Is launching a new product always the best move?

Innovation has been often cited as the key to growth.

For example, a Kantar World panel predicted that 75% of growth for consumer product companies in the next decade will come through new product development. However, such figures can be misleading – as many firms have discovered, the price of innovation failure is high.

A recent TNS study has revealed the damaging effect of innovation, in the form of poorly strategised product launches. The research firm assesses close to 10,000 new products globally every year, with more than 4,000 in Asia, it said.

“Launching an unsuccessful product wastes marketing budget, undermines a brand’s credibility with vital trade channels, and can damage brand equity – reducing the business’s potential to launch new products in the future,” said a note in the study. Launches can be cannibalistic, eating into the share of a company’s existing products – and diluting customer loyalty.

(Read also:7 questions to ask before launching a new product)

When product launches fail

According to TNS, over 3,000 launches found that 35% of the time, a new product actually decreased its parent company’s overall market share. This is a caveat for many Asian businesses confidently predicting innovation-led growth of 15% for the next three years, said TNS.

“For every Pepsi, which derived 8 % of its 2012 revenues from products launched in the previous three years, there are plenty of companies where investments in innovation actually reduce profitability. This is not to say that innovation is always a bad idea – but it is not always a good one,” said a note in the study. 84% of senior executives interviewed also said that launching new products is “very important” to their growth strategy.

Across 200 product launches in the region, the study found that less than half (45%) of new items stay on the shelves after three years, while only 4% actually deliver long-term growth.

This comes at a timely season. The past year has seen conglomerates such as Procter & Gamble and Philips streamlining their brand portfolios. For the former, it announced that it would cut, merge or sell up to 100 brands in the next two years to cut costs and focus on the top 70-80 earners. Since then, Duracell has been sold to Warren Buffett. For Philips, it will be splitting its lighting business from its healthcare and consumer divisions.

Successful product launch strategies: Eu Yan Sang & Tiger Beer

TNS highlighted two recent examples of companies who have been launching new products successfully.

Eu Yan Sang is the first. The company made it a formal part of their strategy to roll out 9-12 new products a year, since which it has seen steady overall growth. In the last five years revenue has climbed from US$222 million in 2009 to US$366 million this year. “New product lines have been a key part of this success, making a significant contribution to the wider group. For example in 2005, the company’s new products launches, including Cordyceps Capsules, Cough Nectar and EYS Vinegar together contributed approximately $5.1 million to FY2005 turnover, accounting for 3% of the Group’s sales for that year,” said a TNS spokesperson.

The other was Tiger Beer, after it launched Tiger Beer Radler.

A spokesperson for Tiger Beer told Marketing that the Radler launch was its biggest product innovation in five years.

She spoke about its publicity strategy: two weeks before Radler hit shelves, it invested in massive outdoor advertising; ran a TVC ran on free-to-air TV, Cable, YouTube and in cinemas. It also was websites like SG News, Yahoo SG, Facebook and on print titles including Straits Times, The New Paper and 8 Days. This was on top of media launches in the form of special events. Intensive sampling followed the media and trade launch in the following months and Tiger Radler pop-up bars were placed in high traffic areas where the working, shopping and drinking crowds. This also included the team going offices, supermarkets, beaches and parties offer the product.

She added that since the launch of Tiger Radler in December 2013, these helped the brand achieve an awareness of 98%. However the brand has not revealed sales figures.

“These brands offered benefits that were important to the customer but which were also suitably different to their portfolio, with the ability to attract a previously untapped audience. For Tiger Radler, it was about appealing to a new category of people looking for a light and refreshing drink who might not have previously considered beer,” said Ray Crook, director for innovation and product development for TNS APAC.