New product innovation for the post covid experience economy
By Elisa Adams, CEO
Designing new products and services that people connect with requires a profound understanding of constantly changing consumer behaviour. The COVID pandemic has disrupted long-held social norms, buying behaviours and the way businesses deliver products and services to their customers. To compete and thrive in the post covid experience economy, product innovation and the ability to design new products and services that people love, are critical. Evolve or die will be a reality.
New products and product innovation are essential for companies that need to grow revenue and profits. As highlighted by research from McKinsey, 25 per cent of total revenue and profit across industries comes from new products. As companies plan for a post-pandemic future, most are expecting growth to be created from new products, services or business models. Global spending on R & D, according to statistics from UNESCO, has reached an all-time high of $US 1.7 trillion per annum. R & D world puts the figure at close to $US 2.4 trillion for 2021.
Why new products fail
According to research by George Castellion and Stephen K. Markham, on average 40% of product launches fail. More startling is that most start-ups businesses fail: in 2019, the failure rate of startups across the world was around 90%.
Taking a product from the concept stage to the consumer is a path fraught with dangers, obstacles and detours. The reasons for failure are numerous, including wrong timing, targeting the wrong audience, poor marketing strategy, the product failing to add value or resolve a problem…the list goes on.
The disruption, uncertainty and anxiety wrought by the COVID pandemic has made the job more difficult. What’s perceived to be the ‘new normal’ is in a state of flux, making most predictions about future market trends speculative at best. How can brands successfully design new products and services when what consumers want is constantly and rapidly changing?
New Opportunities ahead
This disruption should be seen as an opportunity for brands who can develop a deep and updated understanding of consumers. A changing world means new products and services will be required to meet new emerging needs, providing savvy players plenty of opportunities to move ahead of their competitors.
A behavioural based research and strategy approach is a proven way to develop better products and services, particularly in an environment where consumers feel overloaded, are cognitively exhausted and less able to maximise decisions for themselves. It goes beyond understanding the opinions and wants of consumers to the very core of what motivates them, impacts their decisions and drives their behaviour. It also allows the context and wider implications of purchasing decisions and behaviour to be considered. Behavioural based research will also surface unmet needs and unstated preferences, thereby providing an untapped well of insights for innovation.
Understanding consumer behaviour
Customer understanding is a fundamental stage in the development of successful product development and innovation. But to be honest, today much of the research for new product development is a poor proxy for what will happen in the real market. We see this time and time again. Sub-standard methods lead to missed opportunities and unsuccessful products being developed and delivered to consumers.
All too often, research for new products adopts a limited framework or context. It simply asks consumers what they think they may want or what they think of a new idea. It asks them to predict a future they don’t understand or even know.
Unfortunately, humans don’t know what humans don’t know. They may not know what sort of products or services will solve their problems or add value to their lives. They may not be fully aware or able to articulate the problems they need solving or the needs they want fulfilled. Brands need to discover and understand these things to be able design, price and promote successful new products.
The use of more explorative and implicit techniques is required as well as broadening the frame of the research being undertaken. Instructive product development research is able to investigate, probe and reveal the underlying pain points or problems consumers are looking to resolve in their lives, as well as their core needs and motivations.
Once you have this understanding of consumers’ true needs plus the motivations driving their behaviour, you can move to ideation and start designing product prototypes.
The impact of COVID on people’s needs and behaviour
Sprout’s Mood of Australia is a cultural trends study that has been running for 8 years. In late 2020, it examined the key emotional drivers and motivations for Australian consumers during the first year of the pandemic. We did this using our Neuroscience implicit based techniques which allowed us to fully understand the deep-seated needs of Australians. From this research we identified:
- People are seeking to feel Empowered: More and more consumers want to solve things on their own. We feel empowered when we have the authority, the knowledge and the freedom to do what we need to do. Is your brand empowering your customers to do things on their own?
- Australians are seeking engaging experiences: People are engaged when they feel like they are having a great experience. They are engaged when they absorbed by and interested in the things happening in their life and they feel they are living their life to the fullest. When you find someone engaging it means you are interested and entertained by what they say and how they are saying it. Is your brand engaging with your customers in a valuable way?
- We want to feel like we belong: All humans want to feel like they belong, to be connected and part of a community. We want to belong and feel accepted by our peers, colleagues, and family. We want to be part of groups that we identify with and hold similar values and interests as we do.
The pandemic has heightened our need to feel these emotions, encouraging the purchase of products and services that satisfy those feelings and needs. For example, to meet the need to feel empowered and engaged, we saw ecommerce sales of home improvement and DIY products boom during lockdown restrictions.
Some of the changes wrought by COVID will be temporary while others will have long term impacts. The dramatic shift to ecommerce and the digital delivery of services is likely to stay with us, but will we continue to see demand for home improvement products as social restrictions are lifted and people are allowed to engage in activities outside of their homes?
The needs of consumers will continue to evolve as the pandemic is relegated to the pages of history. Sprout will be updating its Mood of Australia report for 2021, which should reveal what our emotional needs as Australians are as we finally move forward from COVID.
The experience economy
Periods of crisis are typically followed by periods of tremendous rejuvenation and innovation. This is very likely to be the case with COVID. As lockdowns become a thing of the past and people can travel and move about more freely again, spending is likely to surge. History suggests that this will happen. And it’s the experience economy that could see the greatest growth.
There’s plenty of pent-up emotion, fatigue, frustration and spending capacity ready to be unleashed once lockdown restrictions are removed. Consumers have been constrained in terms of the experiences they could enjoy, but more importantly, their ability to share those experiences has been limited.
Experience focused industries such as entertainment, travel and hospitality were dramatically impacted by the pandemic. These industries are hoping for a quick rebound once lockdown restrictions are removed.
Pine and Gilmore explained in 1998, consumers are no longer simply satisfied with goods, services and commodities. They want what they buy to create and contribute to an experience or an event they can share and remember. This will be particularly the case for the post COVID consumer who has been starved of experiences for almost two years.
Sprout Strategy has helped some of the best-known brands in Australia get their product development strategies right. We’ve helped them to safely navigate the path from concept to product design to delivering the final product to the consumer.
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