In a world where consumers continually want something new, many brands seem to think that the key to long-term success is continually releasing new items.
According to a recent Nielsen study — “Nurturing Innovation: How to Succeed in Years Two and Three” — that’s not necessarily the case. The report analyzed 600 launches.
The study notes that 55 percent of new products begin to decline in sales in year two, while 69 percent have fallen by year three.
The takeaway? According to the study, part of the reason is because manufacturers tend to devote fewer resources and less marketing support to new products in year two, because they assume that growth will automatically remain stable or grow after year one.
The Nielsen study noted that growing brands maintain 94 percent of their media spend in year two, while brands that see sales drops tend to cut their media spending by nearly 80 percent in year two. According to Nielsen research, new products must generate at least 80 percent of their first-year sales in year two to be successful over the long term. If budgets are tight, the study advises holding off on launching new products to continue to promote launches in year two.