A combination of the expense of bringing a new product to market and the need to create an immediate success is reducing the scope for innovation, and leading instead to slavish imitation of popular brands.
If innovation is the life blood of any company, there are many suffering from a narrowing of the arteries, particularly in the world of fmcg, where the blood seems to have congealed altogether.
Brand hijacking by me-too products, the growing demands of shareholders unwilling to accept failure, saturated markets, and the expense required to bring a new product to market in a period of austerity all deter innovation. Such factors start to explain why innovation is something people are feeling nostalgic about.
According to the brand identity company jones knowles ritchie, marketers increasingly rely on research and ignore the value of “gut feel” or instinct, which it claims often creates the genuinely innovative product or service.
Andy Knowles, a partner at jkr, says: “The recession has created a vacuum in marketing staff. Many inexperienced marketing executives are more comfortable taking research results as a guarantee rather than a guideline.
“In addition, today’s corporate climate does not accept failure – the pressure is on to succeed and marketing staff are reluctant to follow their own gut instincts and more likely to copy other successful products.”
It costs between 5m and 7m for a reasonable advertising and marketing launch. That is on top of the original research and development costs of bringing a product onto the market.
As the cost of failure rises, the result is a risk-averse culture, where cheaper, short-term launches are preferred, allowing the company to make money while it can. In that environment innovation goes no further than short-sighted brand extensions.
The chocolate confectionery giant Mars has been successful at extending brands into different packs, sizes, special flavour editions, ice cream and milk drinks. But according to Rachel Brushfield, senior brand strategist at brand and product development consultancy Grey Matter, Mars is one of a number of confectionery companies which has failed to exploit its most powerful brands.
She argues that most new launches in the chocolate countlines market in recent years have been safe and predictable, and suggests that brands such as Galaxy have been underused.
“Cadbury, Mars and Nestlé Rowntree are counting on profit-covered chocolate nirvana by the cost-efficient 100m dose, but surely they can come up with more than variety packs, pick ‘n’ mix, giant and mini sizes?” she asked in a letter to Marketing Week (July 26) which was prompted by Cadbury’s 3m launch of its Fuse bar. The new chocolate bar, which went on sale two weeks ago, is the biggest confectionery launch for several years.
However, this general mood of pessimism about innovation is not universal. Michael Levy, managing director at brand consultancy CLK, claims there is still activity although he concedes that people are working in a more cautious atmosphere. “You still get blue-sky projects, but they tend to be more firmly set in a commercial objective. It’s not a case of companies asking us ‘What shall we do next?’. There’s always a rider to that. People are more careful with their budgets.”
However, a pervading culture of conservatism is understandable, particularly in the area of packaged goods where manufacturers are having to spend so much of their time, energy and cash protecting their margins.
Retailers are getting better and quicker at bringing copycat products to market – own-label alcopops cashing in on last summer’s success are an obvious example. And as retailers get more confident about the high standard of their subbranded goods, they are increasingly aggressive about positioning them head-on against specific brands. It’s lazy, it’s unimaginative and it’s easy, and it appears to be effective.
Tesco claims its relaunched range of own-label cereals, made by Cereal Partners and supported by massive in-store point of sale material and sampling, now has a bigger in-store share than the market leader Kellogg, for example.
But it is not just packaged goods that have become an innovation-free zone. In the consumer electronics industry, once a heartland of innovation, the days of compelling new products are numbered. The business is currently following two trends.
The first is to pull a number of products into one box, creating machines that record and playback films, music and CD-Roms. The more fundamental development is the accelerated move of electronics companies into the entertainment and information industries. Neither qualify as true innovation.
According to one observer: “Concepts have got to be stronger and more able to disrupt the market. That is where advertising comes in. Innovation is not enough because it can be so quickly copied – what really matters is maintaining definition.”
The success of innovation depends on a number of variables. Bass’s success with Hooper’s Hooch – which followed Two Dogs to the market – can be explained by the company’s superior distribution through its pubs. At other times success depends on timing. For example, it is hard to imagine the nicotine patch being accepted by consumers ten or even five years ago, before so many smokers were so desperate to quit.
According to jones knowles ritchie, the pressure to be first to market forces management to accelerate its launch programme, resulting in less chance to innovate. But being first is not necessarily an advantage. In fact it can be a distinct handicap. Arguably, by being second, a company can see how the market reacts, and understand what consumers want.
Unilever found to its cost that rushing in first with its innovative two-in-one shampoo and conditioner Dimension was a mistake. The company positioned its brand as a product with “salon” quality, but had failed to understand its market. Procter & Gamble came in later with Wash & Go, using the Vidal Sassoon name as a stamp of quality on the packs, but concentrated only on the aspect of convenience in its advertising.
The result was huge success and a huge market share – because P&G had been able to watch, wait, and learn.
Thomas Bayne of PDP International says there is evidence that marketing executives are more inclined to use research in the expectation that the research – a powerful weapon of persuasion to use on the board of directors holding the company purse strings – will give them the answer, or find the solution. But research can be manipulated to reflect what marketers want.
Some observers believe that the “gut feel” factor can result in the worst examples of innovation, particularly when the determining factor is the company chairman’s particular hobby horse.
Sometimes change masquerades as innovation, as with Pepsi’s decision to turn its cans blue. The move, said to cost $500m (330m) is one of the biggest examples of cosmetic marketing.
Pepsi had to differentiate itself from Coke and Coke’s appropriation of red. It needed to “own” something – in this case the colour blue. But according to PDP, the issue is how can Pepsi innovate to avoid having to play by Coke’s rules?
Others claim this is nonsense. They believe that the “gut feel”, or instinct which prompts a true innovation will always come first. But instinct is coloured by other factors: the particular company’s culture, its willingness to take a risk and accept failure and having a longer-term outlook.
“We genuinely need to innovate if we are to stimulate consumers to go back into stores,” says Chris Cleaver, director of the Brand Innovation Unit at Interbrand. But some companies are now shy of innovation because of the cost and the speed of me-toos entering the market.
Ironically, innovation is probably the best way for brand owners to meet the competitive challenges they now face.