Chunky aloe vera cooler, anyone? According to a recent Reuters article, Coca-Cola is trying “drink texture” innovation along these lines, in hopes of finding the next billion-dollar brand. In another development, earlier this summer, P&G launched its eStore, enabling it to sell everything from Fusion razors to Regenerist micro-sculpting cream (whatever that is…bet it could double as a dessert topping).
Seemingly unrelated developments—but if you look closer, there’s an interesting link in these two anecdotes that reveals an opportunity for consumer packaged goods (CPG) companies to think differently about innovation. That is, the rise of digital and social media should enable CPGs to relax some important constraints on their innovation strategies—namely, the tyranny of fixed shelf space in retail stores.
That’s where the P&G anecdote comes in. What if you relaxed that shelf space constraint, along the lines of what P&G is doing with its eStore? If you do that, you have to worry less about giving up some of the shelf space of tried-and-true, mass appeal, high earnings products in return for stocking untried, new products that may not deliver the same earnings per-square-foot. That’s because with a virtual storefront, warehouse space for stocking physical product is cheap and plentiful. This opens up the opportunity for brands to increase the mix of ideas in their innovation portfolios that are of a more niche profile, because they can stock the product without the fixed shelf space constraint.
To be sure, shifting your innovation portfolio to include more niche ideas is not without costs–you would trade out scale benefits associated with mass brands, and you’d need to offset the costs of managing a more complex innovation and product portfolio. However, three aspects of niche products may actually offset these factors:
- First, niche products typically resonate with consumers who have a more specialized needset, and so they command a price premium from consumers who are willing to pay more to have those needs fully satisfied.
- Second, those consumers are likely to be naturally more loyal, because you have satisfied that needset like no other CPG has before. So, in theory, you should have to spend less to drive re-purchase.
- Third, consumers with niche needs often hang out with others like them, either live or virtually. And boy, are they likely to talk to their like-minded friends about how, finally, this one brand has developed a product that meets their needs. So, smart brands can use social networks to spark and amplify that word-of-mouth—the brand won’t need to spend as much on driving awareness of the product.
For a great example of this niche innovation and marketing, see this Wall Street Journal writeup of General Mills’ gluten free product line. General Mills refers to these niche audiences as “narrow-deep”, and spends considerably less to market them, according to the article.
I’ll go out on a limb and suggest that chunky aloe vera beverages are a narrow-deep kind of play…
Next steps for marketers? Ask yourself what kinds of implicit assumptions you and your team are making that could be constraining your innovation approach. Think through how digital and social media might help relax those constraints. And then play outside-the-box with some “what would have to be true” modeling to see if the economic upsides of narrow-deep innovation could offset the downside of foregoing some bigger, but less likely, hits.
MLC Members: Curious to diagnose the strengths and weaknesses of your innovation approach? MLC’s innovation diagnostic is included in your membership and takes only 15 minutes. Then, join us for an innovation webinar: Driving Innovation: New Strategies and Tactics for Harnessing Customer Knowledge, August 16 at 9:00 EST
Or, join us live at an Innovation Summit. The next one is hosted by 3M on September 22nd, and we’ll be in New York on November 30th. Register here.
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