driving profitable growth through major strategic innovations by jeff goldstein of ingenuity...

WWW.ACUPOLL.COM

Jeff Goldstein, President

AcuPOLL Precision Research, Inc.

October 18, 2012

Profitable Growth Through Strategic Innovations: New Businesses, Partnerships, and Acquisitions

Copyright © 2012 AcuPOLL Precision Research, Inc. All Rights Reserved. 2

WWW.ACUPOLL.COM

Confession: I do not meet the #1 criterion for a highly acclaimed speaker

• I’m not from out of town

• However, I do have diverse experience:

– Discovered, invented, patented, trademarked,

developed, funded, launched,

searched, bid, acquired, licensed,

grown, and profited from innovation


WWW.ACUPOLL.COM

Focus Today on ROI

• Not sexy … but powerfully important

• Strong idea and a great product often are not enough

• Tough economy, and competitive maturing markets, require a more strategic approach


WWW.ACUPOLL.COM

Understand Your Audience

Raise Your Hand If You Have…

• Analyzed a market to identify a big new business opportunity

• Developed a written concept for an innovation

Stand If You Have…

• Conducted quantitative market research on your concept, product, or package

IF YOU ARE SITTING, PLEASE WRITE THIS DOWN.

(800) ACU-POLL … we’d be happy to help!

Raise Your Hand If You Have…

• Been involved with a volume forecast

• Worked on a direct response or infomercial campaign

• Interest in raising money to invest in a new business or innovation

• Interest in tips on acquisitions


WWW.ACUPOLL.COM

1. Attractive Markets #1 Decision for finding profits and managing risk

2. Strong Concepts Dramatic & desirable differences

3. Strong Volumetrics Lessons from Snuggies

4. Trial Generation Costs Think like a direct marketer

If there’s time and interest …

1. Funding innovation How much does $1 of funding cost?

2. Growth acquisitions Tips for acquisition search

4 Strategies for High ROI Innovation


WWW.ACUPOLL.COM

CLIFF NOTES ONLY




4. Trial Generation Costs Think like a direct marketer






WWW.ACUPOLL.COM

1. Market Selection Sets the Stage for Success

Often the single most important decision you’ll make

• Play where you can win

• Defines risk and return

Over 100 million sold since 1994 Est. $200 million paid to George

George Foreman Grill


WWW.ACUPOLL.COM

Why selling products to beauty salons was a great opportunity…

• Unlikely millionaires

• Weak competition

• Fragmented distributors

• Great margins

…until marketplace changes ruined it!


WWW.ACUPOLL.COM

Strategic Analysis to Pinpoint Great Markets

• Understand fundamentals – The 5 Cs • Consumers, customers, competition, company, and economic characteristics

• Understand trends Wayne Gretzky: “skate where the puck is going, not where it’s been”

Aging Beauty Look Younger

Healthy Living Nutrition Fitness Self-Treatment Germ-Free

Natural Organic Green Chemical-Free

Specialization Ethnic

Multi-Benefit Devices Licensing Celebrity/Music/Sports Endorsement

Convenience Design Value Premiumization

Pets as People … and other category-specific themes


WWW.ACUPOLL.COM

Strategic Analysis to Pinpoint Great Markets

Translate platforms to products … the devil’s in the details of the proposition!

The Corporation in the Clouds story

• 12 Platforms … 200 ideas … “but I don’t see a product I can launch!”

• Demographics

• Competition

• Company Competencies


WWW.ACUPOLL.COM

Consider How Opportunities Fit Your Portfolio

“Managing Your Innovation Portfolio,” Bansi Nagji and Geoff Tuff, Harvard Business Review, May 2012

2 4

1 3

Existing Products

New Products

Existing Markets/ Channels

New Markets/ Channels

“Innovation Ambition Matrix”

4

Greater Risk


WWW.ACUPOLL.COM

Successful Company Example: Investment vs. Return*

*Results vary by industry


WWW.ACUPOLL.COM

2. The Power of Dramatic & Desirable Differences

Get the concept right!

• Febreze failed twice before national success Trial

• Odor Elimination test market Low

• Fabric Refreshing / Freshness test market Med

• Cleans Away Odor national launch High

More recently, “a breath of fresh air” grew global share 1.5 pts. last quarter!


WWW.ACUPOLL.COM

What’s in a Concept?

The unique & appealing proposition defining why target customers should buy your product or service instead of competitors’

1. Customer Insight – The existing customer belief that illustrates the problem or unmet need your product addresses. It can reflect strengths, competitor weaknesses, habits, emotional concerns or wants, etc.

2. Benefit (#1 in importance) – The functional or emotional promise you make that addresses the insight and motivates purchase

3. Reason-to-Believe supports or explains why customers should believe this promise

Scope Example

Insight: The worst bad breath is in the a.m. and results in 80% of consumption

Benefit: Scope fights morning mouth, the worst breath of the day

RTB: Scope has two powerful ingredients that kill 99% of bad breath germs


WWW.ACUPOLL.COM

Knowledge Drives Odds of Success

Expertise & Research Increase Potential … and Big Companies Invest in Both!

• Fundamentals: demographics, psychographics, needs, language, psychology, etc.

• Focus groups and ethnographic research

• Image, habits, practices, usage, attitudes, segmentation surveys

• Applications: insights, concepts, advertising, product performance, packaging, promotions

• In-market testing

Amount of Customer Research Interaction

Odds

of

Success

With Expertise

Without Expertise


WWW.ACUPOLL.COM

Febreze/Swiffer reached $1B in categories without competition…

where they could most easily create a dramatic and desirable difference!

– Febreze reinvented home fragrance for fabrics

• Only then expanded into plug-ins, air sprays, candles, and cars

– Swiffer reinvented cleaning for the convenience world, eliminating mops

Don’t Be Afraid of a Niche Or to Zig When Others Zag Businesses often don’t end up where they start:

Special K Aveeno Neutrogena Strivectin Pantene Arm & Hammer

Can you own a niche and unique benefit, and earn while you learn?


WWW.ACUPOLL.COM

3. Understand Components of Volume

# Target HHs

% ACV Distribution Difference between accessible and available

% Awareness Marketed or inherited (foot traffic, ease to find, ease to notice)

% Convert to Trial Driven by dramatic/desirable difference!

# and price per first purchase

# Triers & Trial $ Revenue

% Repeat Rate Critical for growth over time

# and price per repeat purchase

Purchase frequency Can be more important than % Trial*

# Repeaters & Repeat $ Revenue *Febreze example

Fourt-Woodlock Model Example:

Snuggies vs. Pedegg


WWW.ACUPOLL.COM

4. Trial Generation Costs

Direct marketers are hawks on infomercial ROI!

They make sure they can cover trial generation costs

They creatively extend their revenue models

• Regimens & add-ons/upsells

• Recurring purchases

• Retail halo / As Seen on TV

You MUST have a visible path to ROI on trial generation!

Think Like a Direct Marketer! Revenue $x COGS/Other -$y Ad cost -$z Profits $P


WWW.ACUPOLL.COM

Never Believe …

“This is a big idea because all we need is 1% of a kabillion dollar market”

The Seafood De-Sheller Story

Trial Generation Question: What does it cost to

reach, interest, and close a sale on this 1%?!!!

Caution


WWW.ACUPOLL.COM

5 Ways to Reduce Trial Generation Costs

Is there someone whose customers may want or be required to use your products or services? – Dunnhumby and Kroger, Macy’s, Home Depot – Your Encore and P&G, Eli Lilly, etc.

1. Sales- Funneling

Partnerships

2. Co- Promotion

3. Joint Ventures

Does someone in a related category deliver or reach your prospective customers? – Tide samples in Maytag washers – LifeLock at Office Depot; America Online discs everywhere – Prenatal vitamin recommendation in pregnancy test kit instructions – Intel Inside – Digital affinity and lead gen programs

Could a partnership bring together complementary capabilities? – P&G + Clorox Glad brand joint venture – Catalina Nielsen joint venture


WWW.ACUPOLL.COM

5 Ways to Reduce Trial Generation Costs

Does someone have a trademark or source of credibility that would make your product more successful? – License: Tide Laundry Essentials, Febreze air filters, Mr. Clean

Car Wash, SpongeBob Cheese Nips, Larosa’s Garlic Bread – Co-Brand: Crest + Scope, Tide + Downy, Kraft Bagelfuls with

Philadelphia Cream Cheese – Endorsement: ADA Seal, celebrity endorsement

4. Trademark or Other Brand

License or Endorsement

5. Co-Location

Does someone have a location that would make your product or service more successful? – Fast Food: Taco Bell + KFC, Starbucks in Target, McDonald’s in

Walmart, Subway in gas stations – Sephora in JC Penny, Sunglass Hut in Macy’s – ATMs in hotels and casinos – Great Water Capital and Dinsmore & Shohl – Nail salons in airports


WWW.ACUPOLL.COM




4. Trial Generation Costs Think like a direct marketer and collaborate!






WWW.ACUPOLL.COM

Cost of Funds Affects ROI and is Highly Variable

• What does $1 cost?

– Consumer Loans:

• Payday lender, credit card, home equity, margin, pledged asset loan

• Rate % depends on the source, pitch quality, and amount you shop

– Sources: friends/family, un/sophisticated angel, venture firm, mezzanine, etc.

– Pitch quality: management team, evidence of opportunity, proven and

scalable revenue model, market size, margin on acquired users, etc.

– Amount you shop: Chicken Soup for the Soul met with >100 publishers!

• ROI objectives vary with the cost of funds, from a few % to 25-35%


WWW.ACUPOLL.COM

A Little About Acquisitions

Some Advantages

• Often a proven business model

• Visibility of current returns

– Much less risk than a new business of investing and achieving $0

• May provide brands, scale, competencies or other benefits

• Buying a “sellable” asset

Some Disadvantages

• Feasibility and timing are unpredictable (i.e. moon and stars must align)

• Seller expectations & competition set the price


WWW.ACUPOLL.COM

Acquisitions Can Be Appealing Relative to New Brand/Business Odds of Success

• Startup and new brand success rates are extremely low

• P&G is the gold standard for new brands in CPG but has many failures

– Developed 32 in ’80s: 16 launched (50%), 8 national (25%), 5 profitable early ‘90s (16%)

– Many failures in ’90s/’00s: HomeCafe, Fit, Torengos, Dryel, Thermacare*, Kandoo*, Culinary del Sol, Juvian, etc.

*Never reached expectations, subsequently sold


WWW.ACUPOLL.COM

Tips for Acquisition Search 1. Clearly define and align on objectives/criteria

• Includes why acquire (sales, brand, technology, etc.)

2. Focus on attractive markets

3. Focus on opportunities that are dramatically and

desirably different

4. Understand how company competencies fit

5. Formulate new vision before assessing opportunity

6. Determine what it’s worth … and when to walk


WWW.ACUPOLL.COM

Future Interest Areas

• Innovation Success Models

• Schemas, Conceptual Blends, and Frames of Reference

• Any reason to call us at (800) ACU-POLL • The 3 Gs: Grow, be Grateful, and Give back

Questions?

Copyright © 2012 AcuPOLL Precision Research, Inc.

WWW.ACUPOLL.COM

driving profitable growth through major strategic innovations by jeff goldstein of ingenuity...

Business

acquisitions copyright

quantitative market

george copyright

acquisition search copyright

great product

growth acquisitions

attractive markets

strong volumetrics lessons