If Your Category is Too Crowded, Expand It with Demand-Driven Innovation [INSIGHT]

By Martin Moore, VP, Nielsen Innovation Practice

To state the obvious, brand managers spend their days looking for ways to grow their brands—and today they have more tools at their disposal than ever before. The challenge of media fragmentation matched with the opportunity provided by big data have come together to give brand managers the ability to target specific “micro” audiences with more tailored messaging, resulting in more efficient growth.

These tools provide the most impact for brands in emerging categories that are still attracting new consumers or in categories with “expandable” consumption—categories in which consumers might conceivably use more of a product over the same time period, whether by increasing consumption on a given occasion or increasing occasions of consumption. In these cases, there’s an opportunity to grow not only the brand, but the category as well, because you’re attracting new buyers or you’re able to generate more value from current buyers.

However, for brands in crowded categories, growing the category often does not seem possible, and brand growth in this environment is hard-won: it requires luring consumers away from your competitors. Brands that do this often begin with an increase in their advertising spend, which only prompts competitors to do the same. The result is an onerous arms race that’s simply not sustainable in the long run.

It gets worse. When the warring brands have depleted their marketing budgets, they lean heavily on price promotion. Consumers promptly acclimate to the ever-present deals, switching among brands based on which one is cheaper this week, transforming promotion from a brand strategy to a consumer expectation that must be met. A sorry additional effect of this dynamic is that it leads the consumer to think of price as a key differentiator. At this point, private-label establishes itself as a stronger threat.

The situation sounds hopeless, but there’s another pathway to growth.

Even the most established categories change over time—and not simply in a passive sense, driven by consumers’ changing tastes, but often as the deliberate result of one brand’s ingenuity. In fact, a category that appears stable may be one critical innovation away from awarding one brand a significant long-term advantage.

For example, if you had asked someone in 1998 if they could envision an innovation that would change the way America thought about mops, you would have received some odd looks—most people probably thought America didn’t think about mops at all. But lo and behold, in July 1999, Procter & Gamble (P&G) launched the Swiffer, completely upending the crowded mop and home cleaning categories. In the final four months of that year, the Swiffer generated more than $100 million in global retail sales. It has successfully grown the brand with new products and line extensions. In fact, if you hit “view all” on the Swiffer website today, you will see 36 distinct products. As of 2015, Swiffer was one of P&G’s 20-odd brands generating $500 million to $1 billion in global revenue.

The Swiffer story has been told many times, but the core of its success rests in one of those observations that seem obvious once made, but often go unobserved for many years; mops provided a far from ideal experience—cleaning with them was a physically demanding experience and, for all the effort required, they were not even very good at cleaning floors. Consumers didn’t like how wet they made the floor, how they tended to just move dirty water around, how difficult it was to avoid splashing dirty water on oneself, how they required lugging a bucket around, how exerting it was too lift and drag around a saturated mop, and how time-consuming the process was.

In short, Swiffer’s creators realized that consumers were making many compromises in order to get the job of cleaning the floor done. It’s a perfect recipe for innovation, so it’s no surprise that Swiffer embodies the core principle of demand-driven innovation: if a brand can pinpoint a circumstance in which consumers are struggling because current offerings don’t provide a satisfactory solution, and tailor a better solution to this circumstance, they have a high chance of launching a hugely successful innovation.

Demand-driven innovation is so powerful that it might seem surprising that many companies start with an idea they think is great, and then try and sell it. In reality, this supply-driven thinking is the rule rather than the exception. To a man with a hammer, everything looks like a nail—but it’s far better to examine all these things that the man with the hammer is banging away at, and design tools that will suit them better.

A recent Nielsen study confirms the critical importance of identifying and articulating a “circumstance of struggle” that resonates with consumers. Researchers analyzed more than 600 product concepts in 60 categories and 30 countries and found that those concepts which clearly conveyed the circumstance—including who was struggling, as well as when and where—performed 58% better with consumers than those without this information

But how many unresolved circumstances of struggle are there really to be found in a crowded category? Haven’t consumers’ various needs already been met? In all likelihood, the answer is no; circumstances of struggle often hide in plain sight. To uncover them, here are a few things to look for:

1.       Trade-offs: Are there circumstances in which consumers are forced to choose between imperfect alternatives? Cat owners had long been forced to choose between purchasing litter in smaller quantities, requiring more frequent trips to the store and a larger outlay, or lugging heavy value packs that were physically difficult to maneuver. Tidy Cats Lightweight resolved this trade-off by creating a litter that was just as effective as traditional litter but only half the weight.

2.       Unexpected uses: Are consumers using products in unexpected ways that yield benefits the manufacturer had not anticipated? The Mountain Dew team noticed that consumers used their product in the mornings more often than they had expected—and sometimes added orange juice to make it a more “suitable” morning drink. As it turns out, many consumers who didn’t have a taste for coffee were still looking for a way to get moving in the morning. As a result of this insight, Mountain Dew launched Kickstart, a caffeinated, carbonated soft drink with juice that specifically targeted the morning-usage occasion; it exceeded $300 million in sales by the end of its second year. In a similar vein, the Nyquil team noticed that consumers were taking Nyquil when they didn’t have a cold if they needed a good night’s sleep—and thus, ZzzQuil was born.

3.       Surprising combinations: Are consumers combining products in unexpected ways to create a solution that no existing product offers? Bud Light discovered it could attract a large number of new consumers—including more women—by marrying beer with margaritas in its Bud Light Lime-A-Ritas offering. The combination made beer more approachable to non-beer drinkers and made margaritas a better fit for casual social gatherings such as barbecues. In the case of Chobani Flip, the very act of combining ingredients became an integral part of the product experience. The Chobani team noticed the rising trend of “deconstructed” desserts at popular restaurants. By applying this concept to the category—adding a sidecar of interesting toppings with different tastes and textures to yogurt packages—the Chobani team transcended the breakfast usage occasion, encouraging consumers to think of Chobani Flip as both a healthy snack and a craveable dessert. As a result, 46% of Chobani Flip buyers are recent converts to the Greek yogurt category.

4.       Product benefits that could become a full-blown “experience”: Can you unlock opportunity by shifting focus from “configuring a bundle of benefits” to “delivering a desired experience”? Magnum managed to re-energize the ice cream category with an apparently not-so-revolutionary product: chocolate-covered vanilla ice cream bars. But by focusing the messaging on the various emotional dimensions of indulgence—glamour, decadence, and even sexiness—Magnum uncovered super-premium benefits in a “plain vanilla” product, and brought them to mainstream ice cream buyers who rewarded the brand with $225 million in sales during its second year.

These runaway successes all hail from mature categories: soft drinks, cat litter, home cleaning and ice cream, where many would have considered breakthrough innovation of this magnitude to be impossible. All these successes began by looking for a specific circumstance of struggle, compromise or unfulfilled aspiration in consumers’ lives, and then working to resolve it in a markedly better way than existing solutions were doing. In this way, small consumer moments can drive big opportunities in crowded categories.