Innovation, The Down-Side – Post II
9 Comments Published by Frank Lane May 1st, 2007 in Execution, Focus, Innovation, Way OffWhat has happened to tooth paste? There are so many options to each brand. Is this category also guilty of over-innovation?
I found a certain SKU (stocking unit) of Arm & Hammer toothpaste a couple of years ago. If my memory is correct I have returned to the store for toothpaste seven times since I discovered their variation that protects enamel. I have found it again only once.
Each time I have been to the shelf to buy it and not found it, I have ended up thinking about the category and deciding what to buy. Several times I have purchased brands other than Arm & Hammer. Is causing me to think a good idea for Arm & Hammer? Absolutely not. The most profitable buying mode for a brand is mindless repurchase. You want the consumer to just reach out and automatically grab what he or she always uses. You don’t want the buyer to even slow down to notice what is new.
If that mechanism makes sense to you, help me understand why adding an sku of the month and replacing something else is in a brand’s best interest. A friend in the beer distributing business told me this weekend that Anheuser Busch is adding 30 new sku’s to be put into distribution in May, in just one month.
I often wonder if companies get sucked into the “latest and greatest” way of thinking. Or, they think in an age where consumers want choices, that providing choices is the way to go. However, it makes no sense. Like you said, in an age of choices, you want *your* product to be chosen over those from competing companies. So why make it more difficult for yourself?
P.S. I just finished reading your new book, which is excellent by the way. And I am truly shocked that your posts don’t have any comments.
Jenn,
Thanks for your post and the comment on my book.
I think what companies got sucked into was “slotting allowances.” About 20 years ago the retail trade, e.g., grocery stores starting charging manufacturers to add a new item, euphemistically calling the charge a slotting allowance. Now it is in the trade’s best interests to take on a new item. The chain gets paid, adds an item then drops it after a short time.
Stay tuned. I am trying to get an estimate on how much grocery, drug and mass merchandiser profit is represented by “slotting allowances.”
In the meantime, please keep contributing.
Frank,
Interesting. I’ve never heard of slotting allowances before, but the concept doesn’t surprise me. Hmmm…wonder what those numbers will tell?
It may take awhile, but somewhere someone has an estimate.
Yes, before slotting allowances we almost never added an sku (stocking unit). In fact, we used to replace current sku’s with “New, Improved” versions. Companies still work on “new, improved,” but when is the last time you saw one? Instead they tend to be introduced as a new sku leading to greater and greater confusion.
We were taught when I was at P&G in the late 60′s what was referred to as the “shopping list” test. If your wife sent you to the grocery store with a list that said Tide and Bounty, would you know what to buy? I went to the store just yesterday and brought home the wrong Tide and the wrong Bounty. Times have changed.
And, like you pointed out in your book, you don’t want to make the customer think. Personally, if I have to think, then price becomes the winning factor. So even if I loved Tide, for example, just having to search through a dozen types of Tide to find my favorite one would be enough to make me stop and consider other brands.
In addition, if a company has a dozen types of its brand, it makes we wonder how good it really is. If regular Tide is a solid product, then why do they need eleven other variations? Are they just trying to make up profit from poor sales of regular Tide? It just makes a person wonder. (At least I do.)
Thanks for offering your perspective as a consumer. Hopefully, some of the clients that are run-aways on the “let’s add another item” train will read this.
Yes. And sometimes offering different variations of a product is a good thing, depending on what the core item is and how you’re branding it. But other times, it’s just not.
Having an interest in marketing, I understand why companies do things like this (although I may not agree with it or see their logic). But I am a consumer first, and so even though I understand, my consumer behavior wins out. (Like in my previous reply, where I said if I have to spend 5 minutes looking for my specific type of Tide, I’m going to say, “Hey. Look at all the other gazillion types. And this one is cheaper.”)
And I’m the kind of person that if you made one, solid Tide formula, and kept the price within reason, I’d just buy it without question.
A thought: Has anyone ever done a study to see which was more profitable–staying with one main brand and not making consumers think, or having a dozen brands and making people think and thus losing business? Those numbers would be interesting to see.
Jenn,
Hopefully someone else will know of something newer. A number of years ago a test was conducted between Ralph’s supermarkets in Southern California and Wonder Bread, where 66 facings including 60 variations of Wonder Bread were traded for 66 facings with only 6 variations. Wonder’s sales volume went up 26% with the reduced number of variations.
Every fast food company that I know of has moved to menu boards with meal #1, etc. This is a way of reducing choices. In every case, lines move faster and sales go up.
The problem is that if you have five different variations of a cat litter and cut it back to one, the trade will not give you the same five facings of shelf space. They reduce your shelf space and this does hurt sales.
Re: shelf space. That’s true. Nothing is ever simple.