June 2007

IN THIS ISSUE

A Letter from CEO Michael Dunn

Innovation is increasingly taking center stage among businesses of all shapes and sizes. Marketers continually feel pressure to drive business results both organically and through top-line growth. In a highly commoditized market, the ability to effectively combine creative thinking with business savvy is an important path to growth and profitability, and lends itself to the development of innovative offerings that can keep those cash registers ringing and serve as powerful differentiators.

Going beyond the hype and creating genuine momentum is a challenge, however. Many issues can arise such as ensuring innovation initiatives and investments generate the desired financial returns. Or making sure a marketing and communications strategy is in place to help offset potential risk. Or understanding innovation is not just a one-time thing, but rather needs to be a self-sustaining approach to creating advantage. And preparing for a cultural shift which empowers employees to pursue and be rewarded for innovative thinking and appropriate risk-taking, even if this occasionally leads to a failed business outcome.

In this issue of our newsletter, we look at such issues that help marketers hone their businesses’ innovative edge. In Branding Innovation, Vice Chairman David Aaker discusses the need to brand innovations to keep them from getting lost in a cluttered marketplace. And in a recent piece from AdAge, Senior Partner Scott Davis and Engagement Manager Eloy Trevino examine the separate paths taken by two corporate giants that led one to innovation, and the other, to desperation. We also invite you to tune in to a podcast with Senior Partner Kevin O’Donnell on how businesses can establish successful approaches to innovation.

As always, we welcome your comments and questions.

Best,

[Signed, Michael Dunn]

Michael Dunn
CEO & Chairman
m_dunn@prophet.com

Branding Innovation

By David Aaker, Vice Chairman

If there’s one aspect to innovation that seems to be overlooked as the topic heats up with the media, in books, among educators, and as a strategic imperative for corporate leaders it’s this: How innovations should be branded.

Too often, an innovation is hidden within existing offerings, which negates its power as a differentiator. Take Amazon’s feature allowing it to recommend books or other products based on a customer’s interests as reflected by their purchase history. It was never branded and thus became a commodity feature common to many e-commerce sites. Amazon didn’t make that mistake a second time when it unveiled One-Click, a branded service that goes a long way in defining Amazon as a leader in what’s become a messy marketplace.

Here are the drawbacks to simply sliding innovations into an existing offering. First, many in the marketplace are neither motivated nor able to sort out claims and what lies behind them. Customers cope by ignoring what they see as confused or contradictory competitive claims, so those claiming to be “new and improved” simply fade in the muddled environment. Second, any dramatic, visible improvement may well be copied by competitors, negating any belief by customers that a unique point of differentiation has been achieved.

So how can a business recognize when the opportunity represented by an innovation will be more fully realized with the help of a brand? Three questions must be addressed:

  1. Is it a significant advance? Westin’s Heavenly Bed, created in 1999, was truly a better bed. The custom-designed mattress set featured 900 coils, three versions of a cozy down blanket for three climates, three high-quality sheets, and five goose-down pillows. It was noticeably and experientially superior.

  2. Is the advance meaningful to customers? Enough so that it will alter their behavior and loyalty patterns? The ultimate level of impact is when the innovation defines a new category by changing what people buy. The Heavenly Bed addressed the very heart of what a hotel room experience should be: the provision of a good night’s sleep. And it created an entirely new subcategory of hotels with premium beds. During its first year, hotels featuring the Heavenly Bed saw a 5% increase in customer satisfaction and increased occupancy, among other measures.

  3. Will it merit investment over time? An innovation worth branding also warrants active management over time, including investments to improve the offering and to engage in brand-building efforts. The value of the branding effort will depend on the value of the business it will support. That involves issues like its profitability, the intensity of current and potential competitors, and the potential to maintain the innovation-based differentiation. The Heavenly Bed did impact the Westin offering and influenced a large business. The effort to extend the branded innovation helped prolong its market impact, with such follow-ups as the Heavenly Bath and the Heavenly Online Catalog.

Branding an innovation involves more than just applying a name and a logo. It takes the creation of a brand that’s supported by a strategy, and an actively managed brand-building program. While not all innovations merit a brand, the decision should be incorporated into the overall innovation strategy.

The above text was drawn from a forthcoming article appearing this Fall in California Management Review’s special issue on innovation.

Embracing Innovation — Not Desperation — To Fuel Growth

By Scott Davis, Senior Partner and Eloy Trevino, Engagement Manager

Recent developments at Burger King and Ford speak to the frenetic conditions that continue to affect marketing’s ability to contribute to business growth. At Burger King, innovation has been embraced as the route to growth. Ford, it’s safe to say, has fallen to desperation.

Burger King has celebrated 12 consecutive quarters of growth on the strength of its innovative product launches and smart promotion of its irreverent King through breakthrough new media and traditional advertising strategies. Ford reported a $12.7 billion 2006 loss and is scrambling to revitalize short-term sales. To that end, it recently announced the rebranding of the Ford 500 to Taurus, hoping to reprise the legendary brand’s outstanding annual sales volume. If only brand revival were so easy.

Empowered CMOs – those who have earned more expansive business influence by virtue of their thinking and successful actions – can help senior management better qualify the routes they’re taking to growth (e.g., desperation or innovation) by addressing the following questions:

  1. Where does our brand credibly allow us to expand? Kodak gets it right by moving back to its original roots and brand values around “capturing memories.” By helping people organize and manage their personal libraries of images through a host of innovative new digital photo services, Kodak stays true to its brand heritage.

  2. What are untapped opportunities/need states that we can own? Sherwin Williams repainted its product picture by understanding consumer needs and innovating around product form. This was then leveraged across its entire product line via Dutch Boy’s Twist and Pour™ plastic, screw top paint container, and Ready to Roll™, a project-sized container with a built-in roller tray.

  3. What organizational competencies/business models can we more effectively leverage to drive innovation? Allstate reconfigured its pricing to allow customers to custom-design insurance policies to meet their individual needs. It’s ensuring its future success by leveraging new business models and innovating around the white space of consumer control.

Nobody “chooses” desperation as a strategic course of action. But organizations that use the answers to these three questions to help better use innovation as a growth driver will smooth the path to success.

An expanded version of this article originally appeared in AdAge, which can be downloaded by clicking here.

Podcast: A “System” for Innovation

The way Kevin O’Donnell sees it, successful companies manage their businesses by maintaining a consistent forward-looking perspective while investing heavily in creating the insights, ideas, and knowledge to ensure they’re competing in new ways.

That’s the essence of innovation, this Prophet senior partner suggests in a Sky Radio interview, to air on American Airlines flights throughout September. To learn what he considers the keys to success of notable business innovators, and how to create a “system” for innovation, click here for our podcast.

Prophet Recommends...

Prophet's 2006/2007 State of Marketing Study: The Effectiveness Imperative

How important is marketing effectiveness to today’s senior marketing executives? Exceedingly, according to findings of Prophet’s 2006-2007 State of Marketing Study. It’s getting there that’s problematic.

The Study was conducted among 100 plus senior-level marketers to better understand how they allocate and measure their marketing investments. It uncovered, as in our 2005 Study, that they continue to look beyond marketing to achieve business growth -- and business strategy, new products, and the customer experience are among the most critical drivers. It all requires executional excellence and a focus on innovation, they agreed.

The Seven Surmountable Hurdles to Marketing Effectiveness  

By Andrew Pierce, Senior Partner

This article featured on MarketingProfs, discusses one of the most pressing challenges marketers face today -- finding the balance between the art and science of marketing to create strategies and programs that meet measurable business objectives. It’s called marketing effectiveness, and achieving it is doable – once some surmountable barriers are overcome.

Power Switch

By Michael Dunn, CEO and Chairman

In many of today's leading organizations, marketing is front and center in driving solid business performance - based on a heightened understanding of and responsiveness to the customer. Leading the charge are empowered chief marketing officers, who have developed a more expansive influence, range of responsibilities, and view of marketing's capabilities in the broader business scheme.

 

Most frequently downloaded from www.prophet.com

Leveraging the Corporate Brand

By David Aaker, Vice-Chairman, Prophet
A perspective on how a company can dial up the importance and role of the corporate (company) brand.

 

Other articles of interest

Online video Ads Bringing Results
eMarketer, June 13, 2007
Online video ads are leading to sales, according to the Online Publishers Association (OPA) "Frames of Reference: Online Video Advertising, Content and Consumer Behavior" report, conducted in partnership with OTX. Of the 80% of viewers who had watched an online video ad, just over half had taken some sort of action. Nearly a third had checked out a Web site, while 22% had searched for more information, 15% had gone into a store, and 12% had actually made a purchase.

Who Blogs?
Advertising Age, June 6, 2007
America is going to the blogs. Every year millions of people create blogs, and even more check in daily to read them. They have the power to send stock prices plummeting, and consumers count them as more credible than advertising and e-mail marketing. But odds are you have no idea who they are. Marketers, meet the bloggers.

The Fanatic: A Brand's Best Friend?
Brandchannel.com, June 18, 2007
We all know them. Say the magic word—"Apple"—and off they go. They preach the virtues of the superior Mac and denounce the skeptical population of PC users. They are fanatics; they love Macs and all things Apple. And they are probably Apple’s most effective sales force.

For additional interesting articles and factoids on the subject of Innovation, check out Prophet’s blog — BackPocket.

News and Events

Simon Marlow joins Prophet as Chief Financial Officer

Simon brings over 13 years of strategic financial and operational leadership in the marketing services/research world to his role as Prophet’s CFO.  Marlow’s career encompasses several professional sectors including market research, advertising, and information technology. He has held senior financial positions with operating divisions of Kantar, McCann Erickson, and TNS. In addition, his areas of expertise range from operational financial management and reporting to overseeing human resources, information technology, legal, procurement, and real estate functions. Read the release ›

Scott Davis discusses the revitalization of several Kraft brands

In this article in the Chicago Tribune, Scott is one of the featured Marketers who say injecting a bit of irreverent, outside-the-box thinking into ad campaigns can help Kraft Foods reinvigorate some of its often-staid brands. Read the complete story ›

Sprechen Sie Deutsch?

If you answered Ja! then be sure to check out our new German web site.

 

Spotlight on Speaking

ANA Marketing Accountability Conference
September 10–11 — Palm Springs, FL
Prophet is sponsoring this event in conjunction with the ANA. Michael Petromilli will be speaking with Toni Gnewuch from American Family Insurance, outlining the work Prophet is doing to help AFI maximize the return on their marketing investments.

Marketing Management
September 17–21 — Zurich, Switzerland
Roland Bernhard will be discussing innovation management and the latest trends in marketing at this event.

Marketing Society Annual Dinner
November 20 — London, UK
Prophet is partnering with the Marketing Society to present this year's annual dinner themed "New rules for a new world."


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