MP3: Managing Offering-Based SCA

What is innovation in a marketing context

the creation of substantial new value for customers and the firm by creatively changing one or more dimensions of the business

captures both tangible products and intangible services

relatively easy for competitors to copy offerings

Key Aspects of Innovation

Broader than product of technology innovation

Must generate new value for customer and seller

Involves change leading to differentiation and SCA

How can firms innovate

1. Change WHAT the firm offers

2. Change WHO the customer is

3. Change HOW you sell

4. Change WHERE you sell

Innovation Radar

captures different ways a firm can innovate and helps define the innovation space

What are the 2 main ways marketing supports innovation strategies

• Launch new offerings to customer => generate sale with acceptable profit levels → Many good products fail to achieve financial goal due to poor launches

• Develop innovative offerings by collecting customer input and forecasting trends → Extensive efforts go into test marketing and understanding the factors that will influence customers to adopt the new offering

why 75% product launches fail

• Lack of perceived benefit

• No differential advantage

• Price vs performance mismatch

• Poor launch execution

• Poor positioning of new product

• Competitive response

Give an example of a failed innovation and why it failed

Kellogg’s Breakfast Mates failed because parents didn’t want their children eating breakfast in the car, despite being a “solution for harried parents

What’s the difference between Sustaining and Disruptive Innovation

• Sustaining Innovation: Improves performance of existing products incrementally (lower risk). → market leaders often win

• Disruptive Innovation: Offers a new value proposition, often with worse short-term performance, but cheaper, smaller, simpler, and grows over time → market entrants usually win

Why do market leaders struggle with disruptive innovation

• Can lose their leadership position due to failing to manage disruptive innovatioin

• Bias toward larger markets

• Difficulty in quantifying new markets

• Oversupplying features beyond customer needs

What’s a Red Ocean Strategy

Competes in existing markets, with known rules, incremental innovations. Often account for the majority of sales but low profits and high rivalry. (close to shore where sharks fight → red)

Can be managed, tested and analysed

What’s a Blue Ocean Strategy

Creates new market space and demand with less competition, higher profits level , and disruptive positioning.

Less competitive rivalry, transforms the image of competitor’s brand features such that they become a negative attribute in the new market.

Hard to test, often requires intuition, high risk

Blue Ocean initiatives characteristic

• Don’t use competitors as the benchmark

• Reject trade-off value vs cost

• Redefines value proposition

• Often the first mover develops barrier to imitation

Drivers of Adoption

1. People (adoption lifecycle)

2. Psychology (social proof, authority, scarcity, prospect theory)

3. Products (relative advantage, compatibility, complexity, trialability, observability)

5 adopter categories in the innovation lifecycle

• Innovators

• Early adopters

  → Crossing the chasm: new products fail if the firm not prepared to sell early majority

• Early majority

• Late majority

• Laggards

What is the Stage-Gate Design Review Process

A product development process that divides innovation into phases, with evaluations at each stage to ensure effectiveness.

Concept & definition (initial ideas) → Design & development → validation & production → final audit → new product

What is Conjoint Analysis used for

To understand customer value by modeling how they trade off attributes, and to predict preferences, WTP, and market share &impact of a proposed new product

What are the two main stages of Conjoint Analysis

• Design: Define attributes/levels, choose profile sets

• Analysis: Use regression to estimate part-worth utilities

How do you calculate WTP, attribute importance

part-worth difference*value of one unit

Importance = Attribute utility range / Sum of all attribute ranges