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In this edition:

• Column: How To Sustain Product Innovation

• Inspiration: The Tango Slap

• Webinar Recording: Pedro’s Take On What Marketing Trends To Watch For

Column: How To Sustain Product Innovation

In marketing we tend to overemphasize advertising.

I understand why — great ads shape culture, drive conversation, and oftentimes become imprinted in our memories for a long time.

However, advertising belongs in only ONE of the 4Ps of marketing, the Promotional P.

While marketing communications are a major driver of sales, pricing and distribution (place) still are the largest contributors of sustainable growth.

But before I jump into those two highly complex Ps, I want to devote a column to the most overlooked P of all: Product.

Product is oftentimes pushed to R&D (if you’re in consumer goods), or to the C-Suite in service industries. However, in organizations where marketing excellence is well established, marketers are the drivers of new product development and existing product improvement.

For the purposes of this article, I will use the term “product” for both products and services. But the challenge remains the same: how can marketers drive product innovation within their organizations?

The Pitfalls of New Product Development

Depending on what paper you read (Duncan Simester’s or Clayton Christensen’s), innovations have a failure rate of 40% to 90%.

This is an eye-popping statistic given how expensive it is to come up with a new offering. From R&D and supply chain CapEx investments, to new hires and advertising, launching an innovation to market is a resource intensive activity.

So, why so many fail?

As I previously discussed in this article, being market oriented is the first step in building a successful marketing organization. However, when it comes to innovation, managers tend to become too product oriented and completely miss the mark on what do customers really want.

The most common challenges that come from not being customer-centric enough in new product development (NPD) tend to be:

• Too many resources get drained into product development and not enough is allocated to market preparation (e.g.: the innovation isn’t advertised enough or key touchpoints along the customer experience are neglected);

• Expectations are set too high and therefore the plug is pulled too early in its short, uphill battle, product life;

• The innovation doesn’t truly solve any big enough problem for the customer;

• The product is too revolutionary and therefore ahead of its time, leading customers to not fully grasp its utility or purpose;

• The organization does not support its growth with enough dollars to give it a chance to shine;

• Among others.

As you can see, all of the common pitfalls of product innovation ladder up to managers not linking it back to their brand’s strategy.

When innovation gets ahead of strategic planning, it risks being disconnected from future growth plans and don’t take into consideration customers’ true needs and wants.

And while some will quote you Steve Job’s line: “people don’t know what they want until you show it to them”, don’t fall for that non-sense.

Apple has always had loads of research to inform their strategic product innovation roadmaps. The result of their disciplined approach to NPD are innovations that don’t just make past versions better, but uncover entirely new usage cases that link back to their researchers’ interpretations of consumer sentiments.

Being consumer-obsessed is the first and most important step in breakthrough product innovation.

The Bigger Fish: Existing Product Improvement

Breakthrough innovations can definitely be game-changers in the fate of a company. However, as we’ve seen, creating something entirely new is risky, resource intensive, and require cultural alignment inside the organization around the importance of such investments.

While some companies like Apple have this process mastered, distributing your eggs into other baskets is how you manage risk and reach for the stars in incremental and sustainable steps.

The concept of existing product improvement (EPI) isn’t just reserved to trivial upgrades; it also encompasses product line extensions, limited time offers, and co-branding plays.

As per usual, the first step for a successful EPI program is to conduct primary research. Gaining a clear picture of how your customers are experiencing each touchpoint along their journey is critical in identifying which elements carry disproportional weight in comparison to the rest, and therefore where to focus your energy on.

Asking customers to describe, in sequence, the major moments when they had a significant experience with your product, and subsequently grading each of them on a scale of 1-10, will uncover touchpoints that you may have never even thought about.

Once you’ve collected this list of moments, you can begin grouping them together by commonality to reduce the list down to a manageable amount. After that you simply assign each of these key moments their average score (bonus points for layering on their standard deviations/variability in scores) and their level of importance based on how often each of them was mentioned by your customers in your survey.

This simple exercise will tell you which key moments are the most common among your audience, and whether or not they are underperforming relative to the rest.

You now have the coordinates of where to dig for existing product improvement.

Types of EPI Innovations

If you walk into a grocery store today and go to the chip aisle what you’ll find are loads of core offerings, which typically account for 60% to 80% of that brand’s profits, and several other smaller SKUs that appeal to more niche consumers.

But if you look closely, right at eye-level, you’ll find things like this:

These types of products are derived from consumer research which yielded responses that could have ranged from “my chip often breaks when I dip it into ranch dressing”, all the way to “I love how crunchy they are and can’t get enough of it”.

When large capital investments are poured into innovations that are breakthrough, product testing is imperative to reduce risk. But for product improvements that don’t quite require the purchasing of new machinery or any significant changes to existing processes, are a lot less risky and can be introduced into the market in the form of limited time offers (LTOs).

By limiting a new product development in the market to just 8 weeks, you can gauge consumer response in real life without committing to significant investments up front. Sometimes, if the LTO is successful, they go on to become line extensions (LEs), if they are not overly cannibalistic to existing core offerings.

Line extensions are permanent offerings that expand the product or service assortment into new price ranges or flavour/sub-category profiles that are additive to the existing offering line up.

For example, in 1977 TD Canada launched its first credit card, the TD Green Visa. Over the years, as credit card adoption increased, new consumer needs began arising.

Increase in leisure travel spend, the need to save money in groceries and gas driven by inflationary pressures, and even brand loyalty to travel miles programs, led TD to begin expanding its assortment of credit card offerings by introducing line extensions such as the below:

The concept of introducing a “premium” line extension, such as the TD First Class Travel Visa, goes beyond just attracting bigger spenders — it also has a halo effect on consumers’ perception of your brand’s quality and credibility.

Finally, the idea of expending your brand into new categories, is also an interesting way to grow your baseline sales by playing in “white space”.

For example, Apple, which was known for its easy to use, high quality smartphones, one day decided to expand their product offerings into the watch space.

When the iWatch came out several people didn’t see the point of buying it because they didn’t want to have their wrist beeping all day with a never ending onslaught of emails and text messages. But by sticking with it, making improvements with each new product generation, and investing tons of money behind its marketing communications, Apple was able to grow its watch business into a $54M a year (and growing) behemoth.

For many decades Apple was known as a computer company, but through systematic product innovation (both breakthrough and not), today they are known as a tech and lifestyle company, which continues to evolve and transform itself with each decade that goes by.

To Add Or To Subtract

Inventing breakthrough innovations and adding new product and services to your existing portfolio is a critical growth driver for any company.

Businesses that stand still for too long tend to see the world fly past them. To keep up, one must have a finger on the pulse of what’s driving customer behaviour so that their brand can continue to solve new and existing problems consumers have in more effective and innovative ways.

However, NPD and EPI can become an addictive drug.

The reality is that most brands’ portfolios are comprised of a few offerings that drive the lion’s share of profitability. Note that I didn’t say revenue.

The decision to cut back on existing offerings can sound scary due to expected reduction on sales run rates. However, by doing so managers can unlock much needed time and resources to be reallocated to existing offerings that are driving the company’s profits.

The revenues at all costs strategy can be a slippery slope because while they drive top line, they also drive costs up. And the moment a marketer begins adding more and more offerings to their existing portfolio, the winning products end up paying the price by subsidizing innovations’ much needed cashflow to survive.

Therefore, product consolidation is a counterintuitive way to further drive innovation in the future, as resources free up for newer and better horizons.

Walking that line between killing existing offerings and creating new ones is a fine balance marketers must find as they drive growth through the often overlooked Product P.

Inspiration: The Tango Slap

Two weeks ago, the brilliant Jon Evans, founder of the Uncensored CMO podcast and CCO at System1, launched an exciting podcast alongside Orlando Wood, called “Never Mind The Adverts”.

Orlando, who is one of the most insightful marketers on the planet, author of several incredible books such as Lemon (IPA, 2019) and Look Out (IPA, 2021), dove into the importance of humour in advertising.

In his spiel, he talks about one of the highest scoring ads in humour of all time, known as the “Tango Slap”, which consequently led to a sales spike of over 700% in the highly competitive and mature category of carbonated drinks.

This goes to show that to be effective you must be memorable. And to be memorable you need to invoke some sort of positive emotion on the audience.

Comedy just so happens to be one of the most effective ways to do so due to the little build up necessary for the joke’s punchline to drop.

This is an old ad, but still a fantastic example of the randomness of great ideas, and of the importance of comedy in advertising.

Webinar Recording: Pedro’s Take On What Marketing Trends To Watch For

Last week, WJ Agency and I hosted a free lunch and learn titled Marketing Insights: Winning with Emerging Trends.

If you missed the webinar, we’ve uploaded the recording to YouTube here for you to watch at your own leisure.

In this 1-hour webinar I dive into 5 challenges that I believe are slowly shaping the future of marketing:

☑️ How to avoid the trap of short-termism

☑️ The importance of creating connections where customers are most present

☑️ The revolutionary impact of artificial intelligence on campaigns

☑️ The growing influence of virtual worlds in gaming

☑️ How a strong brand identity can serve as a powerful differentiator in a crowded market

If you have any questions on the topic, just drop a comment in this LinkedIn post and I’ll answer it!

More of PPA:

• 🤝 Connect with Pedro on LinkedIn and/or X

• 🍻 Come by the WJ office for a brew

• 💌 In case you missed it:

  • Mobilizing Resources Through Objective-Setting

  • How To Be Clear With Your Brand Positioning

  • Why Targeting Still Has A Role To Play In Marketing Plans

PPA 

Pedro Porto Alegre is a seasoned marketing professional with in-depth experience building brand and communications strategies for top-tier B2C and B2B organizations across Canada. His repertoire extends from crafting and executing integrated multi-media brand marketing campaigns to the commercialization of performance-driven innovations for multimillion-dollar and nascent brands alike.