Market Breakers – redefining performance

IBA Update 2 Feb 2004

This week’s guest update comes from Tim Jones. Tim runs the consulting firm Innovaro, based in the UK. You can reach him at tim.jones@innovaro.com, and the firm’s website is www.innovaro.com.

Much of this material comes from Tim’s recent book Innovating at the Edge published by Butterworth Heinemann in 2002.

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A company’s new product offerings often get stuck in a rut. They over-deliver on performance – adding features or options that are not valued by either new or existing customers. Last week’s update, for example, looked rather bleakly at the prospects for success of Gillette’s newest high tech razor, the M3 Power.

Tim Jones’ work highlights products that redefine performance in their markets, and thus succeed at prices that are higher than established, entrenched competition, often to the astonishment of these competitors. These products compete on performance by adding attributes that have been neglected by other companies.

The mint sub-sector of the confectionary market was not a prime candidate for a revolution. In the US, Altoids have been the stalwart for years and, in the UK, Extra Strong mints were introduced in the late 1970s. Globally Tic-Tac, Mentos and Polo had become increasingly established as the leaders throughout the 1980s with each taking a good share of the market.

The status quo has, however, been fundamentally disrupted by a new arrival on the scene and one that is typically priced at three times the competition. This mint is Smint.

Originally launched in its home Spanish market in the mid 1990s, with its distinctive dispenser and powerful taste, Smint was a hit from the start. It quickly became a domestic best seller for its parent Chuba Chups, an organisation that made its name in the conventional lollipops sector, and has since become the world’s largest manufacturer and the market leader in 80 different markets.

The product of a $3 million R&D investment, Smint was specifically targeted at broadening the company’s market from child and youth and into the adult markets. With the uniquely designed 'one-at-a-time' dispenser for added convenience and hygiene, Smint provided consumers with a perfectly packaged hit of flavour that is also sugar-free, made with a plaque-fighting sugar substitute and now tested and approved by dental associations worldwide. Taste and health simultaneously!

In 2001, Smints pushed long-term global leader Tic-Tac into the number two positions in 90 percent of the markets in which it was available. Furthermore it has even taken a significant share of the high value breath freshener market.

Smint took a fashion-based approach to a crowded and somewhat stodgy category. By 2001 the Smint range of flavours had expanded from the original mint to also include peppermint, lemon, peach, liquorice and wild berry. Provocative media campaigns included eccentric TV adverts in Korea, Smint cocktail receptions in London nightclubs, sponsorships of Snowboarding competitions in France, and a plan to convert the Millennium Dome in Greenwich into the world’s largest advert.

To the amazement of existing players, people were prepared to pay a heavy premium for Smints, sometimes even up to 400 percent the price of its competitors. The proposition is different from conventional breath mints, and it is sufficiently compelling to overcome the price barrier and thereby deliver a significant benefit to its manufacturer. This delivers both high volume and high margin to Chuba Chups.

James Dyson’s vacuum cleaner works better than competitors – it doesn’t use a vacuum cleaner bag, has higher suction ability and can vacuum up a wider range of messes. Consumers have been happy to buy it – even at prices that are double the average in the category. After overcoming legendary obstacles, by 2000, Dyson vacuum cleaners had 53 percent of the floor care market in the UK, and were outselling their nearest competitors nine to one.

Now Dyson has brought the same approach of new performance to washing machines with the "contrarotator" washing machine, already widely available in Europe. Protected by over 50 patents, the fundamental element is the dual tub, which, the company claims, enables the product to wash twice as clean in half the time. Six months after Dyson’s UK launch in early 2001, the £1000 CR01 was competing for a top slot with Zanussi and Bosch products priced between £400 and £450.

The examples of both Dyson and Smint share in common the ability to bring new technologies, performance, and excitement wrapped up in high impact packaging to product segments that had been dormant for years. Backed in both cases by significant research investments, these products give their customers new and more fulfilling experiences. Customers agree to pay a premium to have these experiences, often to the astonishment of existing competitors.