Focus on the Best or the Rest?
Sometimes you hear claims such as: “20% of the brands in a certain category of consumer goods counts for 80% of the sales” (cf. the Pareto principle). This feels easy to believe e.g. when looking at what youths wear and use: they all seem to wear and use products of the same brand, or of the same few brands.
The best-selling 20% of brands would, according to this claim, sell 80% of total sales.
Yet it is also claimed that the total sales of the “rest-sellers”, i.e. not the best sellers, is bigger than that of the bestselling 20%.
What can be learned from the above said, when it comes to innovation?
Since price is one factor affecting the decision which product a customer chooses, we must see to it that there is a fit between our innovation/product and the audience we plan it for. Other factors than price also play a role and are thus related to whom we innovate for. This is illustrated in the video.
Once an innovation has found its customers – or vice versa – customers have found our innovation, we can try to broaden the use of our product/innovation. One example of this development is digital photography. Once digital cameras sold and the technology was further developed, the cameras could be integrated in mobile phones. Thus, groups of consumers who otherwise maybe never would have bought a digital camera, began using – and buying – the technology.
One observation is a question about our innovation audience – whom do we target with our innovation activities; the customers buying the bestselling products, or the rest of the customers? There is of course an infinite number of different ways to segment potential customers – bestsellers vs. rest-sellers is only one example. A more commonly used example is the diffusion of innovation theory. The theory describes how different groups of consumers, for example early adopters and late majority (adopters), begin utilizing a certain innovation. The group of adopters we want to focus on, affects our pricing strategy.
It can be an idea to look for groups of customers that so far have not used our products. Maybe we can modify (cf. innovate) our product a bit and expand our clientele? If our organisation produces high-end handrails for cruise vessels, maybe we could produce cheaper handrails for other customers within the marine industry? Or portable handrails for outdoor events? Or maybe even fences for gardens?
Inspiration for Reflection and Discussion
Think about who you innovate for:
Also try to describe different kinds of customers, maybe in the middle of the continuums: mid-price, environmentally friendly but not perfect and so on.
If it was easy to answer – could you broaden your focus? Or narrow it further? What would that result in?
Closed vs. open innovation
