According to new research, the two biggest concerns for marketers today are business growth and innovation. “New product development is the lifeblood of our business,” says Procter & Gamble’s (P&G) global marketing director Stephen Squire. “The key engine of growth is innovation.”
But there is a problem. Many brands complain that long lead times, budget constraints and fear of failure are holding them back.
P&G, and brewers AB InBev and Greene King have all launched new products and variants recently, and although their strategies differ, each has similar goals: to achieve greater penetration among current customers or appeal to new ones.
A study by consultancy Dunnhumby shows that 69 per cent of respondents cite new product development (NPD) as a concern, while 73 per cent say their main worry is business growth. These rank higher than budgets, product marketing and balancing affordability and profitability.
“The main concern is about outstripping budget constraints,” says Dominic South, marketing director for Greene King brewing and brands. “To be truly innovative, you have to take risks.
“At the same time, there are always commitments that you have to deliver against – especially when you are talking about capital investment and the financial risks associated with innovation.”
However, Dylan Slaney, head of brand at Dunnhumby, points out that such risks are unavoidable. “In a climate where consumers constantly expect more for less, innovating is a necessity just to maintain share.
“The key is to innovate in a way that adds incremental value to your business and your category – this is the greatest challenge.”
Slaney recommends that brands put new data sources at the heart of decisions right through the NPD lifecycle. “Brand owners now have the opportunity to harness the power of connected insight into their consumers’ shopping habits, media usage and attitudes,” he notes.
“More reliable information to support NPD is also available pre- and post-launch, but this might involve moving away from a traditional approach.”
In the case of P&G, which last year made sales of more than $84bn (£50bn) and spent more than $2bn (£1.2bn) on research and development, that approach meant crowdsourcing.
The US multinational launched what it calls the world’s first ‘smart toothbrush’ for Oral-B. It tracks a person’s brushing regime through Bluetooth technology and sends the data to a mobile app. Having shared the data with a dentist, the user can also programme routines into the device.
In the process of bringing the smart brush to market, Oral-B approached consumers for ideas. Specifically, it launched an unbranded contest on the crowdsourcing platform eYeka to find out what a connected toothbrush might offer them. In 22 days, community members from 24 countries responded with 67 suggestions.
“Crowdsourcing gave us people who also understood the technology possibilities,” says Squire, “and speed, because we could get a lot of ideas very quickly. Speed is critical because the technology space is moving so fast. It means you have to move from thinking to execution to implementation much faster.”
The three winning ideas, as well as the creative contributions from the community, were analysed by the platform. As a result, Oral-B developed and brought a branded smartphone app to market in September last year.
This was followed in February by the reveal of the SmartSeries at Mobile World Congress, released on sale last month. In addition, the toothbrush will be the first P&G product to be listed in the Apple store.
The product development and campaign were a departure for P&G, says Squire, who describes the new approach as “terrifying”. Traditionally, the company goes through an extensive modelling process for new product launches that manages money, people, resources and supply chain.
Capitalising on consumer trends is a tactic that Greene King used for an NPD project. It noticed a trend among younger drinkers to experiment with new flavours and speciality beers.
Unlike P&G, the brewer devoted significant time to the branding project, working in conjunction with agency Ziggurat Brands. Having researched the craft beer market – looking at competitors, considering what was successful and developing ways to launch into the market in a credible way – it introduced a selection of five beers in January.
“The beer category is seeing more innovation, both in terms of products but also pack formats and [how they are] dispensed,” says South. “Over 10 per cent of our business is made up of innovations that we have launched within the last two years, so we need to and do innovate at a fast pace to ensure we stay ahead.”
He adds: ”We recognise that one of the hurdles to NPD can be short-termism, therefore we have taken a longer-term view and continue to measure performance up to three years from launch.”
Following trials earlier this year, AB InBev introduced a new flavour variant to Stella Artois Cidre last month in an effort to broaden the brand’s appeal. Phil Pick, marketing manager for Stella Artois, says: “If you look back over the past 10 years, we have been successful in bringing some big brands to market.
“From Becks Vier, Stella Artois 4 per cent and Stella Artois Cidre, we have looked to make big bets on innovation. It’s about making sure we drive scale innovation in the market. For me, that’s key to sustainable innovation.”
He adds: “It’s inefficient for businesses and retailers when there’s a constant churn of innovation that is there for 12 to 18 months and doesn’t last. That type of innovation doesn’t serve anyone and is why we are focused on big bets within our categories. Those big opportunity areas are where you’ll see a lot more from us over the next few years.”
The reasons for innovation that marketers cite in the research allude to growth incentives within companies. However, the ability to drive competitive advantage also scores highly among brand marketers (see box below).
For bookshop chain Blackwell’s, competition from online sellers such as Amazon poses an obvious threat. Yet its response to digital challenges helped it to pick up The Bookseller award for Book Retailer of the Year last month.
In April, the company launched a digital learning platform, Blackwell Learning, at The London Book Fair. The product, which will enable students, academics and professionals to download and annotate ebooks, was developed at its digital development hub in Shoreditch, which opened in September 2013.
According to David Prescott, Blackwell’s chief executive officer, the development “is making sure we are keeping our destiny in our own hands in terms of being able to sell digital content to the students and professionals that we serve”.
The hub is also developing a bespoke customer relationship management system to ensure Blackwell’s communicates with its customers as individuals, rather than using round-robin emails.
“Having a culture that allows people to take risks is critical for us,” adds Prescott. “We also have 100 per cent board alignment. That doesn’t mean we don’t disagree but everybody knows what we are trying to achieve. They understand that we will innovate, and sometimes [the innovations will] work and sometimes they won’t.”
It is clear that innovation is one of the principal driving forces for these brands. Each has shown a commitment to take risks, and each has been willing to put in the necessary investment.
As P&G’s Squire concludes: “Marketers need to learn small, fail perhaps and succeed hopefully, but learn by doing as opposed to spending a lot of time internally trying to manage the risk.”
What marketers say about innovation
- One third of companies spend up to £500,000 a year on product innovation and just under half spend up to £1m
- Almost a third of those surveyed didn’t know what proportion of their innovation budgets led to a successful launch
- More than 40 per cent of respondents say that their company reinvested up to 20 per cent of profits in NPD
Reasons for innovation
- 98 per cent: to grow the company or brand
- 90 per cent: driving competitive advantage
- 69 per cent: new products help the brand be seen as an innovator
- 65 per cent: the brand needed to innovate to renew a connection with the customer
- 63 per cent: new products mean increased customer conversations around the brand