Is innovation addiction creating confused consumers?

Discussion
Jun 29, 2015

A.G. Lafley, Procter & Gamble’s CEO, believes that the continual push by retailers for more product innovation is leading to an overload of choices for shoppers.

"I don’t think the shopper or consumer sees it as innovative — the innovation that matters is the innovation she buys," Mr. Lafley said last week at the Consumer Goods Forum global summit in New York, according to Fortune.

His comments came as P&G last August announced plans to shed up to 100 brands to focus on the 80-to-90 percent that generate 95 percent of profits and 90 percent of sales. While looking to create a more profitable and responsive company, the move is also designed to meet the needs of consumers.

"There is a lot of evidence in a number of our business categories that the shopper and the consumer really don’t want more assortment and more choice," Mr. Lafley told analysts at the time. "Consumers want to keep their life simple and convenient."

shopper confusion

As often reported, the continual arrival of new items has led to:

Exponential SKU growth: Between 1975 and 2008, the average supermarket’s mix has expanded from 8,948 items to almost 47,000, according to the Food Marketing Institute. Beyond new items, the growth has been boosted by a flood of line extensions as well vastly greater variety in staples such as eggs (cage-free, free-range, with omega-3, etc.);

SKU productivity dwindling: With the expansion, SKU efficiency is now seen by many as following the Pareto principle: 20 percent of a grocers’ mix accounts for around 80 percent of sales;

Shopper confusion: Studies find shoppers undergo "analysis paralysis" when confronted with an overabundance of choices. While larger choice sets are more appealing and enjoyable, shoppers freeze or postpone purchases due to uncertainty and frustration over so many options.

Silicon Valley, with its constant launch schedule, often debates the merits of too much or too little innovation, with Google Glass lately cited as an example of excess. Overdone innovation for traditional retail items is less often discussed but Mr. Lafley feels the pace is too fast.

"In general, we can get tired of our brand, what it stands for, our product, our package, long before our consumer does," Mr. Lafley said last week. "New isn’t the best product in the store; the best product in the store is the one she or he wants, purchase more often, uses more often and comes back to."

Is the mantra of continual innovation and newness leading to an inefficient mix of products in CPG categories? If so, what’s the key to finding the right balance between new and established products?

Braintrust
"This is not new news, yet the industry seems to be in denial about it. Several years ago, FMI did a study in conjunction with the GMA (I think) and the answer came back the same ... "Give us curated assortments.""
"First of all, full disclosure: I’m a HUGE A. G. Lafley fan and he did "blurb" my first book. Secondly, that said, he needs to get over always referring to the customer as "she." "He and she" works so much better. Thirdly, he is dead right."

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20 Comments on "Is innovation addiction creating confused consumers?"

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Paula Rosenblum
Guest
2 years 5 months ago

This is not new news, yet the industry seems to be in denial about it. Several years ago, FMI did a study in conjunction with the GMA (I think) and the answer came back the same … “Give us curated assortments.” Instead, we get more and more “flavors” of Tide.

The balance is in asking the consumer before changing product lines. Sometimes I wonder if slotting fees are driving the whole scenario. New products = new slotting fees, don’t they?

Ryan Mathews
Guest
2 years 5 months ago
First of all, full disclosure: I’m a HUGE A. G. Lafley fan and he did “blurb” my first book. Secondly, that said, he needs to get over always referring to the customer as “she.” “He and she” works so much better. Thirdly, he is dead right. True, the CPG industry has enjoyed a period of continual, and apparently continuous, product “innovation” — if, of course, you count line extensions, flankers, blockers and myriad “me-too” products innovative. But what shoppers want is critical innovation, not continual innovation. My local supermarket, Holiday Markets in Royal Oak, MI, is a case in point. If you are looking for key lime pie flavored yak milk yogurt you are likely to be in luck. Dannon plain vanilla? Not so much. The shelves are (almost quite literally) collapsing under the burden of thousands of new items but it’s really hard to regularly shop for the same boring items one has always bought. It is, in short, a policy of new items for new items’ sake — and while wonderful in theory, it… Read more »
Chris Petersen, PhD.
Guest
2 years 5 months ago

There is an interesting paradox in the CPG space — consumers state that they want choice, but often cling to familiar “trusted” brands. Perhaps in our busy lifestyle today, we as consumers simply don’t have time to try out new CPG products.

There is however an increasing trend of retailers building smaller stores. Even Walmart is building much smaller footprints these days. So a safe prediction will be that the retailers will be doing a lot of 80/20 analyses to cull SKUs down to the 20 percent that will drive the most profit through a smaller footprint.

Max Goldberg
Guest
2 years 5 months ago

With CEOs managing on a short-term basis and big companies failing to truly innovate, the easiest thing to do is to create line extensions. Big companies use their trade dollars to get these products on the shelves and retailers are all too willing to take that money. The result has been an explosion of products with little difference or reason for being.

P&G is shedding brands, but will it also look at shedding SKUs? How many different types of Crest toothpaste do consumers really need? How many versions of Tide? Brands and retailers have created consumer confusion. It’s up to these same companies to restore sanity.

Tony Orlando
Guest
2 years 5 months ago

It is too easy to have another copycat SKU on the shelves, and for me, less is more. Each store must build on its strengths and be the very best at it. In the last five years, I have gotten rid of cigarettes, 96 percent of my HBA, diapers, formula and most useless household items, and yet our sales are still good.

We’ve added extra room for dairy, deli and in and out crazy deals to our mix, which has helped us build a treasure hunt philosophy.

Innovation is great but, just like phone apps, there are way too many of the same thing being placed into the marketplace, and as a business you just can’t carry all of this stuff. The k-cup pods, which at one time were the hottest thing on the market, now must have 5,000 flavors. Really!

Common sense and knowing what your market needs will carry the day, and every store is different and needs to address its needs accordingly.

Ralph Jacobson
Guest
2 years 5 months ago

The focus needs to be on consumer value and brand affinity. The 80/20 rule has been the case literally for decades in supermarkets. I can remember doing a specific analysis on this as far back as the early ’90s. Innovation is very much still required, however listening to your markets to determine what the shopper will consider true innovation is key. Successful new product introductions are still a huge challenge for manufacturers. I think many are doing the right thing by listening to their audience and keeping it simple for shoppers to enjoy their brands.

Mark Heckman
Guest
2 years 5 months ago

Innovation for the sake of innovation is similar to brand line extensions for the sake of growing brand sales and space allocation. Neither prosper in the long run.

As physical stores now appear to be trending smaller, there will be a need for the utmost discretion on what SKUs and technologies make the final cut. Retailers must establish selection criteria that goes beyond pocketing slotting allowances for carrying items on their shelves. In turn, brands must be responsible for managing their line extensions with the knowledge that more items can result in less sales.

Shoppers will embrace true innovation if the benefit is tangible. If it is just another shopping app that turns out to be too much trouble to use in the store, or a new flavor of gluten-free, herbal, lemon-coated Triscuits, shoppers will see it as just adding more confusion to a very confusing existing marketplace.

Ben Ball
Guest
2 years 5 months ago

Is this really even a question? A discussion?

While few of us can say this with the impact A.G. Lafley has:

“In general, we can get tired of our brand, what it stands for, our product, our package, long before our consumer does,”

this has been obvious to honest industry observers for years. I can remember teaching (OK, admonishing might be a better term for what I did) marketing assistants who joined the CPG new products groups I worked in that “lime-lemon is NOT a meaningful consumer difference from lemon-lime.”

Advertising is just as bad if not worse. I vividly remember agency account executives pitching the need for new creative every year. Somehow the fact that our media budgets were only large enough to generate a 20 reach and a 1.2x frequency among our target audience once a year didn’t phase them. WE were tired of the commercials — not our consumers.

It is going to be up to retailers to stop this cycle, and living on slotting allowances is not the way to do it.

Gordon Arnold
Guest
2 years 5 months ago

We now know that selection as in good, gooder and goodest is an expensive redundancy that can stifle sales opportunities. Product categories and comprehensiveness have a better chance to increase inventory turn rates and consumer average tickets in today’s economic climate. Selection and price are the best means of reintroducing one-stop shopping for the consumer to the big box, or any size box for that matter.

Raymond D. Jones
Guest
Raymond D. Jones
2 years 5 months ago

The vast expansion of available SKUs is undeniable and it certainly has created confusion among shoppers. While shoppers want more choices, they have difficulty dealing with the more complex purchase process that results.

When shoppers are asked which shelf set has more variety, they will frequently identify the set which includes their preferred choice rather than the one with the most SKUs. In trying to satisfy the shopper, we have created a less friendly shopping experience.

However I would not attribute this to innovation. It is important to distinguish real innovation from simple product proliferation. Real innovation provides the shopper with new benefits, extra features or improved performance. Product proliferation simply offers the same thing in more colors, brands or varieties.

It is critical to recognize the impact of innovation versus the complexity of more choice.

Ian Percy
Guest
2 years 5 months ago

I wonder if we all have different definitions of “innovation.” IMHO “innovation” and “variety” aren’t synonymous. One can add SKUs without an ounce of innovation. Innovation to me is like what a PhD dissertation is supposed to be: the revelation of something new, something the world hasn’t seen before. I’m for minimizing mere product extensions and maximizing true product innovation.

Ben Ball
Guest
2 years 5 months ago

“Innovation” and “variety” aren’t synonymous.

I had to jump back in on this one to applaud Ian Percy’s comment. We literally have clients who have dubbed their annual product proliferation cycle “innovation.” We don’t talk about our new SKUs anymore — we talk about our “innovation.” This is almost as dangerous a misnomer as calling our annual five year financial plans “strategy.”

Gary Hudman
Guest
Gary Hudman
2 years 5 months ago

At one point Bounty paper towels had, I believe, 17 different roll sizes each available in a seemingly infinite number of packs sizes, effectively paralyzing customer choice at the shelf. Perhaps P&G should condense this number into something manageable, say two roll sizes available in 6-8 pack sizes. This would certainly give consumers plenty of choices and make comparison shopping more transparent.

Kenneth Leung
Guest
2 years 5 months ago

I think the issue is product innovation versus line extensions. Adding another detergent packaging with a different scent co-branding is not innovation, that’s just extension and that does add confusion. Pods, for me, are an innovation in packaging (you can argue the wastefulness, but my friend who is visually handicapped found the detergent pods for dishwasher and laundry to be a godsend as you can imagine). Bottom line, there should always be a push for product innovation, but things like adding branded scent just to get another SKU is adding to confusion.

Dan Raftery
Guest
2 years 5 months ago
Mr. Lafley is right on his base premise that true product innovation is rare and the SKUs crowding shelves interfere with sales. (Paula — the study you referenced was “Variety or Duplication: A Process to Know Here You Stand.” It was published in 1993 by FMI, authored by yours truly while VP at Willard Bishop Consulting.) As stated above, this is not new news. What is also not new is the manufacturer addiction to product proliferation and the retailer addiction to slotting allowances that get the “innovations” into distribution. As an industry it seems to be easier to dedicate resources to “innovation” than other creative ways to sell product and guide/reward loyalty. In the 1993 study, we looked at a ton of syndicated data by category across multiple retailer store sizes and saw a flat sales dollars line develop in several categories as SKU count increased. I expect that could be replicated today. The focus of the study was to define a process for identifying duplication, not to prove that less is more. By removing duplicates —… Read more »
Dr. Stephen Needel
Guest
2 years 5 months ago

If new isn’t better or at least different (as in adding variety in a variety-seeking category), it has no reason to be there. Shoppers aren’t always looking for new and are only sometimes looking for different. So the right balance is not new vs. established, it’s what shoppers want to buy. That’s a testable proposition — it’s how many of us in market research earn our living.

Ken Silay
Guest
2 years 5 months ago

There is a difference between product innovation and breakthrough innovation. Product innovation is more iterative, i.e. process/ product improvement, whereas breakthrough innovation is truly about achieving something unmatched that leapfrogs the competition. However, I do also believe that there is some fatigue currently in the marketplace around the overuse of the word in advertising. We seem to have substituted “innovation” for “new and improved.” That substitution has definitely blurred the understanding of true innovation.

James Tenser
Guest
2 years 5 months ago

Mr. Lafley is an exceptional executive, and I agree with his strategy of pruning back lesser-impact brands and sub-brands from the P&G portfolio.

He is (and his competitors are) disingenuous, however, when he presents this argument to stakeholders without acknowledging that the brand system in his own company is at the root of SKU proliferation.

Let’s admit that career advancement for brand managers in large CPG companies depends upon the success of line extensions and innovative product forms that deliver incremental category share. Invent a new category (say, men’s body spray) and you too can be a superstar.

Where is the research that shows how many times an individual shopper purchases a new line extension? I’d hypothesize that, on average, the number is between one and two. Unless you capture a highly-motivated shopper segment (like consumers of pasture-raised eggs), most of the 15,000 (is that still the figure?) new products introduced each year are very pricey lottery tickets.

Doug Garnett
Guest
2 years 5 months ago
Yes, I think the obsessive push for innovation often drives out what consumers like with what they won’t like as much. On the other hand, it is critical that store shelves feel “vital” and “fresh”. And that requires some continual presence of innovation across the shelves for the retailers — but not in a specific area brand by brand. We specialize in advertising to introduce innovative products (a big, big problem most places). My advice is find small numbers of innovations that work well, put enough money behind them for them to succeed, and stick with them. Far too often, communication is given short shrift in the introduction when companies try to do too many things at once — spreading money between far too many products so it is far too thin for success. That said, this also leads to interesting opportunities: If your competitor showed up at the X show (e.g., Hardware Show, Housewares show…) with an innovative product and it never turned the cash register alive, it may have been that they didn’t… Read more »
Arie Shpanya
Guest
2 years 5 months ago

Anyone that has ever been to a grocery store knows that there are too many options for a number of products. This makes me think back to the 2000 Iyengar and Lepper study about decision making when faced with a few vs a lot of options. Shoppers were more likely to buy a jam that they had sampled when there were just a few options, compared to having several.

Shoppers don’t want endless choices. It’s a matter of presenting them with the best versions of the product. The only way to figure this out is to test. I think Amazon is a great role model here: innovate often and fail fast. Not every brand needs to release something new every month, but focus on the highest quality ideas and let the sales data and customer reviews speak for themselves.

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Braintrust
"This is not new news, yet the industry seems to be in denial about it. Several years ago, FMI did a study in conjunction with the GMA (I think) and the answer came back the same ... "Give us curated assortments.""
"First of all, full disclosure: I’m a HUGE A. G. Lafley fan and he did "blurb" my first book. Secondly, that said, he needs to get over always referring to the customer as "she." "He and she" works so much better. Thirdly, he is dead right."

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