Product Development: Innovating for Channel Strategy

06 Jul Product Development: Innovating for Channel Strategy

If there’s anything we’ve learned from watching ABC’s hit show Shark Tank, it’s that some of the greatest entrepreneurs start small. Take, for instance, the story of Ingvar Kamprad (no, not a Shark Tank contestant…just a great story). In the 1920s, at the age of only five, Kamprad discovered that he could buy bulk quantities of matches in the Swedish capital of Stockholm and resell them to his neighbors at a low price point—making a profit while also saving his customers money. Soon selling matches turned to selling greeting cards, decorations and writing utensils. But these small items weren’t enough for Kamprad.

In the 1940s he started selling furniture. But not just any furniture. Kamprad wanted to sell pieces with unique designs that required self-assembly. To advertise, he disseminated a catalogue and opened a showroom for people to stare into as they passed the storefront. Seventy years later, that dream has turned into what is now IKEA, and the rest, as they say, is history.

In a recent article from Forbes, IKEA’s Chief Marketing Officer Leontyne Green Sykes details the company’s rise to success—both brand-wise and financially. She identifies five key components to IKEA’s strategy that prove quite useful when examining our own suggestions for how your company can improve its product development. Here are IKEA’s platforms, according to Green Sykes’ interview: (1) Start with the price tag; (2) Use consumer insights; (3) Apply solution innovation to marketing; (4) Put priority on the design, rather than the designer; and (5) Use a democratic corporate culture. Based on these, and our own research into what works in product development, we’ve highlighted three key areas that your business needs to focus on when creating new product lines and bolstering your sales—and, of course, we’ve tied in IKEA’s strategies and how they can help you define your brand.

Diagnose Price Limitations Early

In our 22 years in business, we’ve seen countless companies invent outstanding products, only to discover that they can’t take them to market due to price constraints. Here’s the harsh reality: it doesn’t matter how amazing your product is if no one can afford to buy it. So, what’s the solution?

Price problems usually don’t appear by happenstance (except, of course, for unforeseeable circumstances like supplier shortages). That means that you can diagnose what price hurdles you may face long before ever running the race. Issue? For innovation leaders, it’s your innovation teams that are typically developing the products—and more often than not, they are either unaware of, or unconcerned with, pricing issues down the line. So, you have two options: educate your team that pricing matters for channel strategy, or be actively involved with the innovation process and bring your own knowledge of pricing issues to the table during each brainstorming meeting. We suggest doing both.

What does IKEA do? The iconic brand identifies the price at which it wants to sell an item long before it ever produces the item itself. This keep the company honest in terms of what it’s creating, and ensures that the creators live up to expectations. This is also a great strategy, because it clearly identifies the goals that your innovation team needs to meet—and if they don’t meet them, you have a reason to send them back to the drawing board and solve the problem.

Use Insights

There’s a reason we’ve always heralded our ability to harness consumer insights: they matter. More than that, in fact. Insights should be what drive your business decisions. At IKEA, for instance, the teams don’t build anything unless they know people will buy it. How do you figure that out? Use customer-directed research that identifies problems consumers are facing, and whether your proposed solutions will actually fix said problems.

Sounds simple, right? So why do we so many companies ignore it? We like to call this the Advertising Firm Syndrome—and it’s one of the principal reasons we rebuff the label of advertising. Too often, advertising firms come up with ideas that they think will work based on some indefinable aspect of creativity, without doing the research to see whether such an idea will actually work in the marketplace. While of tremendous benefit to publications that criticize terribly developed advertising campaigns, it’s not so great for the companies at the butt end of said strategy. The key, then, is identifying early on what the market calls for, and then crafting a solution that is perfectly tailored to the research results.

Market the Product Last

For such a basic premise, you’d be surprised how many companies fail to adhere to it. Before you market a product, you have to have the product. Why? See the tip above—your business may not truly know what it has until it actually has it. If you develop a marketing strategy before the product is finished, you’ve inadvertently placed a constraint on your innovation teams—telling them that their final product has to fit within the confines of the prescribed strategy. This is understandably problematic.

Perhaps more important than that, however, is the role that research should (yet again) play. Once the product is finished, you need to make sure—through focused research and insights—that it actually accomplishes what you thought it would accomplish for the same consumers identified in the first stage of the research. Then, from there, run more research and analytics to determine what strategies and approaches might make these same people more likely to buy the product (and, of course, make sure to branch out to other audience segments). This brings the product development process full circle and ensures you see a greater likelihood of ultimate success.

Want to know more about what research and customer-facing insights can do for your company? Shoot Mike Reiber an email at mreiber@axiomcom.com. Curious about improving your innovation processes? Email Rob Beachy at rbeachy@axiomcom.com.