Now that companies have weathered the commodity and pricing crisis, Simpactful is seeing C-suite leaders shift their focus back to driving growth. This comes as leaders recognize that volumes are falling or leveling off and continued reliance on pricing to keep revenues afloat will not be sufficient. This is driving a lot of critical questions including those around channel cost to serve analyses, trade architecture, retailer media optimization, key account Joint Business Plan implementation, and Sales organizational capability and structure.
Todd Ruberg provided insight on the latter topic here, and today we will cover the importance of renewed innovation strategies and plans as we have seen leaders from the C-suite on down begin to solicit help. They are redefining their brand and channel strategies, redefining innovation priorities, delving into ideation, and staffing teams to generate the next big product, service, or experience disruptor. That said, many leaders still have not brought innovation to the forefront of their Leadership Team priorities, and that may be a costly mistake. Here’s why:
Innovation that Drives Incrementality, Creates Joint Value: As the focus on commodities and pricing passes, Retailer buyers will be looking for ways to drive Category growth. They value brands that bring them exciting new ideas and opportunities that unlock not only brand penetration, but help to create value on their category scorecards. This can come in the form of increased store or aisle foot traffic, extended category lifecycles, trading up, improved profitability, simplified operations, and alignment with corporate priorities such as Omni or Sustainability. The push for exclusivity and differentiation also remains as retailers look to create competitive advantage and to drive shopper loyalty. “Throughout my career in sales, I was always excited to walk into my buyer’s office with an idea that was either surprisingly obvious and shelf-ready, based on shopper insights, or an idea co-created with my retailer to showcase the partnership and leadership investment behind it,” says Simpactful Sr. Partner, Marcy Selva.
Transformative Innovation Can Secure Top to Top Engagement: Making the leap from a retail Annual Business Plan account to a Strategic Business Partner can result in significant value for manufacturers driven by access to more senior executives and joint investment in driving category and brand business together. Most retailers can only invest in 1-2 partners per category or department, and competition for executive audiences is fierce. Senior retail executives will often entertain a discussion when a manufacturer is investing behind a true transformational project. Simpactful Sr Partner, Jill McIntosh has first-hand experience. “When leading Natural Foods at Kroger, my buyers were pitched size or flavor changes every day, but they would pull me in when brands came to them with new categories, innovative new packaging, value disruptions or even shopping approaches that would solve tradeoffs or unmet needs for natural shoppers and consumers, while also helping provide Kroger with a competitive advantage.”
Innovation is Often the Unlock to Implement Pack Price Architecture Strategies and Trade Architecture Visions: In today’s environment, taking pricing to implement a new Pack Price Architecture or pricing slopes without justification is a non-starter in most negotiations. However, bundling pricing as part of a bigger story around meaningful innovation with category-growth potential, profitability or sustainability interventions and brand reinvestment (especially in Retail Media Networks) is far more palatable to most buyers. Mike Tolkowsky, Simpactful Sr. Partner and Strategic Revenue Management expert explains, “As CPGs seek to expand brand penetration, increase purchase frequency, and drive net price realization, a vital approach remains working the continuum of innovation to create marketplace value and competitive advantage. Whether an incremental change, a disruptive one, or a truly transformational improvement to products, services or operations, each approach can help upgrade brand connections and deliver real value with consumers & customers. From a Revenue Growth Management (RGM) perspective, relevant and compelling innovations help ‘premium-ize’ portfolios and reduce the reliance on trade investment for growth.”
Sunk Costs are High for Innovation that is Not Designed to Win with Internal and External Business Models: Simpactful Sr. Partner, Heather Burgess, weighs in. “Over the course of my CPG, I led over 50 new product projects, several business model and innovation strategy renewals, and have consulted on a dozen more. It is normal for organizations to fall in love with shiny new ideas and inventions as projects get nurtured through the process (we like what we know!). However, when business leaders follow only the needs of the consumer and do not balance this with a clear business model that factors in channel requirements and shapes the critical questions and project KPIs, even the coolest new technologies can quickly fall apart.” This can create significant sunk costs, impact team morale and holes in both internal fiscal and retailer joint business plans. Simpactful Sr. Partner, Todd Ruberg, has experienced this numerous times and helped clients avoid the same mistake. In his words, “it is particularly important that the success requirements of all retail channels are met for innovation. Historically, the Club, Dollar, and eCommerce unique requirements aren’t met with CPG innovation launches, which has led to expensive retrofit like extra trade spending, extra packaging expense (bundling, etc.), or even contract manufacturing for different sizes or shapes. Simpactful has helped many CPGs identify those channel success requirements and how to bake them into innovation development processes.”
Lastly, Great Innovation Takes Time: It may be challenging to hit stretching growth goals using non-innovation levers. Buyers are pitched new products all day long, and they get excited when they see a brand that has raised the bar with innovation that will sell itself off the physical or digital shelf and can drive broader scorecard improvements. They may also request some incubation learnings before leaning in. The combined technical, commercial and supply readiness can take year to complete.
Innovation is not easy, but Simpactful can help. Our team includes former buyers and retail executives, as well as an expanded roster of multi-functional leaders who have navigated innovation from strategy through to sell-in and successful execution in-store. Here are some examples of recent engagements:
- Innovation strategy development
- Innovation training (insights, concept-writing, KPI and business case development, etc)
- Consumer/shopper insights & analytic support
- Surprisingly obvious ideation sessions (products, services, etc.)
- Stage gate and portfolio management processes
- Retail joint business plan guidance
- Top to top early innovation engagement and sell-in support
- Shopper based design and in-store transformation