Costs and benefits of launching new products

Annelle Sheline
7 Min Read

CAIRO: Egyptian representatives from various multinational companies discussed the costs and benefits of product innovation on a panel hosted by Ipsos, a survey-based research company headquartered in Paris.

Rahif Kayal, Ipsos’ MENA marketing research director, pointed out that rates of product failure have risen as a result of faster trend cycles.

“The rate of success has been decreasing over the last seven or eight years. Consumer expectations are changing more quickly. Trends used to take time to evolve, but now they happen every year. The issue is the lag time between innovating and missing the boat. Many launches occur after a trend has come and gone.

He suggested market research as one way to keep up with consumer tastes. Acknowledging that research takes time, he said, “Successful launches apply research findings at an early stage. If research can provide clear direction, it shouldn’t take additional time.

He gave an example from the auto industry, where seven to 10 years elapse from idea to car: a client lost $500 million because they conducted market research after beginning development and chose to ignore the findings.

Dalia Abdel Kader, deputy general manager of Arab African International Bank, criticized the shortcomings of the financial industry to use market research to listen to customers’ needs.

“Banks are egocentric, asking only ‘What’s profitable for me?’. The financial crisis was caused by innovations that proved exponentially profitable, but resulted in a crash, she criticized.

Addressing the local context, she stated, “financial products are not understood by the majority of the population owing to [low] financial literacy. The banking population does not exceed 10 percent.

She pointed out that even among those with bank accounts, understanding of the different products and services offered is minimal.

“We banks are addressing our peers more than addressing clients. We are competing with each other over rates for market share. But we’re lagging in trying to penetrate an extremely rich market.

She called for innovation to address those not in the “top of the pyramid.

“The A and B classes are saturated, there are no fresh funds here. We need to shift to integrating the masses.

She pointed out that the rest of the Egyptian population has money to spend, highlighting the more than 70 percent penetration rate of the telecom industry and its success as transforming the one-time luxury item of a mobile phone into a basic necessity.

Commercial Director for Pepsi Cola Egypt, Mohamed Saada warned however that launching a new product in Egypt requires consideration of the expected source of volume or revenue.

“Bear in mind that 80 percent of consumers in Egypt are in the D and E classes; they don’t have extra money to buy additional products. If they want to purchase a new product it comes at the expense of something else.

He admitted, “We have learned that what works in developed markets often doesn’t work in emerging markets, and described research and development centers sprouting throughout the BRIC countries (Brazil, Russia, India and China) as well as Egypt to develop models particular to emerging markets.

Failure to launch?

Each panelist was asked to name a common reason products fail.

Abdel Kader of Arab African International Bank responded, “The lack of a unique selling point to distinguish a new product.

Floris Wessleing, managing director of Danone Egypt, said, “Lack of revenues.

“Lack of continuous support, was Saada of Pepsi Egypt’s reply, that new products may achieve initial success but then fail when advertising dries up.

Hani El Gebaly, director of strategic planning for Intel Corp replied, “Lack of data.

Kayal of Ipsos answered inversely, saying that a product is generally successful if consumers feel it is relevant to them, different from what is on the market and not too expensive.

“If these three elements exist in any new product or service, there’s a good chance it will succeed, no matter where you are, he affirmed.

Lee Markowitz, chief research officer of Ipsos-Insight, then provided the “10 Secrets to Award-Winning Products and Services. Many of the examples remained highly specific to the American context, such as Swiffer, a product not currently available in Egypt.

He gave examples of innovative marketing strategies such as Ax deodorant crowd sourcing, or allowing people to submit ideas and then vote on an advertising campaign, then described new packaging as “almost recession proof, giving the example of Heinz ketchup redesigning their bottles.

He responded to questions from Daily News Egypt about the specifics of launching or innovating products in the Egyptian context.

“Egypt is similar to other emerging markets, especially those in the MENA area. Here local product development is important. A lot of times the products launched elsewhere don’t fit because the culture here is unique.

He continued, “This is a smaller market in terms of money spent on marketing and in the amounts that consumers can afford to spend, which means that marketers have to be efficient. It is also important [to keep products] simple and key. Those developed elsewhere may be too sophisticated for this market.

He echoed panelist in saying, “Emerging markets must consider that consumer budgets can’t afford a lot. Consumers won’t buy something they don’t need, or if they do it will replace something else. You need to know what it will replace, is it from your company or a competitor? If it’s from yours, does the product have a higher or lower margin?

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