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Innovation in Saturated Product Categories: Case of Emerging Markets
- Manoj Kothari
Can there be an innovation in SUGAR? - probably sounds like a joke, if you keep aside
sugar-free sweeteners and some frequently seen varieties. Think of a plastic tap. It is
almost ‘sugar’ once it hits the price sensitive market like India. A plastic tap is available
for as low as Rs. 15 (25 Cents) per tap to several hundred rupees at the higher end, with
seemingly only aesthetic differences at best. However, it is a low involvement product,
with literally no-entry-barrier because anyone with an injection moulding machine can
make it or import it from China. In such situations, the distributor becomes the king. Once
a few brands become known in such a product category- the situation becomes touchand-go at the point of purchase. The customer decides based on whatever he is
presented with on the counter, apart from the short list of brands that he has already
zoned-in.
This situation can be extended to anything from pen, perfumes, fans, heaters, lighting,
furnishings to jewellery etc. The mass-end of the market actually tests the business
acumen of the entrepreneur to the fullest. Innovation here does not stop at just one
thing; at the same time it can be really scary to change anything. Companies handling
such product categories as market leaders for years together, are hesitant to explore
changes. Any change or innovation will also have its price implications. More or better
features will mean added cost and hence market slipping to the lower price competitor, is
the regular worry. However, here are some things that I have learnt and applied in the
past few years1.
Move from Price Based Market Segmentation to Consumer Profile Based
Segmentation
Even this, which is a seemingly straight forward thing in this age, may look weird, once
you are in the thick of things. Resistance to change may not come from the managers but
from the ‘trade’ or the dealers and distributors themselves, who may be hooked on to
using ‘economy, regular, premium’ kind of categories at the minimal. One of the better
examples in this journey is of Titan watches in India. Once competing with then
established brand HMT on price points this brand has spun several sub-brands each
catering to a profile e.g. Raga series of watches for working women. More mature
product categories like branded FMCG or automobiles have mastered this art of
consumer segmentation. But segmentation for a country as diverse as India, is a tough
challenge and several companies including mine, are evolving models that suit the Indian
scenario better, rather than using ready templates from the West.
Copyright (C) Manoj Kothari [email protected]
August 2013
2. Don’t Just Ask, Project the Needs: Consumers Cannot Tell or Articulate their Future
Choices
Innovation based on vocalised consumer demand is passé. It is proven that consumers
are exposed to severe changes in the market conditions and their demands are changing
faster than ever before. The average consumer cannot articulate what he/she would
want, a few years ahead. However, the product planning, platform planning and brand
architecture planning needs to be done not on a year to year basis, but a few years
ahead. In such cases, conventional market research fails to provide clues for creating a
robust plan for product and brand. Of late, projective techniques like consumer
ethnography, gaming, megatrend studies and co-creation workshops are being used to
understand the future needs of the consumers. These methods are later substantiated
with conventional quantitative research to bring ‘numbers’ into the strategy.
3. Benchmark Laterally: Not with Just the Competition
This one is from our own experience. While working on Treasure Chest, a small electronic
cupboard restyling, we looked at the competitors of our client’s brand. They were all
doing the same brown/beige/grey colour for an electronic chest which apparently has no
aesthetic function, but rather sits in a secret corner. When we suggested a bright blue
colour with a gradient, the marketing team thought it was rather fancy. “It may look
totally out of place in a shop-window”, “Who wants to show-off the secret cup-board”
etc. -were the voices from the marketing team. However, the CEO chose to go with our
gut-feel and the product became a runaway success. There was indeed, an inherent need
for better aesthetics which was never taken care of earlier. Finally, the consumer is not
living in an isolated island. He is bombarded with colourful objects all through the day.
Thus looking laterally into other product categories around the target consumer would
show the definitive direction. Similarly, a technology which today, seems far-off may
become common place once it lands into the hands of an aggressive competitor.
4. Focus on ‘Aspiration’, Not ‘Affordability’ of Consumers
Bracketing the target segment with price, looking at his/her monthly income, size of the
home etc. is an inaccurate metric to assess how much a consumer would spend on a
certain service. Mobile phones have proven this to the hilt. An auto-rickshaw driver, with
a monthly earning of Rs. 10,000 (USD 135) would go to great lengths to buy a new smartphone with a bigger screen. Aspiring for a better life is human. But this human quality is
stretched to the extreme in emerging economies. The society has been starving for long
to match the developed counterparts. So a consumer will leave no stone unturned to get
to that status. Any product plan or a strategy based on ‘current affordability’ of the
consumer is likely to hit a wall very soon. On the other hand, a product strategy feeding
to ‘aspirations’, may actually sound unrealistic in board meetings. It is a tough call.
Copyright (C) Manoj Kothari [email protected]
August 2013
5. Continuous Kedging: Not Continuous Improvement
Continuous improvement as a term brought in by Japanese has worked well for
optimisation of manufacturing processes and supply chain of established categories. To
meet the uncertainty lingering around the commoditised product categories and
aspiration fired consumers, ‘Kedging’ is the term to follow. Kedging refers to throwing an
anchor far-off in the direction intended, and then pulling the rope to veer the ship that
way. Linear and ‘benchmarked’ changes in the product or service are fine, but there is a
need for a team that works in parallel on creating a whole new direction for the category.
This team must be helping the chairman to throw the innovation anchor a bit farther by
working on far-fetched ideas, which otherwise may not find place in the companies R&D
labs.
End of document
Copyright (C) Manoj Kothari [email protected]
August 2013