In mature markets where technology is not decisive, brand creation is crucial for innovation. The first step is to group consumers and users in a different way.
Brands give a name to a problem. The group has a reference; there is something that represents them. The people with the same needs have a way to express. In the end, the process makes it easier to create products and services to improve things.
This post is the second part of "Marketing to innovate. Innovation in mature markets". You can read and follow each piece independently.
Marketing and innovation
Traditionally firms make products and use advertising to let people know and appreciate them. Marketing reverses the process. First, identify a need for a group of consumers and then look for a way to make the product that satisfies that need.
As I said in the previous post, marketing facilitates innovation. The number of things to improve is infinite. Each one is an opportunity to create something new.
Here I will talk about the first step: segmentation.
Possibilities to innovate
I have explained that it is possible to innovate in mature markets. Even with products that have no direct relation to technology. First, it is necessary to identify groups of consumers with similar tastes or preferences. They need goods or services that could make their lives better in some aspect.
There are different possibilities to innovate. I purpose three. 1. Unsolved needs, 2. Hole in the market, 3. New and small groups.
To find needs that other brands did not attend is the most challenging option. Multinational efforts and technological innovations concentrate on this point. That makes it the worst option for small and new companies. They need a lot of resources, and competition is high.
Hole in the market
Small firms can concentrate on segments that have little attention for big brands. In mature markets, you need that resource more than anywhere else. It is better to have a small group of raving fans than a big audience with only some interest. The enthusiasts are eager to pay more. They will also evangelize the product with friends and family.
New and small groups
Grouping people in a new way is another option to innovate. It is usual to consider only socio-demographic variables like sex, age, and social class. It leaves the possibility to see things in a new way. Perhaps it is possible to find common things between people following other criteria.
The internet makes things easier. A small firm can sell its products online to small segments.
- Skip the intermediaries. New technologies make it possible to bypass the middlemen. Manufacture and sell to the end consumer in a direct way. It is viable to produce products in small quantities. In those cases, the cost-benefits related to large volumes are not a priority.
- Worldwide. With the internet, the market is the world. Some segments are small considering the population of a country. They can be profitable if they view the whole world as a market.
Let's see some examples of what I have explained. Here are some firms that could innovate specializing and segmenting in new ways.
Glasses and razors. New segmentation
Warby Parker is a New York firm that sells eyeglasses online. They launched in 2010 with an initial investment of $2,500. In those days, they had no store. They wanted to penetrate a mature market dominated by multinationals.
Is that product for everybody? In 2010, I think, it was not. At first, their target was students, and people with limited resources. They desperately needed a cheaper product. A large proportion of this group wears glasses. They have a solid background and know what they want. At the same time, they are confident about buying online. A small segment built following different criteria.
A similar case is Harry's. They try to innovate with razors. They have grown so fast that they bought a factory in Germany. However, in the beginning, they were tiny in a market saturated by the big ones. They are not products for everybody. It was even truer when they began. They focus on men that want to buy online, are active on social media, and are sensitive to social causes.
Meals online. Innovative segmentation
We can find examples in the market of home-delivered meals. In the San Francisco area, many initiatives are popping up. The first segmentation is geographic. They test, learn and then apply to other zones. Also, each one has a specialization; they focus on a different target. I will talk about some of them just as an example.
Uber Eats. They deliver food made by restaurants. They take advantage of the infrastructure they have created with passenger transport.
Amazon wants to deliver everything, now including food from restaurants. It is free as long as you already have Amazon's annual Prime membership.
Blue Apron. They provide the recipe and ingredients pre-measured. The user has to prepare it but has the products and information to do it fast and easy.
Munchery. They make the meal and deliver it. The product is cold. The customer only has to heat and eat.
There are many other options. I only mention some of them. What is relevant here is that each one has some specialization. They make segmentation of the population following innovative criteria. Also, they specialize in segments that are now small but that have substantial growth potential. Those firms are clear examples of what I tried to explain before.
Brand to differentiate
I have explained that the first step is to select a group of consumers with common characteristics. The second is to build a brand around. That will help them feel identified and represented.
That implies the creation of a name and design. It is crucial also to coordinate all the other communication elements. The logo is the visible part. There must be a sound unified strategy behind it.
It is a market that has no direct relation with technology. Innovation seems difficult. It is not an emerging market like virtual reality, mobile phones, or electric cars. There is fragmentation. There are large multinationals, but also many small businesses. 70% of global sales come from local and family business.
Despite being a mature market, innovation is still possible. For instance, Danone’s new products represent 20% of the annual sales for the group. New brands like Actimel or Activia represent a new line of work. They have higher added value than traditional yogurt.
Other small brands launch new products as an answer to new segments. For instance, yogurts with vegetables, and milk with royal jelly or fiber.
I have talked about companies whose principal goal is to grow. Others want to be small, handmade and local. All options are possible. Growing fast and globally does not have to be for everyone.
First, you must invest in marketing. You need to research the market for new ways to group consumers or to find segments not reached by big the companies. Then, you should create new brands that represent those needs.
It is not necessary to be in the last new technology or work in a multinational. The real innovation, the closest, the most revolutionary is the brand.. Because it represents a new way to understand the environment. Around the brand, you can group consumers in a new way.
Here are other posts related to innovation in marketing and brand: