Marketing Innovation vs. Product Innovation
Bringing an innovative product to market is the best way to increase revenue growth for consumer packaged goods companies, but it's not always possible to load your product pipeline with breakthrough offerings. Fear not, for a recent study [registration required] of 480 product launches discovered there's another way to grow revenue and, guess what? It's all about marketing.
The folks at McKinsey & Co. who conducted the study found that "novel products" could bring about a "2.7 percent improvement on the average revenue growth in their particular categories" but that such novelties were fairly rare, comprising a mere 15 of the 480 launches considered. By contrast, they found that a combination of "incremental innovation" - changing an existing product slightly - and repositioning the product towards new consumer segments or uses could effect a 2.8 percent improvement. If you don't have a passel of brand spanking new products coming down the pike, this is your ray of hope.
Two Yoplait products were cited as exemplary of this approach (which was employed in 26 of the studied launches). The first was Yoplait Whips, where the innovation resided in "whipping air" into their existing yogurt and then positioning it as a dessert. The second was Yoplait's Nouriche line, which is a vitamin enriched (the incremental innovation) yogurt drink aimed at health-consious consumers. The bottom line? "Sales of these two products grew four times faster than the yogurt category as a whole and accounted for nearly 20 percent of Yoplait's total sales in 2005."
Of course, repositioning a product associated with breakfast or snack-time as a dessert brings with it its own set of challenges. First you have to figure out how to make it seem like a dessert (by whipping, for example). Then you have to address the fact that desserts are usually sold in a different part of the store than dairy products and breakfast items. Moreover, you have to take a whole set of new competitors (ice creams and puddings, etc.) into consideration. This all requires that you have a marketing organization capable of collecting the necessary data, distilling the practical insights, and disseminating the relevant information to sort out these challenges. To quote a related McKinsey report, "It's critical to involve a diverse array of people, including some with regional knowledge, others with trade or pricing skills, and still others with skills in branding or key-account management."
Here's the rub: Successful marketing innovation, as opposed to product innovation, depends on the people involved and the way they are organized. In addition to talented individuals who know how to think outside of their functional silos (account, channel, product, etc.), you need an organization that fosters communication and collaboration via common methodologies and shared data models. Your marketing department needs to be broad-minded, harnessing its collective intelligence to identify and act on opportunities revealed by the confluence of varied knowledge streams. Everyone needs to be talking to each other - the channel people, the consumer insight people, the sales people, et al - and the resulting revelations need to inform marketing plans that make things new - a new way of consuming, a new reason for buying, a new means of enjoyment, a new path to fulfillment.
And remember, "making things new," and not just "making new things," is what "innovation" is all about.
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