want or need changes almost as fast as you can click the “play” button on a TikTok video. In a report about post-COVID consumer behavior, McKinsey notes “Consumer sentiment is no longer neatly aligned with consumer spending, and simple methods for predicting consumer behavior are insufficient.”

Consumer demand shifts quickly, but it’s even more difficult to predict what those demands will be. In other words, the work of CPG analysts is getting harder while they are expected to provide faster and more accurate answers about what consumers want and will pay for.

“We learn from our failures. If you’re not failing some of the time, you’re not pushing the limits. Failure is no fun, but it’s necessary and valuable if you learn from it.” 

- Pat McGauley, Vice President of Innovation, Anheuser-Busch

A failed launch can cost millions of dollars, so while failure may be inevitable some of the time, hopefully it can occur earlier in the process of testing. Along with the financial implications, when a new product fails, brand trust declines and retailer relationships suffer. 

There are two key things that can help limit the fallout of failed innovation. First, is the idea of failing fast. By shortening the cycle of creating, testing, analyzing and optimizing, brands can make the timeline between the idea and testing the product shorter. And given the rapid rate of change in what consumers want, faster is certainly better. 

The second is to make sure the innovation actually meets some consumer want or need. In an article titled Why 95% of new products miss the mark (and how yours can avoid the same fate) published by MIT’s School of Professional Education, Svafa Grönfeldt, PhD says: “Some of these failures arise from a lack of empathy on the part of the organization, with those in decision-making positions not taking the necessary time to study and understand the customers’ true needs. Without putting themselves in their shoes, it’s often too late when they realize there’s no market for their solutions.”  

Testing early ideas with consumers is the way to check, then double-check and make sure the product or innovation actually does fill a consumer need. That means creating a continuous loop that prioritizes progress over perfection, even when you’re working on a breakthrough innovation.

The first big challenge is coming up with concepts to test. At Zappi, we have AI Concept Creation Agents that serve as a super-fast marketing team for ideation.

These agents can help you develop a list of strong concepts very quickly—within minutes, based on past learnings. Once you have a list of ideas, the agents request more information so that your concept can be refined further. The combination of Zappi’s data, your data and large language models results in unique concepts tailored to your brand, complete with messaging and visuals. 

Work that once took months now can be completed before lunch. But, concept creation is just the first step. After that, you need to test the product, packaging and messaging to make sure that it works with real people in your target audience. Not all of the ideas in your original list are likely to work. Moving from trial to success involves multiple tests. 

One problem that teams may encounter during the testing phase is having too much information and too many analyses. Parsing through and understanding all of the results conventionally can be slow and not always provide the most important information. Reporting matters, which is why Zappi also offers real-time feedback in clear formats that simplify insights. 

Sometimes knowing how consumers respond to various elements of a concept isn’t especially helpful. Analysts also need to know why consumers make the choices they make in order to make the best decisions going forward. Mixed method insights that include quantitative validation along with qualitative depth reveal the why alongside the what. 

Quantitative validation includes concept scores, purchase intent and pricing elasticity, while qualitative reports offer verbatim analysis, sentiment and cultural context. Those details matter when it comes to deciding exactly which concepts might be refined and improved. 

At one point, testing a concept might have resulted in a binary decision: go or no go. Now, with AI and connected insights tools, you can easily decide to iterate and try again.

But even with mixed-method insights, it may be difficult to reach decisions without context. Zappi provides benchmarks and norms that allow brands to compare across categories and geographies. Understanding what success actually is based on these types of benchmarks as well as how success in different categories and places compare gives analysts the tools they need to make the best decisions.

CPG analysts need accurate information, in a useful format, with sensible benchmarks and comparators in order to move from making guesses to serving as strategic advisors who can transform research into growth. After all, the risk of failure in the CPG space is real and products that become failures represent multi-million dollar losses, or in some cases, the failure of the company. 

It’s not just the initial concept, either. Packaging, pricing, messaging and product optimization are all critical for success. Leveraging the lessons from past failures and across launches means each new approach or idea becomes better through a learning loop that reduces mistakes in every area. 

See how Zappi’s Innovation System helps CPG insights analysts cut failure rates, accelerate launches and deliver consumer-backed evidence for every product decision.