By Todd Maute:
Here’s a sad but true statistic: As many as 95% of new products introduced each year are financial failures, according to AcuPoll. It’s not surprising. Most companies tend to equate “product development” with things that are really line extensions, in which a brand adds a new flavor or ingredient and calls it new. But “orange juice with mango” isn’t really an innovation; it’s more of a new product for new product’s sake. True innovation is about leveraging your brand in a multitude of ways, by understanding the behavioral needs of your consumers.
In recent years, technology brands have led when it comes to innovation, with the amount of new products and services coming at breakneck speed. Apple changed the world with the iPod, a product that people didn’t even know they needed – but soon the brand had carved out an entirely new category around those little white music players. National brands have definitely learned a thing or two from Apple and created products that are true innovations, not just line extensions. Coca-Cola’s Fridge Pack filled an unmet need by revolutionizing the package and beverage categories by introducing a longer, narrower package for its 12-pack soft drink cans that dispenses easily and stores smaller in the refrigerator. Scotts “Tube-Free” Toilet Paper was “a-ha!” innovation moment that spoke to consumers who wanted to do something good for the environment.
Private Label Innovation
But while national brands typically led the innovation game in grocery, it actually seems that the most interesting kind of innovation is coming out of the private label world. Historically, private label brands have ridden on the coattails of national brands – first as followers, and more recently as “fast followers.” But smart retailers like Duane Reade, Safeway and Walgreens are leveraging brand development, their retail spaces, and technology when it comes to innovation, and shifting the focus away from products. Here are some recent examples of successful brand innovation that come to mind:
Duane Reade played into the behavioral insights and learnings from their NYC consumers and created a “New York living made easy” positioning that spoke to its heritage as New York’s drug store chain. They developed new brands that played into this positioning, including a premium private label program, Delish, never before sold in this kind of retail space, and then made their stores destinations by giving customers “Uniquely New York” experiences. These included novel innovations like a growler bar, Brew York City, that offers dozens of kinds of beers, an “upmarket: CHOP” salad café, and a self-serve frozen yogurt bar called Fro-Yo. These scalable innovations were all grounded in strong insights and a solid understanding of Duane Reade’s New York consumers.
Safeway reinvented its stores based on lifestyle, launching a new “Ingredients for Life” positioning. Their private label lines – “Eating Right,” “Open Table” and “O Organics,” were developed under this positioning, and were distinguished by design, marketing, as well as product offering. (For example, one of the store’s recent innovations, Safeway Select Grilling Sauce, comes in a spray bottle so you aren’t continually dipping your raw-chicken covered basting brush back inside a jar.)
Photo development, once a big money maker for drug stores, suffered greatly with the advent of digital photography and smart phone cameras. Walgreens tapped into this opportunity and met the needs of consumers by creating an innovative app that lets people download smartphone photos and then automatically send them to local Walgreens’ stores for printing.
The success surrounding these innovations can largely be attributed to these retailers knowing their customer and their market. To pinpoint what was missing from their current offerings and set their brands apart, they stepped back and looked at three key things:
a. Look at your brands and how they relate to business goals. Ask yourself, “How can an innovation strategy help you achieve your goals?”
b. Look at your business and innovate to your strengths, e.g. Duane Reade “NY Living Made Easy.”
a. Understand the cultural milieu, in terms of how people are spending and what products they are buying.
b. Send the innovation message throughout the organization. This is not just about products – it can be merchandising, store experience, services or technology-based innovation.
a. Get in touch with consumer behavior – know what motivations, needs, and wants they have – and develop simple solutions to drive differentiation.
b. Hire the right people that will help you think and act differently.
Innovation is a process and a way of thinking. Look at innovation more broadly and you will help minimize the space planning game and drive meaningful points-of-difference. Retailers have a captive audience and deep relationship with their customers, and are in a perfect position to leverage their knowledge. Using product, services, retail experiences, and/or great design will help you differentiate your brand and help build undying consumer loyalty.