Relevant Differentiation: CPG Innovation Can’t Succeed Without It

As consumer goods Marketers strive to innovate successfully – to develop new products that will grow their businesses – they are faced with a seemingly vast array of factors that have the potential to impact success. Consumer acceptance, advertising and promotional spending, packaging, pricing, distribution, competitive threats – all of these factors will play a role in the success (or failure) of any CPG product.

But if a Marketer had to prioritize what to concentrate on most – what would really be the most significant driver of success – what would that be?

Very simple: Relevant differentiation.

In order to be successful, a new product must, above all, be relevant. By relevant, we mean that it must meet consumer needs. Another way of looking at relevance can be summed up by Tim Manners, author of Relevance: Making Stuff that Matters:

“Relevant brands seek to help people live happier lives but do so by addressing everyday problems…”

In empirical terms, R&D conducted by Ipsos Marketing, Consumer Goods demonstrates that relevance is strongly linked to new product success; moreover, it has been shown to be an excellent predictor of long-term success.

But relevance is not enough. In order to increase their odds for success, Marketers should aspire to create products that are relevant and differentiated. Being differentiated means providing unique benefits vs. competitors. When a new product is perceived by consumers to be both relevant and differentiated, it is almost sure to be a hit – assuming it is not perceived as too expensive. Again, R&D conducted by Ipsos Marketing indicates that the combination of relevance and differentiation is remarkable in predicting new product success – and certainly even stronger than relevance by itself.

Relevant differentiation does not apply only to innovation, but also to growing strong brands. In his classic work, The Mind of the Strategic, Kenichi Ohmae stresses that brands must achieve “relevant differentiation.” What does this mean?  Simply stated, Marketers must maximize the fit between their brand and consumers’ needs (what we refer to as relevance) and maximize the distance between their brand and competition (what we refer to as differentiation).  So, the key is differentiating on relevant dimensions.

Theoretically, this all seems to make sense. But does it work in the real world? There are a plethora of examples that it does. Red Bull® differentiated on energy when no one else was doing it.  Mr. Clean® Magic Eraser® met household cleaning needs by differentiating on technology – this product can clean all types of surfaces without the use of harsh chemicals.  Pringles® potato chips achieved relevant differentiation through packaging – making it easy to retrieve the chips, open and close the container, and store the product.  Colgate® toothpaste met consumers’ needs like no other toothpaste ever had – by providing cleaning, whitening, gum protection, tartar removal, and breath freshening benefits all in one product.  The list goes on, and the lesson is the same: relevant differentiation can drive new product success and be instrumental in effectively positioning brands.

September 7, 2009.