Producers are driving innoflation

Innoflation is the buzzword used to describe a deluge of new products, often based on a good idea from one company. Despite the customer-focus rhetoric, it is primarily another way of beating the competition and may be crowding out healthy and

Eighty-seven new widget beers appeared within a year of Guinness’ Draught Bitter launch

A new word has entered the marketing vocabulary. Coined by Kim Slater, brand director at Guinness Brewing Worldwide at last week’s Nielsen’s retail conference, most marketers will recognise its import instantly: innoflation.

It is, in Slater’s words, where “the industry, retailer and consumer get thoroughly confused by the deluge of new products coming their way” and where, as soon as someone comes up with a good idea, “so many competitors pile in with ‘me-too’ imitations that it clogs up shelf space and undermines the added value of the original offering”.

You can put a positive slant on innoflation. It shows that marketers are keeping track of consumers as they experiment with a proliferating number of distribution channels, consumption occasions and product repertoires.

And it means that to succeed nowadays you need to be first and fast, and you need to really know your customer. No, I mean really, genuinely, deeply, intimately know your customer better than anyone – you know, you’ve heard the same speeches as I have.

Quite right, of course. But you can see things rather differently. For a start, you may wonder if, despite all the customer-focus rhetoric, the overwhelming motive (and therefore, the actual focus) remains unchanged – to beat the competition and build market share. In other words, presentation gloss aside, it’s still fundamentally producer-driven. This may be why, as Slater ruefully noted, 87 new widget beers appeared within a year of Guinness Draught Bitter’s launch and hundreds of new alcopops have popped up from nowhere.

You may also worry, as authors George Stalk, David Pecaut and Benjamin Burnett did in a recent Harvard Business Review article, that marketers’ obsessive customer focus hides an element of displacement activity: a refusal to look inside to see why a better product, service or price can’t be offered. There’s a fundamental distinction between a trade-off, say between quality and price, and a compromise which producers impose on consumers because they refuse to question their own convenient operating practices or comfortable cost structures. Why do you always have to check out of your hotel by noon? And why do UK car manufacturers spend more on their marketing and sales structure than they do on actually making the damn things?

Worse, you may worry that innoflation is only a symptom of innocancer, where the activities of a once normal and essential cell spiral out of control to consume the resources and energy of everything around it. Are all those market research, research and development, new plant and machinery, packaging, distribution, advertising and promotion costs really worth it for a piece of product proliferation that clogs up the shelves and confuses the customer?

Now, of course, innovation and customer focus are marketers’ equivalent of the American Express card: don’t leave home without it. But still, it doesn’t actually get you there. The plane still needs to fly.

Successful marketing initiatives not only display inventiveness and customer insight. They display it in a way that aligns the organisation’s particular skills and resources with the identified customer need, and which also do one of the following two things: something your competitors can’t do, or something your competitors don’t want to do.

Take Asda, for example. At first sight, it’s a text book case study of a company flourishing once it rediscovers its customer focus. But that’s not the whole picture. Asda’s rebound has also depended on a complete overhaul of its internal cost structures, a conscious effort to create a dynamic, risk-taking, service-oriented internal culture, and a hard-nosed assessment of what its real assets are.

It has turned what many saw as its Achilles heel – huge stores in rather downmarket areas – into its strength. Its trading formula (to be the biggest operator of large-scale wide-range superstores at best value) deploys those stores to deliver things – lower costs, range, plus in-store theatre, in a way its competitors simply can’t copy.

Or take Daewoo. It hardly had flash new innovatory products to sell. But it created a total offer whose foundation is that it owns its own dealer network.

Again, the edge comes not only from identifying customer need, but from aligning internal organisation and structures to meet that need in a way that its competitors with large, entrenched dealer networks cannot copy.

Even if it’s not possible to come up with initiatives that competitors can’t copy, marketers can come up with strategies that rivals don’t want to copy. The classic was midget MCI when it took on AT&T in the US with the first ever friends and family offer. By offering a discount to five friends, it encouraged a huge burst of member-get-member recruitment.

For tiny MCI, it was an extremely cheap and rapid way of gaining market share. For giant AT&T, on the other hand, it created a most unwelcome choice. If it matched MCI’s offer, it would hardly gain any new recruits – it would simply slash margins on its existing customer base.

Another potential example today may be Orange’s latest recruitment campaign. Few of its rivals will be keen to help it clear the fog they have created around the true total cost of mobile phones. They have got too much riding on it.

Mars Ice Cream, on the other hand, is an icon of brilliant, consumer insight-driven innovation. But, it seems, it was so sharply focused on the consumer that it failed to see the power of Unilever’s distribution stranglehold. Far from doing something its competitor couldn’t copy it did the precise opposite.

It has been struggling to extricate itself from a sea of red ink ever since – if brilliant consumer-driven innovation isn’t tempered with those extra ingredients of alignment and strategy it can easily turn malignant.

According to Slater innoflation is here to stay. He may be right. But if he is, a major reason is that marketing has given buzzwords like innovation and customer focus inflated importance. So much so that sometimes they’re in danger of becoming cancerous – crowding out the healthy growth of fully rounded, honest-to-God, basic marketing thinking.

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