Some years back, Treetop, a juice drink in tetra packs was launched into the Indian market. It was a novelty at that time, and sales in the first year were so good that the manufacturer substantially expanded production capacity. But sales plummeted soon after and never recovered.
More recently, in a major offensive, a food conglomerate set up a business division to launch nutritional bars into Asia. Initially the growth was exceptional as the brand entered one market after another. However distress signals began to emerge about 8 to 12 months after launch. Another year or two later the business division was closed down.
What went wrong? In the case of Treetop, while the product trial was good, most consumers were not returning to buy the juice drink after their first, second or third purchase. The company was reading retail sales, which looked very strong in the first year of launch. However, what the sales data did not reveal was the repeat purchase rate, which for Treetop was low. In the second example, while the nutritional bars were filling the distribution pipeline and going on the shelf, not many were going off the shelves. The regional team, for some time, continued to post good aggregate primary sales as they kept entering new territories, expanding their distribution and stretching the pipeline.
Primary sales and retail sales tell us how the product is performing at that time, but as can be gauged from the above examples, they are not a good prediction for the future. On the other hand, consumer panels are particularly good in predicting sales, and should be used for this purpose.
Non-performing products result in financial and opportunity losses; and if corrective actions are not taken promptly, they also impair corporate reputation and dilute brand equity. It is important that such products are identified early after launch, and improved or discontinued before they adversely affect the company’s business and its reputation with consumers, retailers and other stake holders.
Considering the high rate of failure, it is important that diagnostic and predictive research continues after the product is launched. Ability to look into the future and gauge the expected share of their new product gives management the confidence they need, to take timely decisions. It gives them the conviction to further invest in performing products, and cut their losses in non-performing products.
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