How New Product Fans Predict Failures
In this newsletter, I’ll share research on how some consumers are heavy purchasers of products that fail -- and why initial strong new product sales can be misleading. But first, two notes:
1. In the last edition of this newsletter, I mentioned I was leading a webinar with BevNet/Nosh where I coached the founder of Plant Press (which just announced the funding of its seed round) on creating a pricing model for their beverage line. If you weren’t able to attend and you’d like to see how it played out, the replay is online here.
2. In just a few weeks, there are two great seminars and networking events coming up in Boston focused on the natural and specialty channels: Becoming a More Effective Sales Manager (Dec 12-13) and Financing Your Consumer Products Company (Dec 14). There’s a healthy discount ending in a few days on Thursday 11/30. More info at the bottom of this message.
Now, about these harbingers of failure:
Some years ago, while working with loyalty analytics, I helped create a consumer clustering methodology based on purchasing habits. I called one group neophiles, people who buy newly-introduced products more often than others. Initially, I thought this group would be a prime target for large CPGs, who launch thousands of new items that are supported by significant investments in generating consumer awareness and trial.
I thought that by marketing to the consumers who can’t help but buy new items, my clients’ new items would have a better chance of success.
But I learned I was thinking about it backwards.
Most companies assume that strong initial sales signal a path to success. Contrary to this idea, some research suggests that strong sales of a new product by certain consumers can actually foretell failure.
A study (PDF) by professors from MIT, Northwestern, and Hong Kong University of Science & Technology revealed a consumer group that consistently purchases new products that end up failing. They call them “harbingers of failure.”
This contrasts with the ideas popularized by Malcolm Gladwell’s The Tipping Point, which suggested that certain people significantly influence the spread of new ideas. In its wake, agencies like BzzAgent popped up to identify such influencers and put new products in their hands.
In some settings — like political sentiment or fashion — it might be true that influencers make a difference. But it’s not the case with CPG products.
The research highlights the importance of identifying consumer groups that can signal the potential success or failure of a product, rather than relying on broader sales signals. Their follow up paper (PDF) expanded the idea from harbinger consumers to harbinger zip codes, geographic areas where there are concentrations of people who systemically buy products that ultimately fail. This could be easier for CPGs to monitor in the absence of household-level data.
So, if your new products are performing well, it’s crucial to analyze who is buying them. Sales driven by these harbingers might be misleading, indicating imminent failure rather than success.
With Thanksgiving behind us, I hope you've had a smooth and productive start to this new week at work. As always, I look forward to hearing your feedback.
P.S. The dataset was from a convenience retailer; new items (circa 2003-2005) included “Hershey’s wooden pencils, SpongeBob children’s shoelaces, and Snackwell sugar free shortbread cookies.”
P.P.S. Sharing a favorite thing: Pirate Ship. Discounted USPS and UPS shipping as if you had a corporate account. This is how I’ll be sending holiday gifts to my nieces and nephews. To complement it: These shipping labels are compatible with Pirate Ship and most other places where I need to print package labels, including returns.
Here’s more information on the sales and finance seminars mentioned at the top of this email. Note that rates are heavily discounted through Thursday, November 30. Hotel discounts are available. Contact Bob Burke at bob@naturalconsulting.com for more info.
Becoming a More Effective Sales Manager Seminar and Networking Event:
December 12 & 13, 2023 at Nutter McClennen Fish in Boston
Led by:
John Maggiore, a leading broker and consultant and former Natural Category Manager, Stop & Shop.
Bob Burke, consultant, co-author of The Natural Products Field Manual, and former Vice President at Stonyfield Farm.
John and Bob will lead in-depth, practical and actionable sessions on budgeting and planning, pricing and margins, working with brokers and distributors, effective sales calls and trade spending.
This event is ideal for entrepreneurs, new hires, experienced veterans new to the channel, and others looking to stay current with networking and problem solving. It is also great for customer service, marketing, and financial staff who could benefit from a greater understanding of the sales process.
Speakers include:
John Raiche, Senior Vice President of UNFI
Holly Long, Whole Foods Market
Ed Attubato, Stop & Shop, Category Manager, Specialty & Ethnic
Aaron May, UNFI UpNext
Melinda Williams, Synergy Sales Consulting
Sarah Dorey, Synergy Sales Consulting
Kathy Sullivan, Johnson O’Hare
TJ Varecka, KMGT Group, on succeeding at Target
Betsy McGinn, McGinn e-Commerce Consulting
TBA, SPINS
Financing Your Consumer Products Company Seminar and Networking Event:
December 14, 2023 at Nutter McClennen Fish in Boston
Led by:
Bob Burke, Natural Consulting
Mike Burgmaier, Whipstitch Capital.
Getting your company capitalized is perhaps the most difficult, time-consuming and frustrating part of building your business. The seminar de-mystifies capital-raising terms and provides insights to improve your odds to successfully obtain the financing you need. In addition, you will hear directly from industry-leading investors as well as an entrepreneur who has successfully raised institutional capital.
Topics include:
How do I determine my financing needs?
What is the best source of capital to align with my needs?
What's the game plan for my business and my time horizon?
Finding early-stage capital
Alternative funding models
Angel Investors/Groups
What terms should I expect?
Demystifying valuation
Institutional Investors & Financing
Anatomy of a term sheet
Do I go alone or get professional help?
Marketing Materials (business plan, sample presentation, financials)
Creating value
Speakers include:
Andy Whitman, Founding Managing Partner of Loft Growth Partners
Keith Kohler, K2 Financing
Adam Spriggs, The Angel Group
Jeremy Halpern, Nutter, McClennen & Fish LLP – Co-Chair, Emerging Companies Group; Co-Lead, Food and Beverage Group
Elly Truesdell, New Fare Partners
Juan Marcos Hill, Stride Consumer
Elliot Begoun, TIG Brands
Anouck Gotlib, CEO of Belgian Boys