Part 3 · FMCG trade practice · Chapter 3.10
Launching a product
Draft: the wording may change.
The idea
A new product has to be placed in shops before any shopper can buy it. The company pays for this with a launch scheme and asks the stockist to take a first order and seed the product into as many outlets as possible in a few weeks. But a launch is judged by the second order: did the shops that took it once, take it again?
The three words
- First-order target — the quantity the company asks the stockist to buy for the launch. Often more than a month's guess, because the company wants the shelves filled quickly.
- Seeding — placing the product in outlets for the first time, often in small quantities: half a case, or a strip of 12 packets.
- Launch scheme — the extra margin, free goods or credit days that make the first order easier for the stockist and the retailer.
At the counter: a new ₹20 chocolate cream biscuit
The SO comes with the launch circular. The ask:
| Item | Company's plan for your point |
|---|---|
| First order | 120 cases, in the first week |
| Seeding target | 300 outlets in 30 days, out of 420 on your beats |
| Retailer launch scheme | 1 free packet with every 12 packets, for the first purchase per outlet |
| Stockist launch support | 30 days' credit on the first order instead of the usual 7 |
| Display | ₹100 per outlet for keeping the launch strip hanging for 30 days, with photo |
| Return of unsold launch stock | "As per company policy" |
Before agreeing, the stockist does a quick sum. 300 outlets × 1 strip of 12 = 3,600 packets. A case holds 48 packets, so seeding needs 75 cases. The other 45 cases are for repeat orders in the first month — and nobody yet knows if there will be any.
So he answers:
Stockist: I'll take 80 cases now and 40 after two weeks, if repeat orders come. And the return line — write down what happens to unsold launch stock. "As per policy" is not a policy.
The launch month, week by week
| Week | Task | Check |
|---|---|---|
| 1 | Receive first order, brief DSRs, start seeding | Outlets seeded |
| 2 | Continue seeding; first repeat orders should start from big shops | Repeat orders from week-1 outlets |
| 3 | Second instalment of stock only if repeats are coming | Stock days on the new product |
| 4 | File the launch scheme and display claims (chapter 3.13) | Claim filed on time |
Seeded is not sold
Seeding numbers look good easily: a DSR can place a strip in 300 shops in a month. The real measure is the repeat rate — out of the shops seeded, how many ordered again within, say, three weeks?
| Outlets | |
|---|---|
| Seeded in month 1 | 300 |
| Ordered again in month 2 | 120 |
| Repeat rate | 40% |
A 40% repeat rate tells the stockist to slow his orders, and tells the SO which kinds of shops the product works in. It is still 120 real customers. From here the launch becomes normal selling, with normal targets (chapter 3.8) and ordering (chapter 3.11).
Common mistake
Taking the full first-order target without a written return term. Launches fail more often than anyone says. When a product does not sell, the stockist is left with cartons nearing expiry, and the company's answer depends on what was written down. Agree the return or replacement terms for launch stock before you sign the first order, and keep the launch scheme claims on the bills from day one.
Where you'll use this
Chapter 3.13 covers the launch scheme claim. Chapter 3.14 covers what to do with launch stock that does not sell. In Part 4, a list of seeded outlets that have not ordered again in 21 days is one of the most useful reports a new launch can have.
Check yourself
- What is the difference between seeding and a first-order target?
- In the example, how many cases does seeding 300 outlets with one strip each need?
- Why is the second order a better measure of a launch than the first?
Answers
- The first-order target is how much the stockist buys from the company. Seeding is how many outlets the product is placed in.
- 75 cases: 300 × 12 = 3,600 packets, at 48 packets a case.
- The first order is pushed by the launch scheme. Only a repeat order shows that shoppers are buying it.