What enables some brands to command a premium, thrive in the wake of unrelenting competition and establish a fiercely loyal user base that is relatively price inelastic?
- Three Things:
- Unwavering Clarity & Consistency on their brand essence, core & purpose
- Meaningful Uniqueness in what they offer and how they offer it
- Understanding their end user, connecting with them on both an emotional and functional level, and having the forward thinking and agility to adapt
Here we will explore how to become meaningfully unique, how to create and establish an innovation platform that is focused yet flexible, and how to create an organization built to foster innovative thinking and action.
If you haven’t figured it out yet, innovation is THE lifeblood of business. Why? It goes back to one of the fundamental questions. What makes us meaningfully unique? If we can provide solutions to our end users that are unique, important, valuable and sustainable, we can create the foundation of a successful business.
There are typically four areas of innovation upon which we can focus:
- Baseline Improvement
- Line Extension
- New Product Expansion In-Category
- New Category or Channel
Baseline Improvements are improvements to current products in-market. They are product updates and improvements that seek to strengthen the value proposition & differentiation of the foundational product with core users, and can be delivered in many different ways. Examples include:
- New & improved formula. “20% better cleaning” or “2X more chocolate flavor”
- New & improved packaging / delivery system. “Easy spray trigger” or “no spill pour spout”
- More volume/better value. “20% more” or “New Concentrated formula cleans 10 more loads of laundry”
- Material or ingredient usage. “Now made with carbon fiber” or “now fortified with ashwuganda & green tea extract”
Line Extensions are new products that are typically close-in relatives of a current, foundational product, but become a new option as opposed to changing the foundational product. What usually triggers the pathway to a line extension is a successful core product that has a loyal following, but misses connecting with another large target audience because of some core feature that is important to loyal users. So, if you change the core product, you risk the alienation of your core users, but that change could bring in a new and meaningful group of new users. If that is the situation, a line extension is typically the route to follow.
Line Extension Case Study: Kellogg’s Raisin Bran Crunch
As a brand manager working for the Kellogg Company on the Kellogg’s Raisin Bran (KRB) ready-to-eat cereal business, I had an interesting dilemma.
- On the one hand, our team had done some in-depth consumer insights to understand our end users, shopping & consumption behaviors, need states, taste profiles, demographics and psychographics, and associations, so we knew our consumer very well. We knew the loyal KRB consumer loved the product, depended on it as a part of their lifestyle, had clear expectations of what it was and how it would taste, and was not interested in changing the flavor, texture or profile. Our core consumer target penetration & usage was already very high, which meant driving increased usage & penetration within our core user group would be very expensive to yield little growth.
- On the other hand, there was a large & growing portion of the population who had no interest in incorporating KRB into their diet. KRB was seen as an “adult” product for mom’s and dad’s (see above TV ad) and even grandparents, while the Gen X and Gen Y targets were large & growing, representing a growth opportunity for the brand, but these younger, growing groups had no interest in the core product. What to do?
Ask one of the most important questions you’ll ever ask when seeking insights. Why do end users NOT buy your product or brand?
This is exactly what we did. Our team sought insights from those who were not our core target. We sat with them at breakfast; we talked to them one-on-one and in focus groups; we watched them shop in-store; and we combed through quantitative studies. And what did we find?
- Younger consumers (Gen X & Gen Y at the time) thought KRB was for their parents. It was a more conservative, adult brand, that was seen as stable, serious and somewhat boring.
- The texture profile was not to their linking, especially the sogginess that is generated once the flakes soak in milk. They wanted options with more crunch and varied shapes.
- The flavor profile was too bland in the sea of sweeter options.
These concerns from the non-users were exactly some of the reasons the core users love the product. So, I began testing concepts for a line extension, in an effort to protect the core product with our loyal users but introduce an option to bring in the Gen X and Gen Y non-users. Here were the three critera we used to test various line extension options:
- It had to fit with the core equity of KRB. So, it still had to fit with the brand essence & positioning, provide some of the functional and emotional benefits of the brand, and not harm the brand or alienate core users.
- It had to deliver a truly unique taste & flavor experience that spoke directly to the current non-users where they would want to make it a staple in their selection set.
- It had to deliver top tier trial, repeat and purchase intent scores among non-users. For example, at least a 75% top two box purchase intent (definitely & probably buy), with at least 35% top box (definitely buy).
Through rounds of product testing & validation, including ingredient changes, sweetness levels, dry and in-milk taste & texture tests, and packaging designs, we validated that our new product, Kellogg’s Raisin Bran Crunch, accomplished all of the three above objectives. Through BASES II concept/product usage tests, we knew we had a winner, so we created a bold new advertising campaign, merchandising blitz and PR program to introduce. It was a home-run, and in the first year we blew away all expectations on sales. We had launched the most successful cereal new product in Kellogg’s history at that time.
New Product Expansion In-Category
The third area of focus is bringing a new product within a broad category that gives the end user a different experience from the core/base product. This is the area where the most time and energy is spent, and unfortunately, can be the area where the most time and money wasted. The key is to limit late-stage failures, something we’ll cover later on.
In creating the strategic growth journey for the Rain-X brand, innovation and new product expansion were critical. Rain-X began with a core product, Rain-X Original Glass Treatment. It didn’t take long for the founders and early business leaders to introduce a variation of the original (larger size, different sprayer).
Increasing the size of the Rain-X business by more than 4X required laser-like strategic thought, a powerful brand essence, a clear brand positioning and a relentless approach to innovation to bring new solutions that were meaningfully unique. Below are examples of the innovation success we delivered, including three (3) Consumer Product of the Year Awards.
New Category or Channel
The fourth area is launching into a completely new category or channel. This is typically a higher risk / higher reward path, thus is normally de-prioritized within most organizations and accounts for a small fraction of insights and investment. But upfront research could show you a path to phenomenal growth if done correctly. As you saw with the Rain-X example, our growth vision included a dramatic expansion into a new category of wiper blades. Through relentless innovation, strategic supplier partnerships, I/P creation and strategic alignment, not only were we successful in expanding the Rain-X brand into this new category, but drove to #1 market share. In essence, we took a low involvement category and turned it into an important, consumer-driven and differentiated category.
The Innovation Stage-Gate Process
Every organization, whether $20M in sales or $2B, has some sort of process to develop, create and launch a new product. Some processes are woefully inadequate, relying on intra-organization influence & pressure to push an initiative to the “front of the line.” On the other hand, some processes are stifling and slow, managing risk but a severe cost to speed, agility, first mover advantage and uniqueness.
Before you develop your stage-gate, ask yourself and your organization 3 important questions:
- How important is innovation to your success? Are you a leader and trend-setter or a fast follower? Are you reliant on innovation to drive margin expansion and distribution gains? Do you have such a strong category and/or market presence, where you are focused more on managing your product line vs. innovating?
- What is your risk tolerance? An integrated energy company like Shell Oil Products, who is building multi-billion dollar oil rigs that require enormous investment, have to withstand incredible environmental factors and place human beings at risk 24/7 requires a very different risk assessment and stage-gate model compared to a nutritious snack business that is launching $7.00 plant-based health food line sold at CVS and Wal*Mart.
- What are your critical paths? For example, if you require FDA approval on every new product, you need to account for that in your stage-gate. If you require OEM approval to introduce a new piece of automotive technology, you have to ensure your stage-gate embraces that critical path. If you have customer line reviews every year, and that is where new product decisions are made, you have to build your stage-gate to account for that key decision point.
Every stage-gate process contains these four general sections:
- Ideation: Ideas are generated based on a myriad of inputs, such as qualitative insights, voice of the customer, attitude & usage studies, ethnography, segmentation studies, market & trend reports, and so on. It is here an idea is created in a rough form, on-paper.
- Evaluation: Ideas are screened and validated. This depends on the company but could be a paper concept that is screened for purchase intent, uniqueness and likability, a rough prototype that is shared with an end user to understand fit for purpose, or it could be a financial estimate to understand what level of investment might be required to bring the idea to life, and what is the payback? Sometimes, it’s a combination of all the above!
- Development: If an idea gets to this point, it usually has been deemed attractive enough on which to place company resources to develop the idea into a tangible offering, which means a financial model has been done and it looks attractive. This is where the most cross-functional resources are engaged, as all functions, from marketing to engineering to supply chain to finance are involved in shepherding this initiative.
- Commercialization: Once the finished product has been developed, passed the hurdles for success outlined upfront and has commercial opportunity, it is set to launch. This is the commercialization & delivery phase where sales, marketing and supply chain are ensuring the product is ready to make, ship and sell while R&D, legal and finance are ensuring freedom to practice, claims and industry or regulatory approvals are cleared.
Key Pitfall to Avoid
One of the biggest pitfalls in the innovation cycle is late stage failure. Investing in innovation is already risky, especially if you are seeking truly unique and differentiated solutions. But when investments, resources and intellectual capital are spent on an initiative only to have it fail in late stages, it is not only demoralizing but it creates a more risk-averse mindset in the company for future innovation. Below are the three most likely reasons for late stage failure:
How to Reduce Late Stage Failure?
Creating an Innovation Stage-Gate
I have created, co-created, changed and adjusted many stage-gates over my career, and can tell you there is not one solution that works best. So I encourage you to not seek a “right answer”, but to really assess your organizational needs, goals and strategic plan to build the best stage-gate that fits your business. I would be happy to work with you to understand your needs and build out a stage-gate process that is right for you.
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