Management teams regularly stretch and invest resources to try to effect innovations. But minor innovation (packaging, sizing, ingredients, line-extension) dominates innovation activity.
Many companies rely on a business model that overemphasizes innovation, but they often fail to perform the simple math before introducing New packs or variants. For example, one personal care brand launched up to six new products a year in a European market. But the majority of shoppers have only one or two buying occasions a year. With too many SKUs chasing too few buying occasions, the company was destined to produce losers. Products never had a chance to get big.
This pattern reflects a widely observed phenomenon of regular churning of minor innovation to create product stories that will invigorate rational product-benefit advertising.
But what does years of research by the Ehrenberg-Bass institute… only breakthrough innovation grows businesses. With rising commoditisation, competitors can easily copy most product innovations. These ‘me toos’, with hindsight in their favour, are even better than the original innovation. Ehrenberg-Bass gurus downplay the role of innovation saying its advantage “seldom lasts long”. Chasing after product innovations to get market share is presumed to be not only a losing strategic battle for most marketers, but also waste of good effort behind unsustainable and short-lived advantage.
These ‘innovation junkies’ would be better off pursuing a more long-term growth model: i.e. using emotional brand advertising with the occasional major innovation.
Inconsequential innovation is a trap that many firms fall into. Convinced that brands need a constant stream of ‘new news’ to keep people interested, they end up on a constant treadmill of minor product launches. New flavours, new sizes, new ingredients, new packaging, new features—anything to give the marketing team (and the sales force) something new to say.
But I’ve shown that effective advertising doesn’t need ‘new news’ to be effective. In fact, advertising doesn’t need to contain rational messages at all. In general, the most effective ads work at the emotional level, and the less focused it is on rational messages the more effective and long lasting it tends to be.
Minor variant launches of this kind can often be worse than no innovation at all. Retailers will give the new products shelf space, but often at the expense of existing SKUs. Shoppers will try them, but the purchases often cannibalises other variants of the same brand. New variants often have quite brief lives and, even if they cling on, they can cause problems by confusing buyers. Brands that are addicted to minor NPD can end up hopelessly fragmented, leaving potential customers baffled and confused. Try buying shampoo or mouthwash and you’ll see what we mean.
Worse still, such insignificant NPD often distracts businesses from the important job of supporting their core products. The best-selling products in the portfolio still need marketing support to maintain their sales, even if they are very well established. Indeed, the highest ROIs comes from advertising core products, not new variants. Core products usually have a bigger sales base and higher margins, both of which boost the ROI from advertising. And core products are more likely to have a halo effect on minor variants rather than vice versa.
Reduction in price elasticity tends to be less likely when there is innovation. It is much harder to charge high prices for new products.
Innovation can boost long-term growth if it is major.
Winners constantly invest in their hero Products to keep building on their success. They invest in product quality to keep generic competitors at a distance and earn a justified price premium. They invest in trade terms to deliver increased distribution, prime placements or promotional slots that attract new buyers. Investments in advertising improve consideration.
There’s a host of possibilities for creating real innovation for buyers once you really understand buyer value. For example snack company Mondelez innovated and introduced mini-waffles. The bite-size version made this rich treat more permissible for more occasions where consuming a few larger biscuits was seen as taboo. Or the water company that introduced smaller bottles with special caps as the perfect companion for thirsty joggers.
Every innovation should meet a high threshold for tapping into different buyer values buyer needs or consumption occasions, thus contributing to a meaningful increase in a brand’s penetration in its category.
so that’s how buyer value focussed innovation can help you grow by increasing penetration amongst buyers.