Introducing Value as a KPI for Innovation Tracking

This blog post summarizes the Veylinx webinar, “Launch & Learn, A Value-Driven Approach to Innovation Tracking.” You can watch the webinar recording here and contact Veylinx for more information.

We recently conducted an industry survey about the importance of innovation tracking for CPGs. The study revealed that 81% of researchers and marketers feel that innovation tracking is important or very important. However, fewer than half of the respondents think their current approach delivers much value.

One respondent stated, “We don’t always understand the reasons behind our failures.” Another explained that their current process for innovation tracking means that they are “clear on what’s happened, not always clear on why.” A common challenge that emerged is the need not only better to understand why a product launch failed but also why it was successful.

Most everyone agrees that innovation tracking is essential to the long-term success of a launch, but it’s clear that a new approach is needed. One way to think about innovation tracking is to consider a rearview mirror versus a steering wheel. In your car, the mirror is great for looking backward — and this is often how post-launch trackers are used. You can clearly see sales performance, how effectively awareness was created, how many people became buyers and repeat buyers, etc. But it’s a lot more difficult to use the tracker as a steering wheel to make changes after the launch based on the insights you’re capturing — and to guide the project in a new direction if necessary. Your innovation tracker should function as a steering wheel, and we’re pleased to introduce a new approach that does just that.

First, what do we mean by “innovation?” Launching a brand-new product is the first thing that comes to mind when discussing innovation. However, innovation also comprises repositioning an existing product or launching a new brand. Simply put, anything you are changing or launching — and want to create awareness and adoption of — should be considered an innovation.

The launch is just the start of a journey toward long-term success.

Typically, innovation tracking focuses on sales data as the most important KPI. But those numbers can only show you so much. You can see what is happening but not why it is happening. Sales as a KPI summarizes all your efforts: distribution, awareness build-up, marketing activities, promotion, etc. Sales is undoubtedly an important KPI, and we don’t recommend replacing it, but there is a challenge: a sales transaction happens at the very end of the process, so it is difficult to use as an early indicator of success or failure. This prevents you from changing tactics and taking the right measures to steer your innovation toward success.

Advantages of Sales as a KPI:

• Can be used to measure progress

• Useful for analyzing patterns over time

• Essential for evaluating long-term product performance

Disadvantages of Sales as a KPI:

• Occurs later in the customer lifecycle

• Provides an understanding of “what,” but not “why”

• Doesn’t give visibility into product value

Value as a KPI

The product innovation journey is long — and the launch is not the end but the beginning of another journey. This is why we have introduced “value” as a KPI for tracking innovations.

By value, we mean the utility a consumer sees in the product. In theory, a transaction happens when the consumer values a product more than the money required to purchase it. When you launch a product in a market, you start at zero: there is zero distribution, zero awareness, and zero perceived value. A successful launch develops all three of these, and once the perceived value reaches the retail price, the transaction occurs.

This relates very nicely to Byron Sharp’s principles of marketing. According to Sharp, it’s necessary for a product to be both Mentally Available and Physically Available. It’s crucial to be on the shelves, but also vital to be on the consumer’s mind when they are shopping for a product. We can enhance this further by adding Value Development. Awareness can be considered part of Mental Availability, but how much consumers are willing to pay — that is, how highly they value your product — can be tracked separately as part of Value Development. Once all three of these conditions are met, a transaction will happen. In order to truly understand how innovation is performing in the market — especially in the early stages right after a launch — an innovation tracker should focus on measuring how value is being developed across your customer segments.

Want to know more about using value as an innovation-tracking KPI? Reach out directly to us or watch the Value Development webinar recording!