Insurance for CPG product launches to drive a higher risk appetite
How might we stimulate innovative communities by designing an experience that gets them to try more of what is “different”?
Here is an idea I was thinking that would help me and others find more new products every week or month at the grocery store. I like tinkering with possibilities and hope it drives food for thought for you.
Grocery chains are often able to establish their brand as the “go-to” for consumers by quality, pricing, or proximity. This leads to repeat shopping at same brands and familiarization with aisles. What ends up happening is that over 80% of household needs are bought repeatedly leading to less than 3% of CPG product launches showing sales that would deem them to be a successful launch.
There is a dearth of competition to the big CPG brands keeping their complement to big grocery chains open to inefficiencies. Secondly, consumer habits need to be stimulated to try newer things which in turn will drive more innovation from the smaller players leading to higher investments by the bigger players to culminate in a win-win for the customer, the industry, and the society writ large.
Launching a CPG product requires eons of planning with little scope to build MVPs and iterate. The finished final product is on the shelf or not. It is very binary in nature in that sense and so difficult to incorporate parallels from the software industry. It also involves significant cost in marketing before launch deterring trial and error.
Given all of this, what if there could be an insurance product where a claim is given up front in the form of a Line of Credit before launch of the CPG product. The LOC funds should be used for specific tasks only to stimulate higher try out of the product. If the product fails they keep the LOC but get a lesser rate of LOC to pay back as the insurance claim. On the flip side, if the CPG product succeeds with terms of success and failure being predefined, the LOC rate goes up and acts as profit sharing for the bank/fintech lender. The terms of success would be defined for each category separately as well so there would be differing rates for all depending on what makes sense.
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