What Price Innovation?
November 1, 2017 | 8 min to read
When we return from the PMA convention, management often asks what did we see that was new and different and will help us drive sales in our department. Management often thinks these new items are the key to be coming successful in the Produce operations and are necessary to keep sales momentum moving. While innovation does help to move the department forward, relying on it as the sole reason for progress shows once again that management “just doesn’t get it!”
New products and applications for fresh produce have always been the hallmark of the PMA convention every October. All the suppliers try to outdo one another by introducing unusual or improved ways to present produce to the consumer. However, recent PMA conventions have featured innovation that was mainly focused on various forms of packaging or processed produce.
It seems as if the influx of new people into the industry without produce backgrounds has sent the industry on the path followed by the large Consumer Packaged Goods (CPG) companies. The prevailing school of thought seems to show that to expand the sales of the produce department and its various commodity categories, one must add additional SKUs to increase overall sales. This is the key to the CPG marketing mindset. It is their view of innovation to keep adding SKUs to a category instead of really looking at what the value of each SKU is and its reason for being introduced.
It is simply not enough to place a retail price on an item to garner the desired level of profit without determining the value to the consumers and whether they will pay the price for the item.
Most of the new products on display at PMA were just various new ways of presenting a similar product previously introduced. Perhaps it was a difference in ratio of ingredients, or packaging, or simply repetition. Instead of adding a new aspect or benefit to the category, the goal seems to be to get a new foothold in the category, if the company needed one, or simply to expand a company’s presence in displays. Nobody seems to question the need or the necessity of introducing “innovative” products. It is simply more important to develop these “new” products to maintain the company’s image of being “innovative.”
Given the large number of these products being introduced to the market, the responsibility falls heavily on the retailers to sort through this avalanche of items to determine which ones represent true opportunity. When vendors came to my office to present new items, we always went through a structured process:
• First, I wanted to know what was the purpose of the new product and why was it being produced. Was it a new item? A convenient way to use? Or was it a replacement item? Or perhaps an improved version of a previous item? Or was it just another item to be added to a category?
• Secondly, it was always stressed that the product needed to have a complete marketing program behind it. Where was it to be displayed? What category does it belong to? How much space would be required? How much ad support does it have?
Once we had viewed the presentation and the answers to all these questions, it was time to determine the key aspect of any new item… Will it sell? This determination always depends upon the cost of the product and the necessary retail price to meet the goals of the individual department. The positive aspects, benefits, and opportunities from the item all must be offset by a proper retail price to move the product.
It is simply not enough to place a retail price on an item to garner the desired level of profit without determining the value to the consumers and whether they will pay the price for the item. Just because it’s a new item and represents some sort of advancement in packaging, processing or technology does not guarantee it will be successful in the marketplace. It must have a well-thought-out marketing push behind it and offer the customer a value reflected by its retail price. Just carrying an item and placing it in an already crowded display space at an unreasonable retail price to see if it will sell is a recipe for failure.
Despite what everyone says in their marketing programs, the Number One reason customers purchase an item is for its value to them. Unreasonable, high retail prices may temporarily raise sales, but this effect will be short-lived and at the same time could even result in less volume being sold going forward.
Innovation is a good thing, but it must be tempered with reality. Creating over-SKUed sections, crowded with similar products, is not a recipe for driving sales and only adds to the confusion for the consumer when looking at this type of display. Placing high retail prices on these products only adds to the resistance for purchasing them, which places additional pressure on the sales momentum in the department.
True innovation provides the foundation to move sales to the next level. Success depends upon a true evaluation of the item and its value and sales potential.
Don Harris is a 41-year veteran of the produce industry, with most of that time spent in retail. He worked in every aspect of the industry, from “field-to-fork” in both the conventional and organic arenas. Harris is presently consulting and is director of produce for the Chicago-based food charity organization, Feeding America. Comments can be directed to [email protected].
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