Core SKUs or NPD? A game-changing decision on where to invest marketing spend

 

Thought piece:

Core SKUs or NPD? A game-changing decision on where to invest marketing spend

Kate Birtwistle, Client Director

Annual brand planning plays a huge part in setting up for success for the year ahead. A hot topic of conversation in these sessions is whether to focus marketing investment on core SKUs or NPD, particularly as budgets don’t always stretch to support both.

Of course, there are nuances to be mindful of and reasons for supporting particular products; for example you might want to push a specific SKU or range to protect its listing against an increased competitor threat or even during a range review window. And these factors should come first and foremost when prioritising marketing spend. However, sometimes having done that brands are still left with a choice to make: Should I support my core SKUs or should I support the NPD? At Capture, we believe that the focus of marketing spend – and in particular shopper marketing spend – should be on NPD. Here’s why.

Doesn’t supporting the core SKUs make plain sense?

Yes. The majority of your sales – for the most part – come from your core SKU(s). Fact.

Take the biscuits category as an interesting case in point. Despite being a category renowned for launching high volumes of NPD into market every year, core established SKUs drives the vast majority of the category’s sales. A huge 80% of biscuit sales come from an alarming 7% of products1. This means that when thinking about any sort of marketing or promotional activity, driving a small % sales uplift on your core SKU(s) could be huge in value terms.

When investing in the stock-market, it makes sense to back winners, and typically, the core SKU(s) are your brand’s core by virtue of being a winner. This thinking could very well lead us to believe that a brand’s focus should always be centered around the core.

But NPD is the lifeblood of our industry…

To overlook supporting NPD will likely have negative repercussions.

First and foremost (and at the most basic level) if a brand is unable to establish the base rate of sale of an NPD in line with the retailer’s expectations, forget retaining your listing. All of the blood, sweat and tears that went into developing the NPD and getting it onto shelf is for nothing if you’re not talking to your target audience about what the product is, why to buy the product and where to find it – the end goal being to maximize trial and conversion to sales.

What’s more, big bet NPD plans have a large role to play in driving engagement with key customers, many of whom are seeking exclusive launches that put them head and shoulders above their competitors in terms of their range offering. Customer engagement tends to be highest when NPD has the opportunity to drive value into the category or when the launch is at the forefront of a significant changing consumer trend. But it’s no good launching an NPD and hoping for the best, otherwise dubbed as the ‘spray and pray’ approach. Significant marketing support needs to go behind an NPD to ensure that we can ‘catch’, ‘connect’ and importantly ‘close’ our target audience.

So what’s the solution?

In reality, marketing budgets are finite. Building extensive plans to support both core lines and the many NPD launches planned across any FMCG calendar year is unrealistic. Tough decisions need to be made to ensure that marketing investment isn’t spread too thinly in order to do the campaign justice – think fewer, bigger, better.

With the core vs. NPD debate at the heart of brand planning discussions for many of Capture’s clients, we turned to our shopper data2 for answers and found something remarkable.

We compared sales uplift performance of shopper executions that focused on NPD3 vs. those that focused on the core.

We discovered that the average sales uplift % is much greater – both at featured SKU and brand level – for NPD-focused execution. This is a given – an NPD’s base sales are significantly smaller, so one would expect to see a higher sales uplift %.

But it became interesting when we looked at the average £ sales uplift comparison. Whether the execution was focused on core SKU(s) or NPD, we see more or less the same incremental £ uplift for the featured SKU. But at brand level, we see a significantly higher £ uplift for NPD executions: on average the £ uplift that we see at brand level for NPD executions is 42% greater than when the core is the focus.

This tells us that where there is the opportunity to support NPD, the power of ‘new’ injects growth into the core. It drives excitement for your established brand, encourages new shoppers to the brand and importantly gets shoppers to expand their consideration for multiple products from your brand.

Therefore, regardless of whether your aim is to drive sales of the core or of NPD, your best bet is to lead with NPD, as long as the other business & commercial reasons for support align too. For a long time, the FMCG industry has talked about ‘the power of new’. This data tangibly proves the real power it has, and we think it’s game-changing.

How do you currently plan shopper campaigns? Are they restricted to the retailer’s own media toolkits or has your thinking evolved with shopper behaviour? Let us know hello@capturemarketing.co.uk