Monetizing Innovation

Transcription

1 the world's leading pricing consultancy The Economist Monetizing Innovation Designing the product around the price Ljubljana, 3 October 2017 Alexandra Wogritsch Consumer Goods & Retail Practice Office Vienna Schubertring 14, Top 5.OG 1010 Vienna, Austria Alexandra.Wogritsch@ simon-kucher.com

2 Simon-Kucher & Partners at a glance Best consultancy in marketing and sales World leader in pricing manager magazin Marketing and sales 1 Simon-Kucher & Partners brand eins Thema Marketing, branding and pricing Simon-Kucher & Partners Sales, after-sales and CRM Simon-Kucher & Partners World leader in giving advice to companies on how to price their products BusinessWeek The world s leading pricing consultancy The Economist 2 3 Boston Consulting Group McKinsey & Company Boston Consulting Group McKinsey & Company McKinsey & Company Boston Consulting Group Pricing strategy specialists The Wall Street Journal In pricing you offer something nobody else does Professor Peter Drucker Source: manager magazin survey of top managers in Germany, August 2007 and 2011/IMB Source: brand eins Thema/Statista survey of approx. 1,800 partners and project leaders from consulting firms and approx. 1,400 C-level managers from German companies, May 2014, 2015, 2016 and 2017 Global presence 34 offices worldwide, > 1,000 employees, 240m revenue in 2016 Amsterdam Atlanta Barcelona Beijing Bonn Boston Brussels Cologne Copenhagen Dubai Frankfurt Geneva Hamburg Hong Kong Istanbul London Luxembourg Madrid Milan Mountain View Munich New York Paris San Francisco Santiago de Chile São Paulo Singapore Stockholm Sydney Tokyo Toronto Vienna Warsaw Zurich > 3,000 projects in the last 3 years Growth and competitive strategies Product portfolio (re-)design Pricing excellence Sales strategies and sales channel optimization Customer-centric digital approaches End-to-end transformation towards customer excellence OH_034DE17008_CGR_FMCG Ljubljana 2017_Simon-Kucher_Monetizing Innovation_3 October

3 We have extensive experience in consumer goods and retail Selected Simon- Kucher clients Food/Beverage Non-Food Retail ABF Nestlé adidas Mary Kay 7 Eleven Rewe Beam Suntory Moet Hennessy Asics Nike Auchan Media/Saturn Danone Pernod Ricard Beiersdorf Philips Ahold Delhaize Leroy Merlin Kellogg s Mondelez Molson Coors Peroni Unilever Pepsi Coty Prestige Henkel Kimberly-Clark Reckitt Benckiser Shiseido Yves Rocher Barnes & Noble Castorama Douglas Metro C&C Office Depot Relay Selected consumer goods clients many other clients excluded due to confidentiality. OH_034DE17008_CGR_FMCG Ljubljana 2017_Simon-Kucher_Monetizing Innovation_3 October

4 Four numbers OH_034DE17008_CGR_FMCG Ljubljana 2017_Simon-Kucher_Monetizing Innovation_3 October

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6 R&D investments higher than ever Companies with highest innovation expenditure VW 13,5 (5.2%) Global R&D investments $1.559bn Samsung Microsoft Roche 10,4 10,0 13,4 (13.4%) (19.0%) (6.4%) Google 8,0 (13.2%) R&D investments 2013 in bn 1 (share of turnover) Selected numbers in the CPG world: P&G 2.9% Mondelez 1.4% Clorox 2.4% General Mills 1.3% Kellogg s 1.4% 1 Source: Battelle, R&E Magazin; Fortune; Aug. 21, 2015 OH_034DE17008_CGR_FMCG Ljubljana 2017_Simon-Kucher_Monetizing Innovation_3 October

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8 How did your last new product launch perform? Are your new products meeting their profit targets? Yes 28% On average only 28% of new products meet their profit targets No 72% Share of products Source: Simon-Kucher Global Pricing Study 2014 OH_034DE17008_CGR_FMCG Ljubljana 2017_Simon-Kucher_Monetizing Innovation_3 October

9 A tale of two car launches: vs Dodge Dart Porsche Cayenne OH_034DE17008_CGR_FMCG Ljubljana 2017_Simon-Kucher_Monetizing Innovation_3 October

10 Dodge Dart: Designed without customer WTP at the centre Disastrous sales performance Second biggest new product flop in 2012 after the Apple iphone map Discontinued in 2016 I can tell you right now that both the Chrysler 200 and the Dodge Dart, as great products as they were, were the least financially rewarding enterprises that we've carried out inside FCA in the last eight years. I don't know one investment that was as bad as these two were.. Sergio Marchionne, CEO OH_034DE17008_CGR_FMCG Ljubljana 2017_Simon-Kucher_Monetizing Innovation_3 October

11 Porsche Cayenne: Roaring success driven by focus on the customer Challenge Needed a new innovation outside traditional sports car niche Zero experience in the SUV category Inconsistent with the Porsche brand at the time (speed, power, daring and engineering) Outcome Most profitable car in the automotive industry Most important car in Porsche portfolio ~50% of total company profit OH_034DE17008_CGR_FMCG Ljubljana 2017_Simon-Kucher_Monetizing Innovation_3 October

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13 There are four types of innovation flops #1: Feature Shock (over-engineered or wrong features) #3: Minivation (underpriced or "undervolumed") #2: Hidden Gem (potential not recognised) #4: Undead (born to fail) OH_034DE17008_CGR_FMCG Ljubljana 2017_Simon-Kucher_Monetizing Innovation_3 October

14 #1: Feature Shock amazon fire phone: An offering consumers didn t want A feature-packed phone with four cameras facial recognition technology 3D effects the shopping feature Firefly The result: A $170 million writedown due to unsold inventory One of amazon s biggest flops in years OH_034DE17008_CGR_FMCG Ljubljana 2017_Simon-Kucher_Monetizing Innovation_3 October

15 #2: Hidden Gem Digital imaging: Kodak did not realise its potential 1974 Steven Sasson tasked with figuring out whether chargecoupled devices (CCD) had any practical applications invents first digital camera Suffers internal resistance for fear of cannibalising film sales 1995 Kodak introduced its first digital camera, only getting serious about that business in Kodak declared bankruptcy Today Digital imaging & sensors critical across myriad sectors Manufacturing Military & aerospace Upstream oil & gas Scientific research Medical & life sciences Security OH_034DE17008_CGR_FMCG Ljubljana 2017_Simon-Kucher_Monetizing Innovation_3 October

16 #3: Minivation Park Assist: A product heavily underpriced Cost-plus pricing towards VW and other OEMs: approx. 100 OEMs understand actual customer value VW's customer price: 670 OH_034DE17008_CGR_FMCG Ljubljana 2017_Simon-Kucher_Monetizing Innovation_3 October

17 #4: Undead Segway: Born to fail or clearly the wrong positioning Ambition Reality Breakthrough personal transporter to transform the B2C market Niche B2B product for tour operators and shopping centre security 6,300 2 Business plan sales target: 50,000 in first year Actual sales: 30,000 in 6 years OH_034DE17008_CGR_FMCG Ljubljana 2017_Simon-Kucher_Monetizing Innovation_3 October

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19 9 key steps for successfully monetizing innovations 1 Have the WTP talk early 2 Segment! One size fits all doesn't work! 3 The core: Product configuration and bundling 4 Monetization model: How you charge trumps what you charge 5 Pick the winning price strategy: Skimming vs. penetration 6 Outside-in business case: from hoping to knowing 7 Value communication: The product as such is not sufficient 8 Use behavioural pricing to fine-tune 9 Maintain your price integrity OH_034DE17008_CGR_FMCG Ljubljana 2017_Simon-Kucher_Monetizing Innovation_3 October

20 1 Willingness to pay... often not considered! OH_034DE17008_CGR_FMCG Ljubljana 2017_Simon-Kucher_Monetizing Innovation_3 October

21 1 Without the WTP talk you cannot prioritize and focus! What are consumers actually willing to pay for? Inner material Brand Outer material Size Sole material What are mere choices of preference? Additional detail Cut Color Fastening Value drivers Preference drivers Source: Simon-Kucher project database OH_034DE17008_CGR_FMCG Ljubljana 2017_Simon-Kucher_Monetizing Innovation_3 October

22 1 Convenience helps drive a 50% premium for one added product feature Industry Example Weber charcoal grill "Original kettle" Weber charcoal grill "Original kettle premium" Only difference is this ash tray! Price: $99.00 (94) Price: $ (269) Source: Home Depot website on Apr OH_034DE17008_CGR_FMCG Ljubljana 2017_Simon-Kucher_Monetizing Innovation_3 October

23 2 Segmentation: One size fits none! Source: Simon-Kucher OH_034DE17008_CGR_FMCG Ljubljana 2017_Simon-Kucher_Monetizing Innovation_3 October

24 3 What does that look like in reality? Occasion Brand Package Price Channel Example: Impulse consumption opportunity Commuting Workplace A B 25cl 33cl 50cl Hyper Super Cash&Carry Convenience Mom&Pops Street Vendors School time C 75cl 1l Pharmacies Bakeries Travel Retail On the go meals D 1.5l Vending Horeca OH_034DE17008_CGR_FMCG Ljubljana 2017_Simon-Kucher_Monetizing Innovation_3 October

25 4 Technology has created different consumer shopping behaviors Subscription Trial-to-purchase / leasing Mobile ordering, payments & loyalty programs Flash sales and direct to consumer Portable consumer experiences and many more Source: Simon-Kucher OH_034DE17008_CGR_FMCG Ljubljana 2017_Simon-Kucher_Monetizing Innovation_3 October

26 4 And the tools to cultivate a direct relationship through offer personalization Free virtual makeup try on app positioned as a personalized, digital beauty advisor Digital recreates a content and a relationship with the consumer that we have never had Almost in the 20 selfservice world. People go into a store, million downloads they are faced worldwide, with a wall of products and by definition, top they lifestyle don t app, get 65 any advice when it s self-service. We can million create product the trials in digital beauty adviser that will help them 2015 choose" Buy easily on the app Jean-Paul through Agon, L oreal.com CEO Source: Barcode scan for use in stores OH_034DE17008_CGR_FMCG Ljubljana 2017_Simon-Kucher_Monetizing Innovation_3 October

27 5 Pricing strategy... Not always on top of the agenda! OH_034DE17008_CGR_FMCG Ljubljana 2017_Simon-Kucher_Monetizing Innovation_3 October

28 5 The huge challenge of aligning pricing goals 0,35 0,30 0,25 0,20 0,15 0,10 0,05 Relative importance CEO CMO Sales director CFO Supply chain Account manager Product manager Pricing Marketing 0,00 Profits Market share Volume Product mix Volume growth Revenues Cost reduction Source : Simon-Kucher project database OH_034DE17008_CGR_FMCG Ljubljana 2017_Simon-Kucher_Monetizing Innovation_3 October

29 6 Without WTP your business case is useless! Typical process Concept testing Apply volumes Back solve PPA & volume to hit profit hurdles Feminine Care case study: Successfully broke line-pricing Assemble basic ingredients, core Include price and count elasticity, perceptions Understand secondary impacts Active/Sport line launch Add risk assumptions Source of volume Consider competitive reactions (war gaming) Keep checking in Source: Simon-Kucher experience OH_034DE17008_CGR_FMCG Ljubljana 2017_Simon-Kucher_Monetizing Innovation_3 October

30 7 What does your product stand for? An innovation won t speak for itself Source: OH_034DE17008_CGR_FMCG Ljubljana 2017_Simon-Kucher_Monetizing Innovation_3 October

31 8 Your consumers will behave irrationally Low price article: Volume increase: 14% High price article: Volume increase: 21% Before: After: Before: After: $ 3.50 $ 3.50 $ $ $ 2.50 $ 2.50 $ $ Source: Simon-Kucher project example OH_034DE17008_CGR_FMCG Ljubljana 2017_Simon-Kucher_Monetizing Innovation_3 October

32 9 Simple principle for price reactions In our organization you have to come up with at least three measures what can be done apart from price decreases before we even think about decreasing prices. This simple rule had the highest impact. Everybody understood. - Board member Source: Simon-Kucher OH_034DE17008_CGR_FMCG Ljubljana 2017_Simon-Kucher_Monetizing Innovation_3 October

33 9 key steps for successfully monetizing innovations 1 Have the WTP talk early 2 Segment! One size fits all doesn't work! 3 The core: Product configuration and bundling 4 Monetization model: How you charge trumps what you charge 5 Pick the winning price strategy: Skimming vs. penetration 6 Outside-in business case: from hoping to knowing 7 Value communication: The product as such is not sufficient 8 Use behavioural pricing to fine-tune 9 Maintain your price integrity OH_034DE17008_CGR_FMCG Ljubljana 2017_Simon-Kucher_Monetizing Innovation_3 October

34 monetizinginnovation.com Case studies Methods & tools Blog articles learn more! OH_034DE17008_CGR_FMCG Ljubljana 2017_Simon-Kucher_Monetizing Innovation_3 October

35 Thank you! Office Vienna Schubertring Vienna Austria Alexandra Wogritsch Director Tel: Mobil: Alexandra.Wogritsch@simonkucher.com Americas Atlanta, Boston, Mountain View, New York, San Francisco, Santiago de Chile, São Paulo, Toronto Europe/Middle East Amsterdam, Barcelona, Bonn, Brussels, Cologne, Copenhagen, Dubai, Frankfurt, Geneva, Hamburg, Istanbul, London, Luxembourg, Madrid, Milan, Munich, Paris, Vienna, Warsaw, Zurich Asia/Pacific Beijing, Singapore, Sydney, Tokyo Vienna office Schubertring 14/Top 5. OG 1010 Vienna, Austria Tel OH_034DE17008_CGR_FMCG Ljubljana 2017_Simon-Kucher_Monetizing Innovation_3 October