BOSTON: Game-changing innovation is rare and most companies are better advised to focus on incremental change that helps drive loyalty and revenue growth, according to a report from Bain & Company.
The consultancy's "Elements of Value" study highlighted 30 universal building blocks that address four kinds of consumer need: functional, emotional, life changing, and social impact.
This "elements of value" model is rooted in Abraham Maslow's hierarchy of needs, but extends those insights to focus on people as consumers, and describe their behaviour around products and services.
"Breakthroughs may be worth pursuing, but our recent research shows most companies benefit more from incremental innovations that add new consumer value to their current products and services," said Eric Almquist, co-author of the report and brand strategy leader within Bain's Customer Strategy & Marketing Practice.
"However, the trick these companies often face is determining what elements to add in order to boost the perceived value of their existing offering."
Bain surveyed more than 10,000 US consumers about their perceptions of more than 50 US-based companies to test whether these elements of value can be tied to company performance.
It found that those companies which performed well on multiple elements of value had more loyal customers than the rest. Companies with the highest scores on four or more elements had, on average, three times the customer advocacy of companies with just one high score, and 20 times that of companies with none.
Further, companies doing well on multiple elements were shown to grow revenue faster than others. And those that scored high on four or more elements had recent revenue growth four times greater than that of companies with only one high score.
"The elements of value work best when a company's leaders recognize them as a growth opportunity and make value a priority," said Almquist. "They should be at least as important as cost management, pricing, and customer loyalty."
Companies can establish a discipline around improving value in key areas, the report said, including new product development, pricing and customer segmentation.
Data sourced from Bain & Company; additional content by Warc staff