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Published: May 29, 2012
 / Summer 2012 / Issue 67

 
 

Rethinking the Product Launch

As noted, Wendy’s is the go-to restaurant for this last group — an enviable position in some respects. (Some quick-service restaurants, such as Dunkin’ Donuts, seem not to command any segment consistently.) But the want-it-all segment does not appear to be large or profitable enough to support further growth. Other, larger segments hold more promise for Wendy’s. If it wants to grow profitably, the company needs to look across the customer segments where it is not currently the leader and figure out where it has the most headroom. In other words, it needs to look more closely at its rivals’ least satisfied consumers.

Darwinian Competitive Review

Innovation executives and chief marketing officers are always thinking about new product or service introductions and enhancements — about how they can come up with the Next Big Thing. Few business possibilities are as exciting as a new idea that could become a company’s next billion-dollar product, and these ideas frequently involve a real spark of creativity. However, even the best ideas must map to some proven value proposition — something that has already worked elsewhere. If no such analog can be found, it’s a good bet the company’s new or enhanced product won’t be successful.

That is the point of calling market dynamics Darwinian. No customer value proposition emerges alone; like species that evolve through natural selection, all marketable ideas have antecedents. At best, they’re applications of ideas that have proven successful in the past. The emulated business model need not be from the same industry; it could be something that the company borrowed from another industry. Ideas such as providing expert customer service to justify premium pricing or becoming a leader in environmental soundness have leaped across a remarkably diverse set of industries, including food, energy, automobiles, and consumer electronics.

The challenge with Darwinian market dynamics is to figure out the value propositions that are open to innovative new entrants. Consider: What are the most successful customer value propositions in the world today, and why do they work? What do competitors offer, and how does that vary by customer type and market?

For this article, we conducted a scan of competitive value propositions in the QSR sector around the world. We discovered seven that have survived Darwinian natural selection: value (including low price), convenience, experience (an appealing restaurant environment), familiarity, health, taste (of the food), and having a premium product or service. Most successful restaurant companies have not limited themselves to one of these value propositions; instead, they combine two or more to configure their identity. Starbucks offers convenience and experience. Subway offers familiarity (“pleasing ritual”) and a perception of nutritional value (it is one of the very few QSR players that has successfully promoted the healthfulness of its offerings).

By testing consumer perceptions of rival brands in our survey, we learned that some attributes are virtually locked up. McDonald’s, the industry leader, has staked its livelihood on price sensitivity and convenience, and it will do everything necessary to defend its leadership position. Meanwhile, among the mainstream (non-premium) QSRs in the United States, having an appealing consumer experience seems to be underrepresented. It is possible that Wendy’s could improve its customer value proposition along these lines.

Capabilities-Forward Assessment

A capabilities system is the integrated combination of processes, practices, skills, competencies, technologies, and culture that allows a company to deliver its distinctive value proposition in a competitively advantaged fashion. The most coherent companies tend to have three to six differentiated capabilities that combine into a capabilities system, reinforcing one another, creating barriers against competition, and giving companies the right to win in their chosen markets. (Six is the maximum number, empirical observation suggests, that companies can maintain.) Differentiated capabilities are specific and usually cut across multiple functions. Amazon’s genius at retail interface design, Tesco’s application of data in the service of increasing customer loyalty, and Honda’s leadership in internal combustion engines are all examples of differentiated capabilities. Having the right capabilities in alignment can make the difference between mediocrity and greatness — in offering a product at “low cost” versus “lowest cost,” for example, or providing casual customer engagement versus extreme customer satisfaction.

 
 
 
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Resources

  1. Ken Favaro, David Meer, and Samrat Sharma, “Creating an Organic Growth Machine,” Harvard Business Review, May 2012: Toward an expansion strategy, building on these techniques and more.
  2. David Meer, “A New Way to Gain Customer Insights,” s+b, Spring 2012: More detail on conjoint analysis and its use for organic growth.
  3. Maureen Morrison, “How Wendy’s Found Itself, Slipped Past BK Into No. 2 Spot,” Advertising Age, Jan. 9, 2012: Recent in-depth story about the chain’s revitalization.
  4. Corey Yulinsky, “Making Customer Segmentation Deliver,” s+b, Winter 2011: A four-step process for making segmentation drive improved performance using sophisticated data.
  5. For more thought leadership on this topic, see the s+b website at: strategy-business.com/marketing_media_sales.
 
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