Innovation Lessons from Prior Recessions

Continued innovation during a recession greatly increases a company's chances of being successful when recovery begins, setting the stage for long-term growth and success.

We know this to be true, but it's not always easy to act upon it. Through examining prior economic downturns and subsequent recoveries, very specific lessons emerge for both the Marketer and the Market Researcher.

1. Make the Early Stages of Innovation More Efficient

Successful new product introductions during a recession are vital to recovering quickly after the downturn ends. It comes down to innovating as efficiently and effectively as possible - but by all means continuing to innovate and invest in R&D. Prune the idea tree religiously then nurture what's left.

Ipsos advocates a set of practices that can be easily adopted as part of a reconfigured innovation process, one that ultimately uses fewer resources to achieve a superior (some would argue more strategic) end game.

• Focus on key measures that are less affected by economic conditions: a measure such as Relevance should be less affected by immediate economic conditions. This affords a CPG company the ability to maintain both its short- and long-term innovation pipeline and use a consistent key measure throughout the entire research process, with necessary market-driven adjustments made a the forecasting stage.
• Narrow the ideas under consideration prior to developing concepts: rather than creating fully developed concepts immediately after ideation, Ipsos recommends creating and testing two or three sentence idea statements.
• Calculate an expected fair share for ideas that pass idea screening: calculate the volume a new product with average concept performance, price and marketing support might be expected to achieve in the market in which the idea would compete.
• Create fully articulated concepts only for those ideas that are sufficiently promising and have acceptable volume potential: rather than qualification, the focus is now on optimization.

Through being more judicious about the product ideas that graduate to fully articulated concepts, CPG companies can increase the ROI of their innovation programs.

2. Assess Your New Products' "Expensiveness"

Businesses that provide superior value-for-the-money are both more profitable during a recession and faster-growing thereafter. However, measuring value is not as easy as it seems.

Benefits of adding Expensiveness to your surveys (in addition to Value for the Money) include:

• isolates the price variable
• forces consumers to think in terms of competitive context
• correlates highly with in-market price data
• can be used instead of in-market price for forecasting

3. Focus on Competitive Context

During a recession, improving the perceived quality of product offerings relative to competitors tends to result in better profits and growth. One possible (and, possibly, expensive) approach to addressing this consumer desire is to undertake product reformulation, especially to the extent that quality can be improved without affecting price.

The other, less obvious, approach is to uncover the levers that best differentiate you from your competitors in a way that increases your perceived quality. And the key to uncovering those levers is to understand the competitive context in which your brands operate.

Final Thoughts

It is often a prolonged recession or business downturn that pushes a company to do what potentially it should have done all along-what starts as cost-cutting measures may be plain good business practices.

The payoff from the approach we've proposed here can be measured multiple ways:

• On a quantitative basis, seeking truth at the earliest stages of innovation and quickly and inexpensively eliminating bad bets can result in a significant reduction in human and financial capital.
• Equally as important, on a qualitative basis CPG companies become better equipped at later stages to seek success and maximize the value of their initiatives. More time can now be spent talking with consumers, refining positioning, evaluating packaging, and generally focusing on both short and long-term product success.

Much of what works well during bad times amounts to a refocusing on the basics - improving perceived quality, optimizing price by understanding how expensive a product is perceived to be relative to competitors, and approaching innovation in an efficient, effective way. By following these guidelines, companies stand a better chance of both weathering the economic storm and enjoying increased prosperity when market conditions improve.

These are experts from a recent Point of View from Ipsos Marketing. For more detailed analysis on these valuable recessionary lessons, download a copy of our Point of View.