How many of you know who Brian Chesky is? What about Joe Gebbia? Or Nathan Blecharcyk?
Well, they all moved to San Francisco in October 2007. They moved into a loft apartment but couldn’t afford the rent. So, they came up with the idea of putting an air mattress in their living room and turned it into a bed & breakfast.
They put together a website that offered short term accommodation for people who were unable to book a hotel in the saturated San Francisco market. Their site “airbedandbreakfast.com” officially launched on August 11th 2008. Their first customers were people who were attending an industrial design conference later that month.
Fast forward eleven years and Airbnb have got two million people staying with them each night.
They are the biggest accommodation provider in the world. Yet they own no accommodation. Not a single room. People like us provide the accommodation. Airbnb provide the service.
They are selling the same thing – a place to stay – as their hotel competitors. But they are selling it in a very different way.
Two million people a night says it’s a pretty successful way.
Why are we talking about this? Well, in the FMCG industry the word ‘innovation’ tends to mean ‘product’. And when we think about business challenges or opportunities we tend to think ‘product’.
How to drive category growth? Launch new products. What is in the brand plan for next year? 3 new product launches. How can we help retailer X differentiate? Give them an exclusive product.
No matter what the question, product is often the answer.
Psychologists talk about something called the ‘law of the instrument’. It means having a cognitive bias that leads to an over reliance on a familiar tool. Or to put it another way “if your only tool is a hammer then every problem looks like a nail”.
In the FMCG world, the tool is usually a product. But it doesn’t have to be. We can take a broader view of innovation. One that goes beyond products.
So how can you do this?
Innovation in HOW you SELL. This could be about different selling models. Think Graze. Think Tails.com. Think Dollar Shave Club. Or it could be about how you sell in store. Think the Waitrose packaging free cereal dispensers. Think the Lindt pick & mix solution that has gone into some Sainsbury’s stores. Think the Innocent chiller complete with artificial grass and daisies we saw in an Italian store last week.
It could be about breaking some of the traditional rules of selling in a category. The craft beer explosion has, of course, been driven by many new products. But it has been driven as much by how it has been sold. Mainly sold in singles. At a premium price. Rarely promoted (and if so, at a shallow discount). Funky names. Vibrant packaging. Tasting notes. It’s still beer but sold in a very different way.
A simple question – how much time do you spend working on what to sell versus how to sell?
Innovation in HOW you COMMUNICATE. We wrote a few weeks ago about the challenge of being better than your competitors. How much better can your strawberry yoghurt taste than your competitor’s strawberry yoghurt? To stand out in an increasingly competitive world you need to be different not (just) better. How you communicate can play a key role here.
The classic example of this is Marmite and the “love it or hate it” positioning. It has cut through so much that “Marmite” has moved from a brand name to an adjective. An interesting current example is Bodyform and their “Viva la Vulva” campaign that is challenging the taboo associated with that body part and feminine care products. Think Dove Real Beauty campaign taken up a level or two!
Many category or brand growth opportunities don’t require new products. For instance, if you want to get everybody to brush their teeth twice a day you don’t need new types of toothpaste or toothbrushes, you need to do things (communication, education) to drive the behaviour change. Another product is probably not going to help.
Innovation in HOW you CONNECT with shoppers. This could be about services. For instance, personal care companies getting into skin or hair diagnostics. Or food companies offering tailored nutrition plans. It could be about how you bring your expertise to shoppers. Like Majestic do in wine. Like Nespresso do in coffee.
It could be about how you connect with your most valuable shoppers. This happens a lot in other industries. If you are in a frequent flyer programme you get more benefits than the standard passenger. The more you fly, the more benefits you get. In the FMCG world it is often the most promiscuous shoppers (the ones who only buy you on promotion) who get the best deal. Not the most loyal shoppers. Tesco are trying to address this right now with Clubcard Plus. Shoppers get more benefits in exchange for their loyalty.
The old normal = innovation meant what you sell. The new normal = innovation means how you sell.
Think about that the next time you are paying to stay in someone else’s house.
Feel free to forward. Have a great weekend. Speak to you in a fortnight.
We are an FMCG strategy consultancy. We help companies win with shoppers & retailers – Category Strategy, Channel Strategy, Shopper Marketing Strategy and Retailer Engagement.