Consumers will buy things that are useful and helpful, even in a downturn. The key is investing in innovation that adds value.
The big takeaway
Your customers will respond to offerings that are genuinely useful and helpful to them, even in an economic downturn. The key is investing in innovation that adds value, rather than chasing what’s trendy.
Beauty giant L’Oreal has invested more in research and development every year, even in tough times. That approach has helped the company transform into a tech-driven beauty innovator, and outperform the global beauty market.
“When there are challenges, that’s the most important time to innovate, because that’s when customers expect new, value-added experiences. They have a different view of normal and how to use your products and services,” said Guive Balooch, global VP of L’Oreal’s technology incubator.
- Multiple studies show companies that operate in survival mode, making deep cuts and reacting defensively, tend to stagger through a downturn, are slow to recover, and never really catch up to those who continued to invest and innovate.
- The investments you’ve made in digital capabilities over the past several years has likely made your company more resilient.
- Consumers are still spending, but more cautiously and judiciously. That means whatever you’re selling must provide added value vs. flash.
Here’s how you can succeed by focusing intently on customer needs, useful innovation, and driving quick wins.
Businesses should invest in technology that actually fills a customer need
It sounds simple, but knowing what your customers need is a key to delivering value.
Case in point is CarMax, the nation’s largest used car retailer and the original disruptor of the used car industry. The challenge for CarMax now is that there are a number of competitors who are showing up and trying to disrupt the industry in their own ways, according to Patrick George, editorial director, The Drive.
To stay ahead, continue disrupting the market, and deliver real value to its customers, Carmax talked to customers to discover what they needed. The answer: they need to envision themselves, and their lives, in the car without actually being in the car.
The digital merchandising team set about creating an immersive experience. They photographed cars from all interior angles (with suitcases, kayaks, drywall, mannequins, and more) to illustrate cargo and passenger capacity. They also added drag-and-drop tabs so customers could better understand the car’s features and how they work.
Get executive buy-in
L’Oreal’s Balooch said he’s lucky to have the support of senior leaders in funding the incubator’s ideas. How can you gain that kind of support?
“The best way to get executives on board is to test [the technology] and show them it actually works,” he said. “The strategy should come after you make the technology happen.”
For those not as lucky as Balooch, Gartner in December 2022 laid out four steps for building a solid business case:
- Understand how your proposal will benefit different stakeholders at the company; gather evidence including internal and external research, and proof of concept research
- Showcase the strategic value of your investment; draw a straight line between the innovation investment and the company’s top and bottom line
- Demonstrate the financial value of investing in the innovation; do a financial analysis, and create an implementation plan (how will you go to market?) and risk mitigation strategy in case the idea doesn’t pan out
- Present the business case in the most effective way possible, including targeting the business case to your audience; i.e., what does this mean specifically for marketing, sales, finance, etc.?
Think like an entrepreneur
Balooch stressed the importance of maintaining a beginner’s mindset, even in a company as big and sprawling as L’Oreal. Don’t fall into the trap of believing an idea won’t work because you’ve already tried it and failed.
For example, its Rouge Sur Mesure, an app-powered device that uses AI to enable users to create their own custom lipstick shades. The system uses three creation modes, including Shade Match which matches a lipstick shade to a photo of any uploaded photo item, and Shade Stylist, which uses an algorithm to suggest coordinating lipstick colors based on your outfit.
Balooch said the company tried to bring it to market a few years ago, but augmented reality and market trends were not mature enough to support it. Rather than shelve the project entirely, L’Oreal waited for the next iteration of technology and until macro trends indicated demand. It’s been a success, described by reviewers as “a whole new chapter in personalized beauty” and “clever and functional.”
“That reminds me to have a beginner’s mindset,” said Balooch.
Invest in technology that delivers quick wins
CarMax’s rich car content is an example of something relatively simple, but high-value.
“We don’t want to over-engineer something that ultimately provides no value,” said Ann Yauger, AVP of product management. “We figure out the cheapest minimum viable product that’s as lean as possible.”
The team gave itself three months to add this content to 15% of its cars, after which they tested customer engagement levels for two months. They found that pages with the new content led to an increase in sales leads.
“We are focused on bringing new experiences to market fast,” said Jim Lyski, executive vice president and Chief Marketing Officer. “We are on the cusp of changing the industry again, raising the bar of what it takes to compete in this industry.”
While the company invests in long-term projects, it is constantly experimenting with shorter-term initiatives that drive value more quickly, which it says gives it a higher chance of success.
Don’t become obsessed with goals that will take years to achieve, if ever. Stay flexible by constantly experimenting for short-term wins. The trick, as CarMax and L’Oreal have found, is to identify areas that deliver true value.
“There’s so much we can do, even if small, to bring value to people’s lives,” said Balooch.
Blog sourced from Salesforce.