Knowledge Bank Blog, New Product Launches

Finding the Innovation Sweet Spot

Do your activities have ‘optimal newness’?

When Airbnb was first looking for funding, do you know how it was pitched to potential investors?  ‘eBay for homes’.

Then a few years later, when Uber was pitching to investors it was described as…’Airbnb for cars’.

And pretty much anything that has been pitched since has been ‘Uber for X,Y,Z’.

Why?  In framing something that was very new, around something that was already established, the people on the receiving end of the pitch had an immediate shortcut that they could use to understand the concept.  It was something new.  Yet anchored in something familiar.

As humans we are torn between two opposing forces.  The first is ‘neophilia’ – a curiosity about new things.  The second is ‘neophobia’ – a fear of anything new.  This is the tension you may feel every time you go to a restaurant.  The desire to try something new (neopholia) versus the worry of trying something that you might not like (neophobia).

Achieving the balance between these 2 competing forces is often called ‘optimal newness’.  This is achieved when something is both familiar enough and new enough.  This means that we are much more likely to try new things if they have enough familiarity about them – e.g. a twist on a familiar dish in a restaurant.

So, why are we talking about this?  Well, last week we talked about reinforcing shopper behaviour – by maximising familiarity.  Reinforcing behaviours that work for you, is good for a retailer or a brand.  However, there are times where you will want to change shopper behaviour.  Often the best way of  doing this, is not to try to get shoppers to do something completely different, but to do something that is a slight variation on an existing behaviour.

To get them to do something that is familiar enough yet new enough.

So, how can you do this?

Product Innovation.  Probably the best way of doing this is through new product and pack formats.  You are offering the same product = familiar enough.  But you are offering it in a new format = new enough.

It could be a significant new product format for a category – for instance pods in coffee.  It could be targeted product formats for different consumption occasions – for instance cheese snacking.  It could be a specific pack format for an occasion – for instance Wrigley’s tubs of gum for the car.

Many of these new product and pack formats command a significant price premium.  Take Pizza Express single serve salad dressings.  The unit price is low – 50p vs the full bottle at £2.  But the cost per ml is double.  A product that is relevant to the shopper and very relevant to category growth.

Most successful product innovation is not about getting shoppers to buy something completely different to what they have bought before.  But a new version of something they already buy. Optimal newness.

Pack Structure & Design.  Think about different types of birds.  First think about a Penguin – it is easy to recognise it as a Penguin, but it is not immediately obvious that it is a bird.  Now think about a Sparrow – it is obviously a bird, but it looks like a lot of other birds.  Now think about an Eagle – it is obviously a bird, but it looks very different to other birds.  It is distinctive.

Great pack designs are like Eagles.  They fit with general category norms = familiar enough.  But they have real distinctiveness within that norm = new enough.  There are two key elements to a pack – structure and design.  Eagles typically conform to one of those elements, but differentiate on the other.  For instance, if most packs in a category are white and a similar shape – follow one of the rules (e.g. same shape) but break the other (e.g. differentiated colour).  Or vice versa.

Shelf Layouts & Merchandising.  We’ve been involved in lots of discussions about radical new shelf layouts.  These ideas are often very nice on paper, often even nicer in a conference presentation with funky pictures.  But, they are rarely good in practice.  They are often too different for shoppers, who have to relearn their behaviour.  They are often too different for retailers, as they are difficult to roll out cost effectively across the store estate.

Instead the best merchandising solutions are typically ones that make small changes.  They will often segment and merchandise in the same way = familiar enough.  But make the shelf layout much clearer (signposting, navigation, supporting product information) = new enough.  The new solution is unlikely to win a design award, but it might win an award for optimal newness.

The concept of optimal newness doesn’t just apply to influencing shoppers.  It also applies to getting people, internally and externally, behind a new activity.  Familiar enough = they are not taking too big a risk.  New enough = it is not something that has been done many times before.

‘Airbnb for cars’ is now worth $51 billion.  There is something in this.

Feel free to forward.  Have  a great weekend and speak to you next week.