Walgreens chief innovation officer Colin Watts was in town this week to host a jury preview of the upcoming Product of the Year awards, an annual consumer-driven competition. This year’s entrants include packaged goods giants like Procter & Gamble, Colgate and Dr Pepper Snapple Group. Contestants are judged on the innovativeness of their packaging, design and function. Winners will be announced at a gala in February, and recipients typically tout the honor in new marketing and packaging. According to Product of the Year, the organization that gives out the awards, brands usually see a 10 to 15 percent sales lift just from incorporating the award in in-store and on-air marketing. Watts, who serves as this year’s jury chair, spoke with Brandweek about some of the new product trends among the current round of recipients, how the recession has impacted new product development, and also what the drug store chain has been up to recently. Excerpts from that conversation are below:
Brandweek: What are some of the common themes you’re seeing—in terms of innovation—among this year’s Product of the Year contestants?
Colin Watts: A lot of interesting themes are coming through in terms of the various different contestants that I’ve seen so far. One is, you’re seeing this area that I call “micro-segmentation.” You’re seeing products that are getting very, very good at understanding what are the unique target segments for consumers and unique target needs within consumers. So, the days of creating these broadly based products are over. You’re now seeing people getting very, very smart about where they’re going.
The other thing is, I think you’re seeing real back-to-nature trends. You’re seeing lots of products that are coming forth and advancing their greenness and their naturalness, which is a big trend with consumers as well.
What’s very interesting as you look across a lot of the products is value. And, it’s not that [the manufacturers] are posting value on the front of their products, but very subtly in terms of the way they’re pricing their products, the quality of the products, what they’re comparing the experiences [to]. They’re really trying to bring value to the consumer without necessarily sacrificing the price point itself. So, this could still be a premium priced product. There are some examples of that . . . the [at home] espresso-making machines and so on. They actually represent a great value to going out and getting a coffee or espresso drink in that they replicate the espresso bar [experience] by bringing it home. You’re seeing a lot of CPG manufacturers getting very smart about that.
The other thing that you’re seeing is an extraordinary design centricity. It’s amazing when you step back and think about it. Who would have thought that we would have been so focused on design…in a category like cleaning products? We’re living in an age where we’re starting to see design permeate everything, so it’s no longer just the iPod that is necessarily the pinnacle of design. We’re starting to see it in household cleaning products, in skin care, and in a lot of other areas.
BW: Has the recession caused packaged goods marketers to define innovation differently, and if so, how?
CW: What I see among the big, major consumer packaged goods companies is marketers know that no matter what the economy is like, their success is predicated on coming forward with new innovation year after year. And the entrepreneurial start-ups also know that frankly, [hard] economic times or not, if they have an idea or innovation, they need to market it and they are looking at this situation as basically, even though it’ll be a bit more challenging for some of the products that are premium-priced, they recognize there’s an opportunity to actually push their innovation in the marketplace itself.
I do think more than ever, we at Walgreens are seeing people being very careful and watching what their price points are. There used to be a tradition that if I introduced something new, I would always ask for a bigger premium from the consumer for it. What you’re seeing now is innovation that goes in the other direction: I’m actually trying to find a way to reduce that opening price point. I’m trying to make this something that is more value-oriented for the consumer because it’s very difficult in today’s environment to introduce a brand new product that is meeting an unproven need and price it really high and expect people to jump on it.
BW: Are we seeing more line extensions or new brand launches among this year’s contestants?
CW: You’re seeing a little bit of both. It’s very expensive in this day and age to introduce new brands. So, we have a couple of examples here of companies that are creating brand new brands, and having done that a few times before in my career, you really have to know what you’re doing and you have to be sure that you’re spending your money wisely because the consumer can only handle so many new brands.
On the other hand, what you’re also seeing is brands that are entering into new categories and thinking about themselves as a brand in very expansive ways. Procter & Gamble has a lot of entries this year and they’ve got so good at starting to think about a brand like Mr. Clean and new categories that it can get into that we, 10, 15 years ago, would have never imagined putting it in.
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