'Myth #1: If you simply build a great new product, customers will pay fair value for it'
- What should companies do instead to ensure fair value is paid consistently?
A stepped approach is recommended. Brands need to fully understand consumers’ needs and then discover how this translates into value. Dr. Jochen Krauss advises companies follow a five-step process:
- Understand consumer needs and measure their willingness to pay
- Understand differences across consumer segments
- Knowing the product configuration
- Exploring accurate pricing
- Conducting value communication
'Myth #2: The new product must be controlled entirely by the innovation team working in isolation'
- Who else should be involved in this process?
It is important to recognise that many brands do not have the financial resources to increase workforces to explore design thinking. As financial resource constraints are so often in place, it is vital that companies are as open as possible in the organisation.
They should, therefore, invite other departments such as IT, production, R&D and distribution to view boundaries and actively engage in open conversation to explore all potentials available.
Forward-thinking companies of today need to build an environment where they can create innovation.
Radical innovators are at the forefront of many groundbreaking advancements, yet businesses can be defensive of these. This does not need to occur, as it is these radical innovators that are forging industry ahead, and it is simply largely because they have nothing to lose.
This level of innovation is only possible from those that do not have anything to lose — no core business for example — and it is this position that leads to continued levels of innovation.
Organisations must, therefore, strike a balance. While an organisation needs an innovations team, they must be careful that they do not restrain it so much that they reduce levels of radical innovation and are fearful of creating something new.
Leadership means to build something today that makes money tomorrow.
'Myth#3: High failure rate of innovation is normal and is even necessary'
- What do failed brand efforts have in common?
In part two of our interview with Dr. Krauss, we discussed what brands should do prior to the product launch stage. As this is such as prevalent myth, we wanted to hear more about running themes in product failures.
The common denominator of the cosmetics and personal care industry’s worst product failures relate to timing, Krauss revealed. While specific market trends may be emerging, if consumers are not asking about a product and yet it appears, this can lead to a flop.
Often, from a technical perspective, a product release appears as a positive and successful innovation. However, as no one asked for it, it has answered a demand that simply was not there.
This isn’t to say that at a different point in time, it may have been a success. Markets progress and demands change and become more sophisticated — it’s about understanding how this stands at the current moment in time and near forecast period.
In today’s landscape, the word is effort. Companies need to apply an adequate amount of effort. Market communication is crucial, so as a base question, brands must ask about consumer perspectives relating to satisfaction and measured turn management.
This considers how consumers think about information, how they receive it and how they can utilise it. Brands must analyse customer complaints too to find what they are missing, and apply a functional perspective.
Even if marketers are not the intended product end-user, it does not prevent them from appreciating the item from the target demographic’s perspective. This approach must be integrated into the organisation’s complete concept to launch process and must feature into appropriate customer management systems.
The fifth and final part of our interview will explore the two other leading myths in value pricing. This will be published on Monday 18th December 2017.