Winning at Product Development

By examining a broader spectrum of consumer needs, businesses can use this opportunity to build future growth.

Let’s set the record straight. There are three terms that people confuse when talking about new product development: there’s new brand development, new product development and innovation.

Rather than use them interchangeably, I would like to explain how we view these areas at Honey and suggest some key considerations for businesses that are preparing to go through a period of transition. By examining a broader spectrum of consumer needs than the usual drivers such as price, businesses can use this opportunity to build future growth – in whichever form that might take.

Consider the difference between how an entrepreneur develops their business compared to a large organisation. Entrepreneurs immediately understand the market niche and make instinctive decisions that often involve them developing a new brand from scratch. Companies that are not led by an entrepreneur don’t make decisions in the same way and are often building on an existing brand, which can prematurely restrict their thinking to new product development even when this isn’t always the most suitable direction. Instead, what happens when we bypass these two options and innovate directly from consumer insights?

This was the reason behind City Kitchen’s success. Through market research and strategic guidance, we found that consumers believed takeaway meals were healthier than ready meals. They considered ready meals unhealthy, heavily processed, and lacking in texture and taste – not to mention the major aws in traditional ready meal packaging like being too hot to handle straight out of the microwave (making them unsuitable to eat from the container) and not being sturdy enough to pack in a work bag without the risk of mess.

It was no wonder that the ready meal sector was in decline. These insights helped Tesco identify a gap in the market for healthy ready meals aimed at a younger, professional audience. Instead of developing an existing product range and facing the challenge of pre-existing consumer perception, we helped them through a process of new brand development to totally overhaul the traditional ready meal container and launch a genuinely new offering under the name City Kitchen.

The new brand development was the right decision resulting in a turnover of £19 million in the first year.

This kind of agnostic, insight-driven innovation is also prevalent in the technology sector. According to the BrandZ Top 25 Most Valuable Retail Brands 2016/17, Amazon is now top with sales of $104 billion. Technology giants like Google, Uber and Amazon often fund new ventures for years before they begin turning a profit.

Most of Google’s current revenue comes from advertising. So why do they invest in things like cloud computing, virtual reality and broadband internet? Because both Google and Amazon are counting on cloud computing as a way to make money in the future. In other words, they are building the infrastructure first.

Innovation should benefit everyone: company, partners and consumers

Look at Tesla. The company has only had one pro table quarter since they went public in 2010, yet they recently acquired SolarCity for $2.6 billion. Assuming they can secure enough investment to see them through to pro tability, this is a smart move that could position them as market leaders later on. It paves the way for them to sell electric cars and solar roofs to consumers under a single brand. Elon Musk said the decision would make them “the world’s only vertically integrated sustainable energy company”.

Tesla is a great example of innovation through new product development, new brand development and even brand acquisition. Talk about vision. Whatever the approach, innovation should benefit everyone: company, partners and consumers.

For multinationals, this transformation must start at a basic level and transcend departments.

This means identifying the insight – finding the direction in which to develop – then aligning expertise throughout the business and working with external partners to make it happen. This isn’t radical thinking, back in the days of the Industrial Revolution, businesses that invested in new factories and equipment survived. This became pertinent to delivery and ef ciency, and those who didn’t invest soon went bust. Indeed, those that ourished went further still by investing in living spaces and introducing ways to improve quality of life for their workers.

The first businesses bankrupted by technology were brands like HMV, Game and Jessops. But this is now spreading to other sectors.

We’re seeing the same transition today with the technological revolution. The first businesses bankrupted by technology were brands like HMV, Game and Jessops. But this is now spreading to other sectors. Monzo, one of our guest speakers at Honey’s Shoreditch House event, Rip It Up Start Again, has recently sparked a banking revolution and taken on the high street banks by launching a convenient banking service designed around a smart phone app.

Similarly, Amazon are about to forever change brick-and-mortar retailers with Amazon Go. No more lines and checkouts – just grab and go. Once an online bookseller, Amazon’s real brand value is now in convenience.

It’s a similar story with McDonalds, who many consumers think of as a burger chain, but could also be described as a real estate business (they own property worth an estimated $40 billion worldwide). Their former CFO, Harry J. Sonnerborn, was remarking on their franchise business model when he was reportedly quoted as saying: “We are not technically in the food business. We are in the real estate business. The only reason we sell fteen-cent hamburgers is because they are the greatest producer of revenue, from which our tenants can pay us our rent.”

Understanding the true values of your business should underpin every decision, especially innovation. That’s why our strategists use a range of tools and methods to pinpoint a brand’s value proposition in hierarchy of importance to consumers, focusing on the functional elements of value that address their basic needs. If Nokia had understood their role in consumers’ lives then perhaps they would still be here today?

Instead, it was Apple that redefined themselves as being more than a computer company by launching the iPod in 2001 – a new product under the same brand name that promised “1,000 songs in your pocket” and led them to develop the iTunes Music Store (which sold one million songs in its first week).

Understanding the true values of your business should underpin every decision, especially innovation

The question CEOs should ask when taking about new product development is, where are we today? Are you a challenger brand, disruptive and working towards a vision of dominance, or a start-up with the intention of selling to a house of brands? You might already be a global leader in a position of strong buying power looking to make your next acquisition.

Whether you’re a Unilever/Coles/Premier Foods or the latest drinks start-up, you should think about long-term innovation rolled out as a series of stages. To do this, businesses need to unite internal expertise: Operations, R&D, Marketing, Brand, Supply and Logistics. Through collaboration and knowledge sharing, companies can more consistently make profitable decisions.

Insights can often lead to unexpected innovation. One memorable example of new product development that soon led to new brand development is Tea Pigs.

Nick Kilby wanted to launch a premium everyday tea and he believed that consumers would pay more for a better product. Driven by a belief that many consumers value taste and provenance over price, he founded the brand Tea Pigs to bring ‘real tea’ to the mass market. Our Creative Director, Greg Vallance, was previously involved in the original packaging design. The product launched in 2006 and is now so iconic that the same packaging is still used over 10 years later. This is the power of insight-based innovation that places brand at the centre of the relationship with consumers.

Unfortunately, the story of Tea Pigs is not always the norm. A common mistake that I see is for brands to attract loyal customers and then destroy the trust by cost optimising.

This usually happens when they start off with a great product and later drive the price down, usually at the expense of the product or service. Instead, they should think about value perspective. Quality and variety is often more important to consumers than price.

It’s essential to consider the consumer’s hierarchy of needs in order to understand the functional, emotional, life changing and social benefits of the product – in other words, knowing what role the brand plays in their lives. Price isn’t everything.

Do you really know what your brand offers consumers?

If you don’t believe me, how many of you would be comfortable increasing the price of your product by over 60%?

This is exactly what Amazon did in 2014 when they increased the cost of Amazon Prime from £49 to £79 and announced extra perks including a new TV channel. And guess what? Amazon CEO Jeff Bezos said in a press release that Prime membership increased by 53% that year. He also added that they were “confident that customers would continue to find it the best bargain in the history of shopping”. There are many things that we can learn from parallel industries.

Branding for food and drinks brands is infinitely more complex than mere packaging design. Winning at innovation requires a deeper understanding of consumer insight and brand values than many businesses immediately realise. It’s a journey that has led to some of the most unexpected examples of new product development in history.

If there is one question to leave you with, it’s this: Do you really know what your brand offers consumers? If the answer is no, let’s have a conversation and find out.