Sunday, October 14, 2018

Innovation 101: What does it mean to innovate in FMCG

Its been a while since I wrote & apologies for that. Clearly I couldn’t keep up the discipline of writing at least once every month (much like my diet). 

What prompted me to write today was actually the Maven Meet - IIM Indore - Mumbai campus’s marketing event. It was a one day event with 8 speakers including me and the theme of the event was Disrupt or Die. Each one of us had picked up a trending topic within innovation to show how innovation is the only step forward. The event made me realise I haven’t covered Innovation at all on this platform so far. So here we go - Innovation 101!!!

During the course of this post; I will try and cover two fundamental things about Innovation:

1. Renovation vs Innovation
2. When to Innovate

Before I start, putting out a caveat - these are my experiences & views about innovation and may not be 100% relevant for all categories and companies. So be like goblin forged metal - imbibe only what makes you stronger (apologies to the non Harry Potter fans reading this). 

My entire post has an underlying assumption - the company/brand is conscious about ROI & success. There are outlier brands/companies - those who must not be named. They are the dark forces who only innovate to make life difficult for competition without caring about ROI now or anytime in foreseeable future. So I am not going to look at such outliers. 

Renovation vs Innovation

Simply put anything you do which is new on the base business is called renovation and when you introduce a new variant/sub brand/benefit et al its call an innovation. But its not so simple and hence lets try & understand the objective of each. 

Renovation is something that makes your current promise or as I call it the current core benefit either more relevant to your non buyers to increase trial or induces brand loyalty that results in either higher frequency of purchase or higher consumption (or both) amongst your current users. 

I am consciously making a bold & a controversial statement. Most marketers will tell you any initiative should do both but I truly think that its “mithya” and hence does not exist. Lets see why I believe in this so strongly. 

When you renovate you can take one of the following actions:

a) Make your product better 
b) Change something that is not liked in your product (cited as a reason for lapsage)
c) Make better claims on your product because of either a product improvement or new testing or some new technology that allows you to make new claims without changing the product substantially 
d) Change benefit or add benefits to your promise

Now think about it - while some of these actions can appeal more to both your users & non users - your analysis & consequent actions need to come from pushing one trigger. 

Lets use an example here. Suppose there is brand of child nutrition that promises immunity as a benefit (completely fictional & I dont know if any brand does). The non users may not be buying it today because of the following three reasons (in no particular order): 
1. They dont trust/like the brand
2. They like their current brand & dont think they need to switch 
3. They dont buy into immunity as a benefit - whatever may be their reason

And similarly the users of the brand buy it because:
1. Immunity is important to them 
2. They trust/like the brand
3. Their child eats it without any fuss etc. 

Now lets go back to the 5 levers one can pull for renovation: 

a) Improving your product say its flavour- this can only make your current buyers appreciate your product & use it more often. A non buyer has rejected immunity/brand & not the product because she hasn’t even tried it. Also someone who has lapsed will rarely come back to you on a promise of a better product. Product improvement can reduce future lapsage. 
b) Change something that is not liked in the product say its ability to mix with water without forming lumps - this will make current users to buy you more often. A non user will not start feeding her child immunity boosting nutrition just because its now easy to mix.
c) Make better claims on your product - your current buyers buy you because they like you, believe your promise & are happy with it. They will not start feeding their child more because you have 2 times better immunity booster. But for non users this could be a reason to start buying you. If they had credibility issues with immunity claim maybe this convinces them to try you 
d) Change/add benefits - say the brand says immunity + brain development. In my opinion it will attract new users more than increasing consumption amongst current users because mental development will bring in new users. In fact, changing or altering promise on a large base business needs to be done with extreme caution because you need to be sure that your current consumers are not rejecting you because of whatever change you are doing. 

Hence all testing for renovation has to have one of the two KPIs. Either win among current users on PI or win among new users on PI while maintaining parity among current users. 

Innovation is something that expands your brand’s consumer base or usage because of a new promise or benefit. An innovation can use one of the following routes:

a) Leverage new benefit segments that are adjacent or complimentary to your core benefit 
b) Leverage different sensorials essentially fragrances, ingredients, flavours etc. 
c) Appeal to a new TG/user group 
d) Leverage a new usage ocassion
e) Ride on a prevalent trend/seasonality/current event that is important in a consumer’s life
f) Create an absolutely never heard before benefit 
g) Makes current consumer habit/usafe easier through convenience

Lets look at an example of each through the lens of the immunity child nutrition brand. 

a) Leverage new benefit segments: the brand could launch a new range/variant for height gain, weight gain, better digestive system or any other benefit relevant to parents with kids in that age group. 
b) Leverage different sensorials essentially fragrances, ingredients, flavours etc. - create exciting flavours like chocolate or use ingredients like almonds
c) Appeal to a new TG/user group - create a separate range/variant for older kids whose need for immunity is different
d) Leverage a new usage ocassion - create a different variant for night consumption or when the kid has just finished some physical activity
e) Ride on a prevalent trend/seasonality/current event that is important in a consumer’s life - Monsoon variant or winter variant because the needs for immunity are different. 
f) Create an absolutely never heard before benefit - Am being creative here but say you had a product that could build immunity from allergies 
g) Makes current consumer habit/usage easier through convenience - ready to drink packs, single use packs hence no need to measure etc

Now coming to some tough ones with no right or wrong answer and depends on the companies philosophy more than anything else but I am going to still slot it where I personally feel it should be slotted.

LUPs - should it be innovation or renovation? One could argue it can be both. For me its renovation because it makes your current benefit more appealing/relevant to non users  - basically breaking affordability barrier. 

New News Changes - stuff like packaging change, form, shape, colour - I personally think it can be both depending on the nature of change. If packaging change makes the product easier to use or more convenient it is an innovation. On the other hand if its just to do something new & get noticed & improve shelf throw its renovation. For e.g. dosage control caps on any bottle is an innovation while new bottle shape is a renovation. 

Now the question on when should one innovate - basically what are the checks one must have in place before embarking on the journey of innovation. Even if competition is out innovating you; first look inside - assess the following and then look at innovation as your growth engine. 

Assumption: there is a large enough base business for the brand & you are looking at innovation to drive incremental growth. 

1. Health of your base business: if there is any trouble in that paradise - drop everything and see what can turn it around. Unless the conclusion is that the base business category/your product offering in that caregory is doomed and the only way to grow is to quickly build other pillars. 

2. Weigh your moneybags: here two things need to be checked. Firstly, is your base business sufficiently funded for the time period you are looking at. And secondly, assessing how much money will it take to make your innovation a success (according to your own KPIs) and whether you can afford it because there is some money you have to burn before the awareness to trial ratios start kicking in & create a snowball effect. You need to have the burn money before you innovate

3. Aukat: this again is twofold. Firstly, the brand’s/company’s ability to distribute the innovation. Indian retail space reality is very simple “jab hoga to bikega” - no consumer will go hunting for your innovation shop to shop - unless you can make yourself available in category weighted outlets it is impossible for you to succeed. Secondly, do you have the courage, money & will to sustain innovations - because innovations need nurturing. Its like having a baby - its very different from a dog who starts being your companion from day 1. Babies need to be nurtured till they are 2 or 3 and can talk and play with you. (Am not saying dogs don't need to be nurtured but they do give ROI on nurturing faster).

If you have all three - then be a good marketer and design an innovation (whether incremental or disruptive) that will step change your growth curve. 

As I said, these are my opinions and happy to answer any questions or debate any point. 



Hopefully I shall go back to once a month routine. Till then happy selling :) 

4 comments:

  1. Excellent read!
    Gyaan that is practical and usable!
    Cheers, Chitresh

    ReplyDelete
    Replies
    1. Hey Chitresh.... thanx a ton and I am still waiting for the deck btw

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  2. Simple and straight with no word mincing. That is how I have known you to be and that is how this article speaks as well.

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  3. hey thanx.... I have only worsened on the straight talking bit - not learnt the tricks of the trade at all :(

    ReplyDelete