Innovation Reactor

Creating Integrated Marketing Communications

     

From my experience the best integrated marketing campaigns are driven by a process of discovery, problem solving and collaboration between the client-agency team. Because this process unlocks consumer insights and uses a detailed diagnosis of the marketing problem it invites the team to look at problems from different angles, challenge the status quo and inspires them to come up with breakthrough communications.

1. Consumer Data & Insights

The first step is to understand your target audience by using data and insights to develop pen-portraits of your best customers.

To create these pen-portraits review customer demographics, product usage rates, media consumption and research. Also, analyze your competitors and get Internet usage statistics for your products. These channel metrics should include – online click-through rates, keyword searches, direct mail response rates, email open rates, and phone conversion metrics – to assess how your best customers respond to various media formats.

This will assist the team answer these critical questions.

• Who are our best customers?
• How do we best communicate with them and attract more? 
• What are their attitudes towards the brand, product benefits, customer service, and content?
• What is driving their willingness to apply?
• What are their passions and motivations?
• What are the common characteristics that our top customers share?

2. Marketing Positioning & Customer Experience Mapping

Successful marketers understand how their product or brand is currently positioned in the market, because it allows them to reposition and differentiate their communications. To determine the dimensions supporting your product or brand positioning you may need to conduct focus groups with your target audience, and test different messages to uncover what resonates best.

If you are repositioning your communications it makes sense to also refresh your website and improve the online customer experience. By mapping the end-to-end online customer journey on your website, plus analyzing page traffic, links, online forms, content and functional design, you can start to streamline the customer experience. Use an expert like an agency Digital Planner or Information Architect to help you optimize your online content and media strategy.

How do your customers reach your website? This answer is to map the entire pre-purchase journey and buying process. For instance, a Hotel may find their customers view holiday photos from friends/family on Flickr, read the Sunday paper travel section for inspiration, then search on Tripadvisor or travel blogs to get recommendations, and finally compare prices on Priceline.com or Expedia before making a reservation. By understanding the purchase process you can now insert your media into the user experience, such as banners on Travel specific sites or cross-sell links on travel booking conformation pages.

3. Agency Brief

I believe the agency brief is a dynamic process and not just one-way communication from the client to the agency. Therefore I recommend using a workshop create the brief using the steps below.

• Create a vision for repositioning/refreshing the communications platform, put the strategy into context for the team plus outline targets and key milestones. Ask the team to present the latest consumer research and market trends

• You can task several members of the team with presenting best practice and a review of competitors and any previous communications. Collaborate with team and get them to contribute their ideas, share expertise, and learning’s to create the outline of the brief.

• Ensure you have the best talent and diversity in the workshop so include from the Agency – Account Manager, Planner, Art Director, Digital Planner, Media team, and from the client –  Marketing, Finance (yes the bean counters…and if you include them they’re more likely to approve your budget) and PR.

The workshop brings everyone up to speed quickly, generates new ideas and different perspectives, to develop solutions for your key marketing communications problems. You’ll find the agency-client team will work better, smarter and faster since people understand the strategy, customers, objectives and who to turn to for information.

The final brief should include the customer pen-portraits, a map of the online customer experience and buying process, competitor products, an overview of the marketing strategy, the communications problem to solve, product or brand positioning research, targets and metrics.

4. Creative Development & Testing

At this stage the agency has developed several different creative platform concepts and positioning statements. But many new communications fail to deliver results because marketers second-guess consumer reactions, or go with their gut instinct, rather than using a more robust process to evaluate the creative work.

An inexpensive and fast method of testing creative is online panels or forums. These show the creative concepts to your target segment – testing the appeal, excitement, consideration and intent to apply. For your website, customer labs can be a great way to test new navigation and the online customer experience.

5. Delivery

Your new integrated communications platform will contain online media and content – including banners, email newsletters, blogs, podcasts, whitepapers, e-books, webinars, and refreshed product pages – that will appeal to your targets audience and align with your marketing objectives.

Throughout the process, work with your media agency to enhance your prospect targeting strategy. It's also important to create search engine terms that integrate with your communications to drive awareness. Finally, ensure consistency across your communications by integrating the new creative in your offline channels like direct mail, press, radio and TV.

You're now ready to launch your successful new integrated marketing communications, website and media plan.

The New Product Development Process (Part 3)

Build & Pilot – prototype your product, marketing and customer experience

In the Concept Feasibility phase you developed the full product proposition, go-to market strategy, and financials. Your key stakeholders then reviewed the product plans and you gained approval to move the project forward. The next stage is a successful mobilization effort requiring you to identify and rally teams across your business for support to ultimately build, test and launch your new product. Some of the main tasks are;

1. Pull together a cross-functional team of experts from technologies, operations, risk management, legal, manufacturing and marketing/sales
2. Complete the design, build and testing of the product
3. Develop your marketing material, a PR communications plan and build the website
4. Setup manufacturing and production systems, develop customer delivery systems and logistics – online purchasing, warehousing, shipping and customs
5. Train customer service staff, finalize a risk management plan and seek legal or regulatory approval

Depending on your strategy, product and industry some companies go straight to the rollout phase. For instance the launch of a product line extension that leverages a successful brand may provide the confidence to rollout without further testing.

However for new products running a pilot program is often prudent to validate demand, refine the value proposition, and optimize design, packaging or formula. Testing allows you to observe and adjust the customer experience and stress-test operational procedures. Now is a great time to tweak your product positioning, distribution channels, advertising and sales plans. Technology companies will launch beta versions of software to a core group of users who help them test and improve the product before launch. Auto makers may develop a prototype or concept vehicle allowing enthusiasts to view at car shows or road test at special track days.

I recommend you define the measures of success for your pilot – including sales, revenues, product usage, consumer demand levels – and get commitment from key stakeholders that once these are achieved the product will move to full rollout in a specific timeframe. As some products delay reaching the market since internally no one could agree if the pilot was a success!

Rollout – accelerate your marketing and advertising for growth

This is the commercialization phase whereby you obtain the necessary investment to execute the full marketing plan, scale-up advertising and optimize your online search and media strategy. Moreover, increase manufacturing capacity and grow your salesforce to accelerate growth. Continue to manage your product through the life-cycle with CRM activity, evaluate the product against key performance indicators and manage for payback on your investment.

Good luck with your NPD process and please let me know if you have any questions or suggestions for improvement.

The New Product Development Process (Part 2)

Concept Feasibility – developing a winning product value proposition

At this point in the new product development process you have completed the first 2 stages (refer to my earlier post this month)

1. Strategy Development – to research customers and define the opportunity

2. Ideation – the generation of new ideas for the next breakthrough product or service

The next stage is to turn your ideas into full product concepts. Start by creating a 1 page product concept document for each idea that outlines the following;

• Describe the value the new product will deliver to the consumer. These will be the main product proof-points – Convenience, Reliability, Prestige, Safety, Environmentally Friendly, Relaxing, Quality, etc.
• Explain how the product works and the consumer need that it satisfies
• Detail the functional and emotional benefits of the product
• Choose 1-3 of the strongest proof-points associated with the product idea and expand on them to develop a value statement that describes your unique selling proposition (USP)

The most successful product concepts should effectively build on the economic strength of your existing business model, leverage assets you already have such as technology, service and branding, or expand the core business to target profitable new customer segments.

At this time your should engage with your Design, Manufacturing, Outsourcing or IT teams to conduct a detailed capability assessment of your systems, technology, partners and suppliers. Produce a product blueprint or technical specifications document with production processes, user processes, customer service linkages and any outsourced partner contracts.

You've developed a strategy in Stage 1 but now you need to create an action plan to commercialize the product – including an integrated marketing communications plan, operational plan, online and customer service experience – adding timelines and a roadmap to market.

• Make sure you clearly define the target segment for the product and market positioning. I recommend using a market map to plot your USP and that of your competitors, plus outline where this new product will live in your existing product line hierarchy. Because if you’re unclear you could cannibalize existing product sales and confuse your salespeople or customers.

• Develop a full business set of product financials to estimate cash flows and return on investment (ROI). Moreover run sensitivity analysis to factor in changing customer behaviors, competitive and macroeconomic conditions to stress test your financials.

Further consumer research using focus groups may be required to test the final concepts, product positioning or a prototype. Additionally, online consumer panels are a great way to get the data you need to support conjoint analysis for assessing product benefits, product positioning and pricing.

If the estimated financials meet your company ROI benchmarks then present your plan to secure commitment, investment and resources from your investors or senior management to build, test and eventually rollout your winning product.

Questions for evaluating and ranking new product ideas

 

In the Ideation stage of the new product development process you created a pipeline of breakthrough ideas. So what's the best way to rank and prioritize them for further concept development?

Start by bringing the team back together and also get key stakeholders in the room to discuss collectively the pros-cons of each idea or concept. Successful companies and leaders uncover the best ideas by asking the right questions. I’ve found somewhere in the region of 5-10 key questions focused on different elements - customer, brand, profitability, production, manufacturing, marketing, technology or distribution - are enough to create a short-list of ideas to take to the next stage. 

It’s best to apply a simple scoring system (1-5 points for each question) as this makes it easier to contrast and compare, while also helping to validate and communicate the choices within your organization. Here are some example questions for evaluating your ideas;

1. Does the idea fit with our business model, our brand or product portfolio?
2. Will this new product provide us with a competitive advantage?
3. Does the idea meet a customer need and add real value? Why do those needs exist?
4. What unique benefits will the new product provide to the consumer?
5. Can the product be copied? Is there patent protection or are there substitutes?
6. Is the market an attractive one – size, growth rates, profitability, competition?
7. What is the complexity of implementation? Will we have to build or acquire new technology?
8. Would the idea meet our minimum return on capital or profit margin requirements?
9. Is the product easy for the target customers to understand?
10. Can the product be sold through existing sales and distribution channels?

Phil McKinney www.philmckinney.com also suggests some great questions on his Killer Innovations Podcast to help rank your ideas.

The New Product Development Process (Part 1)

          

Innovation and new product development (NPD) can be managed and measured by using a standardized process. In many organizations the challenge for product development is to implement an efficient process, to improve speed-to-market and the chance of commercial success while preserving creativity. The critical phases of a robust stage-gate product development process are; Strategy Development, Ideation, Concept Feasibility, Build & Pilot and Rollout. Today we cover the first 2 stages and recommendations on how to implement the process within your business.

Strategy Development – research and defining the opportunity

The key ingredient of any innovation process should be the extensive use of data and analytics to support the strategy creation and ideation process.  Moreover, a clear understanding of your overall company strategy is important, since existing product lines and brand portfolios will define areas for new product development, product extensions or product refreshes. By understanding the consumer, competition, culture and macroeconomic environment you can then develop your strategy and identify potential opportunities.

Undertake primary research to gather intelligence into consumer behaviors, wants, needs, unresolved problems and attitudes. Because our thoughts, emotions, feelings and experiences lay mostly in the unconscious cognitive part of our minds, unlocking these is critical for finding unmet needs. Metaphor elicitation and observational research techniques have been proven to work best.

Host workshops and consumer labs that uncover emotions, feelings, passions and real-life experiences may also provide richer consumer feedback than your average focus group or survey. Gather relevant secondary data from market research reports and identify the latest social trends and technology from companies such as www.trendhunter.com. Finally, cluster your research data and market insights into opportunity segments and use them in the next phase to unlock new product ideas.

Ideation – generating the next breakthrough product or service

In the Ideation phase you use the opportunity segments and research to help develop the next breakthrough product or service. Brainstorming workshops can help you generate new ideas however planning is vital to make your sessions meaningful.

Before you start to brainstorm it’s best to send participants any competitor analysis or consumer research ahead of time so they can read and prepare. Make your sessions short (1-2 hours works best) to maximize concentration levels. Also develop some guidelines or principles to help focus your team’s mental efforts - these could be along the dimensions of economic, behavioral, pricing, production, manufacturing, technology or distribution – but don’t make them too narrow as to limit the creativity and fun!

While the CEO should champion innovation, ideas shouldn’t just come from the top down. Ideation sessions work well when comprised of people with diverse backgrounds, personalities or interests. Also try inviting creative Ad agency people, outside experts or cross-functional participants to bring in fresh thinking and alternative perspectives. Another great method is to host internal innovation labs with your customer service employees or suppliers, since they deal with your products and customer pain-points everyday. The result is better collaboration and a wider range of ideas through diversified thinking.

You’ve now created a pipeline of ideas to then rank and prioritize for further development. Additionally, by including people from all levels and giving them the ability to contribute their ideas and buy-in to the strategy, this creates collaboration and internal alignment that will ultimately speed-up the NPD process in your organization.

The Long Tail and Financial Services Online Product Comparison Sites

In the book The Long Tail: Why the Future of Business is Selling Less of More (2006) by Chris Anderson, and in many subsequent articles about the long-tail, there has been much analysis on booksellers, DVD rental and music downloads companies, however little on financial services. My research, observations and experience in financial services suggest a different tail dynamic and performance.

For financial services - insurance, credit cards, loans, and mortgages – I have found three key areas that are vital for marketers to understand; 1) The Winners Curse – fear of the long tail, 2) The long-tail generates negative selection, 3) A self-reinforcing cycle of downward profitability.

Winners curse – fear of the long-tail

With more consumers using price comparison websites to shop for financial services, sites like Moneysupermarket.com in the UK, LowerMyBills.com in the US, or Redflagdeals.com in Canada, now rank and distribute hundreds products. My research found these sites create a long-tail and a “winner takes all” outcome with the highest ranking product in each category attracting the largest share of new customers. In his 1963 book Formal Theories of Mass Behaviour, William McPhee suggests the most popular product gets a disproportionate share of its audience creating a natural monopoly.

 

Source: MindShare ATG econometric models 2008

Most companies fear the long-tail because being number one on aggregator sites dramatically improves sales conversion rates. However hit products often produce a winner’s curse effect because the best product must deliver more value vis-à-vis the competition. To support these products companies offer reduced rates or premiums, expensive upfront incentives, free promotions or costly benefits to maintain the top spot.  In some cases they pay higher commissions to the comparison sites, since many of these sites claim to be consumer champions however require more money to favourably rank your product. Subsequently, the best product drives higher volume but at lower margins.

The long-tail generates negative selection

As success online is concentrated in a few best selling products, for financial services it’s these products that attract more affluent, well educated consumers with higher incomes and better jobs. Because these consumers tend to be heavy users of financial services, more financially astute, and better at distinguishing superior products from middle-of-the-road ones.  Consequently, products in the tail usually offer pricing or benefits of lesser value and attract more high-risk subprime consumers. The result is poor credit quality, higher delinquency or claim rates and larger charge-offs.

A self-reinforcing cycle of downward profitability 

McPhee (1963) suggested a phenomenon called "double jeopardy" whereby niche products typically have fewer buyers than popular ones. Moreover, these consumers generally appreciate them less than they do popular products. For firms with multi-product portfolios, the non-hit products in the tail attract fewer customers and become smaller portfolios in relation to other products. Since risk management, customer servicing, operations and marketing efforts naturally gravitate towards growing and protecting the stars in the portfolio. This underinvestment creates a self-reinforcing cycle of downward profitability as the best (often of the worst) customers soon seek other products that offer better value. Thus the initial subprime qualities are amplified and the portfolio experiences high attrition rates, mounting losses and negative return-on-invested-capital. Anita Elberse (2008) Harvard Business Review found products in the long-tail will struggle to recover their marketing and production costs.

Implications for marketers and financial services companies

The long-tail has significant implications for customer usage and loyalty, such as credit card spending, intent to renew an insurance policy or ability to make loan repayments. So what can you do if your product is stuck in the long-tail?

1. Prioritize product development. Conduct a thorough analysis of competitors and comparison site tables where your products will be distributed. Then customize elements of your value proposition or use special introductory offers to strengthen your product to ensure you rank at or near the top.

2. Develop new customer loyalty programs. Offering a wide selection of products helps retain more heavy-users, deepen customer engagement and grow revenue per customer. However, regain control by targeting niche products at your existing customers via cross-sell or up-sell programs rather than advertising externally to new prospects via comparison sites.

3. Refocus portfolio management. Clean up your old product portfolios, close down high-risk customer accounts and convert the best customers over to newer products offering stronger value. 

Achieving strategic agility in unpredictable markets

 

Some companies seem to have a knack of embracing new ideas and innovations faster than others. In many industries growth and profitability is determined by speed-to-market with new product development. So what makes these companies better at seizing opportunities?

To answer this question I attended a great lecture on strategic agility by Professor Don Sull, from London Business School. He proposes that organizations start off as nimble and agile, but when they grow large it’s how they transition between agility and absorption that determines success.

• Agility - the capacity to seize opportunities faster
• Absorption - the capacity to sustain change and deliver long-term shareholder return

To use a boxing analogy, Mohammad Ali early on in his career had great agility to “float like a butterfly and sting like a bee” but later on lost some of that speed and had to absorb more punches from his competitors, eventually losing the title. 

My research found Abercrombie & Fitch, the fast-fashion company, a great example of agility. While growing to over 1,035 stores worldwide they have developed processes to seize opportunities faster. Their new in-house Innovation Design Center produces flexible designs for quick approval and production, enabling reduced time to market for the latest fashion trends. While also reducing costs and limiting the competition’s ability to copy its designs. These capabilities has allowed Abercrombie & Fitch to post 16 years of earnings increases and deliver superior Total Shareholder Return over the last 5 years, vis-à-vis Gap their largest competitor.

When companies become larger, growth begins to stall as markets mature. Professor Sull suggests that firms can develop absorptive capabilities allowing them to seize opportunities when the perfect storm arises. Some examples are;

• Diversified cash-flow (General Electric)
• A war-chest of cash (Microsoft)
• Powerful tangible and intangible assets (Procter & Gamble)
• Excess resources and staffing (JPMorganChase)
• Lock-in via exclusive partnerships or integration (Oracle)
• Compete in protected markets (Royal Bank of Canada)
• Strong local market or low cost position (Cemex)

These absorptive capabilities mean companies can outlast others in a war of attrition or scale new innovations quickly. Diversification, strong brands or patents can provide the beachheads to reinforce and attack other customer segments. Strict government regulation and exclusive partnerships can limit new entrants. Finally, a strong local market or low cost position may allow you to absorb price volatility and downturns in international markets.

To increase agility in your business you can outsource or acquire it. Outsourcing requires you find the right partnerships that compliment your core business. Whereas acquiring agility involves you keeping the hardware and rewriting the software by changing organizational structure, key management personnel and culture.

How Waitrose competes with a differentiated business model

 

I attended a great presentation from Mark Price, Managing Director of Waitrose Supermarkets and was fortunate to have a quick conversation with him afterwards.  The UK supermarket business is fiercely competitive and recent statistics by TNS show Waitrose has a 4% market share compared to their main rivals Tesco (31.5%), Asda (16.6%), Sainsburys (16.2%) and Morrisons (11.2%). In this competitive industry structure, how does Waitrose grow market share against such strong competition?

Waitrose have created a strategy focused on two specific market segments of affluent consumers

• Baby boomers looking to trade-up to better quality
• Pre-children Gen-Xs that want quality food and drink to match their lifestyle

Then utilizing a differentiated business model, focused on quality Products, Service and Store Environment, they have created a premium brand and differentiated customer experience. This makes it difficult for price-led competitors such as Tesco or Asda to replicate the Waitrose strategy.

Products: Waitrose maintains product quality by investing in the supply chain since they made a strategic decision to invest in organic farming (production) and take a long-term approach with supplier relationships. By paying dairy farmers above-market prices for milk they locked in exclusive relationships. These farmers could then invest in better technology and upgrade equipment, while other farmers struggled to reduce costs and lowered quality. Subsequently, Waitrose then repeated for pig farmers and organic growers.

Service: Waitrose isn’t owned by shareholders, but all employees are partners so profits that usually go to shareholders are paid in bonuses to employees. All employees receive a 20% annual bonus regardless of seniority; the company is open with information like sales data and store performance, publishing this every week; managers are empowered to make decisions to optimize sales and service in their store; while employee committees are elected to consult with the board on strategic decisions. By placing employees first in the value chain, Waitrose has generate higher levels of employee satisfaction, created better customer engagement and increased service levels, resulting in superior levels of customer satisfaction with profitability. 

Store Environment: Waitrose creates a unique customer experience through cleaner stores, wider isles, shelves setup to promote the products and not sales posters or promotions, and established store locations are convenient to the target market with easy car parking.

I asked Mark “how is Waitrose innovating to beat the competition?”

“Waitrose is investing over £10 million in product development each year. We do not outsource our product development to suppliers like other supermarkets rather we employ top master chefs to create new Waitrose-branded product lines. Because of our business model, our produce buyers are more tenured and experienced so they understand the product categories better. This has allowed us to shift from organic to new segments, such as locally grown fresh produce, which grew 170% last year, faster than our competitors. We’ve also invested in online supermarket Ocado acquiring a 25% stake in the company, that’s helping Waitrose expand coverage into new geographic regions and gain a 16% share in online food retailing in the UK.”

Like Waitrose, a challenger brand aiming to steal market share from strong competitors, can start by developing a strategy focused on niche customer segment, then use a differentiated business model to win.

Let your customers design your next product

Companies invest millions in consumer research with the aim of developing new products and bringing them to market. Some companies are becoming smarter and reducing research costs, by using the web to engage in dialogue with customers then using the information gained to create new ideas for products and services.

Starbucks www.mystarbucksidea.com lets you share, post and comment on new Starbucks related ideas. Anything from their used cup recycling policy to feedback on the taste of the new Pike Place Roast. Since many consumers visit social networking sites and read posts but don’t have time to comment, Starbucks lets you vote on the ideas already posted so people then have a fast mechanism to either agree or disagree with what’s being said. This is a great way for Starbucks to collect quantitative data to understand consumer sentiment and pinpoint trends.

Dell created IdeaStorm www.dellideastorm.com an online community that allows customers to share ideas and collaborate with one another. Over 9000 ideas for new products and existing product improvements have been posted –sparking conversations between users. Dell then feeds the data back to their designers, engineers and programmers to bring the best customer ideas to life. Dell creates a great 3-way dialogue, by allowing employees to join the conversation, so they can provide tips, training or just a thank you for any new ideas.

Lego, the Danish toy company has a great site for kids www.lego.com/factory where they can design, share and buy their own customized Lego models. Kids can post their designs onto the site, share them and rate others creations. This helps Lego gain deeper insights into their target audience and from hundreds of postings has now launched 3 new products designed by actual fans.

Companies can also collect data on customer preferences and feed this into their new product development and ideation process. Dominoes Pizza www.dominoes.com lets customers create their own pizza from a list of toppings, crusts and sizes. Through the Nike website www.nikeid.com customers can design and customize their own shoes, gear and apparel – choosing styles, colours and personalization elements. Capital One www.capitalone.com lets customers build their own credit card from a choice of interest rates, rewards programs and graphics.

 

How is your company using the web and social networking to gather customer feedback, generate new product ideas and collect data on customer preferences to identify the latest trends?

Creating an environment for breakthrough innovation

You want to create a new direction for your company and make innovation a top priority. However to make this new strategy work it’s the people within an organization must first transform their communication, relationships, thinking and focus.

To achieve this I suggest 3 steps to generate “Innovation from the inside”

1. Improve communication and relationships to challenge existing ways of thinking

2. Develop a vision for the future and design breakthrough projects to achieve the vision

3. Create dynamic networks inside your organization that focus on driving results

1. Every team consists of a Coach and Players –with their actions on the field determining whether the game is won or lost. However many people become Journalists and Spectators –sitting in the stands giving opinions,  judgements, explanations, telling stories, writing reports or spreading rumours. Since Journalist and Spectator perceptions are rooted in the past they stifle innovation, creativity and change. If you have too many in your organization you cannot begin to realise your new strategy. To provide the catalyst for change try hosting town-hall style meetings focused on putting the new direction into context. Then smaller workshops that highlight Journalist and Spectator behaviours and the resulting low-performance it delivers. By challenging existing ways of thinking and improving communication people can then open up to new possibilities.

2. Work with your teams to develop a new vision for the future –then facilitate open communication to create alignment and shared understanding of this vision. Build momentum by developing a list of breakthrough sprint-projects. These short-term projects could be improving a process, adding a new partnership, building new technology or sales/marketing capabilities.  These action-orientated projects will help refocus everyone on the game and beating the competition.

3. After choosing your sprint-projects develop a rough plan, outline milestones, align resource networks and determine what learning is required to be effective. Remember keep it simple and remove complexity. While every team needs a structure and game plan, too much control limits innovation, restricts ideas and blocks creativity. Space with empowerment allows self-organization to flourish and employees to take action themselves and drive the new strategy forward.

When companies let employees contribute to the vision, facilitate open communication and challenge established norms, they will volunteer for projects and self-organize into dynamic networks. With employees championing new ideas, driving change, and spreading your new innovation culture across your organization imagine what you could achieve.

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