We may live in an era of innovation, but does every innovation guarantee company growth?
Innovation is a key priority for most companies. Faced with stronger competition and more selective customers, many business leaders are feeling pressure to launch new products and services. A recent McKinsey survey states that more than 25 percent of total revenue and profits across industries comes from the launch of new products. However, more than 50% of launches don’t hit their targets.
It’s time for organizations to rethink how the innovation process should work.
We recently ran a Maru/Matchbox study of more than 2,500 consumers in five Latin American countries. The insights we gained helped us identify five key considerations for businesses that are designing new products or services:
1. Innovation is democratic
When it comes to innovation, size doesn’t matter.
Seven out of 10 Latin American consumers believe that innovation can come from national or global companies in equal measure. More than 80% are willing to try innovations that come from young companies and new players if they fulfill a specific need.
Similarly, innovation is not associated with cost, exclusivity or luxury. Instead, innovation must be accessible to all. From a list of 10 innovation attributes, “exclusive” appears only in sixth place and “expensive” is last. Eight out of 10 Latin American consumers expect to pay the same or less for an innovation compared to what they currently pay for their products.
2. “Innovating” does not necessarily make a brand innovative
More than 80% of Latin American consumers like to try product innovations and are actively interested in them. However, the most common brand innovations are not considered innovative by Latin American consumers. From a list of 10 types of innovations evaluated, label changes, new flavors, new functions or cheaper versions of existing products occupy the bottom four positions of the relevance ranking.
Positioning these kind of product changes as innovations can be counterproductive. Instead of generating the image of a dynamic and innovative brand, there is a risk of exhausting the Latin American consumer, and creating the opposite image: a brand that repeats itself.
In fact, 1 in 3 Latin American consumers described products that were ‘not innovations but more of the same’ as being the most important barrier to the trial of innovations. Furthermore, such ‘innovations’ can often generate other challenges. For example, the cannibalization of the gondola space (and sales) of more effective products. If production, logistics, marketing and gondola space resources are limited, allocating resources to initiatives with little real potential to grow the business can become inefficient and counterproductive.
On the other hand, the innovations most highly ranked by Latin American consumers are those that imply a “revolution,” either in the product itself or in its branding and positioning. A true innovation must be genuinely original and relevant. Taking into account that this “true” innovation is not always for companies, every time we decide to launch a new product or service we must determine if it’s a radical or incremental innovation and align the launch around the customer’s expectations and the brand.
3. Sustainability and innovation must go hand in hand, and brands are expected to take the initiative
When discussing sustainability, 95% of Latin American consumers say they worry about the environmental impact of the products they use, and more than 80% are willing to exchange their usual products for eco-friendly alternatives. However, it’s important to note that most would only do so as long as they don’t have to overpay.
“Sustainable” is one of the top five attributes associated with innovation and, in turn, “promotes the emergence of ecological and socially responsible alternatives,” which is the second most mentioned benefit in relation to innovations.
Although there are still barriers and new habits to be learned, when we see that the issue of the environment is gaining more and more prominence within social debate and public opinion, those who lead the change will surely have more chances to win.
4. Efficiency, simplicity and flexibility are key
Today more than ever, Latin American consumers are looking for innovations that respond to their needs. More than 40% of Latin American consumers point out that “innovations make our lives easier because they allow access to better, more practical and more efficient products.”
Our research shows that the most valued product and service innovations are those capable of making life easier for Latin American consumers. Time savings, simple and intuitive use, availability at all times and places, and the use of existing platforms or devices are expected. New payment methods such as MercadoPago, online marketing systems, streaming platforms and digital content, and on-demand mobility services appear as the most valued recent innovations.
Related Post: 3 Lessons From Coca-Cola’s Global Innovation Community.
5. Freedom without losing control. Innovative, but not “alien”
While Latin American consumers want innovations to give them freedom and make their lives easier, they do not want this to be at the cost of loss of control.
We evaluated 22 innovations and saw that within the same category the most valued innovations are those that offer additional benefits or user-controlled upgrades as opposed to innovations where the person surrenders control to a device or institution. For example, Electric cars occupy the first place in the attractive ranking, while cars with autopilot are ranked 20th. Personal health monitoring via smartphone is the fourth most valued idea, but the proposal of a health insurance company that offers discounts based on physical activity measured via smartphone is ranked 16th.
Similarly, innovations that are too “futuristic,”—those that radically deviate from the familiar and safe—are rejected. For example, nutraceuticals occupy the top three rankings of tested innovations in the food industry, while cultured meat is in last place.
Mobile technology and apps are seen as a “sine qua non” condition of innovation. However, it is important to remember that technology and digital still need to have a relevant use or purpose.
Therefore, to innovate successfully, we believe that it is essential to look beyond basic categories and towards the needs, desires and interests of consumers. Choose to offer innovations that can really connect with the desires, motivations and mindset of our Latin American consumers.
To learn more about how Latin American consumers see innovation, contact our team today. We have also provided a handy infographic that displays the 5 ways to understand innovation from the perspective of Latin American consumers.