INNOVATION STILL MATTERS
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1 To Consumers INNOVATION STILL MATTERS Insights from the 2015 Ketchum Innovation Kernel Study
2 O1 The threat of Innovation fatigue Truly understanding how consumers perceive innovation enables companies to impact reputation and purchasing behaviors. We call this mindset the Innovation Kernel. Susan Butenhoff Partner and Director, Ketchum s Global Technology Practice Innovation is everywhere. From those making appliances to automobiles, laptops to lab equipment, companies promise consumers a superior experience based on a brand s innovation claims. More than 250 books on innovation were published in Q alone. Yet with the rise of the internet and technology moving at infinitely faster rates, the term innovation risks becoming as obsolete as some of the technology itself. For marketers, the threat of innovation fatigue is very real; the term is so en vogue that it risks losing its value as a motivating brand attribute. Yet this risk also presents an opportunity. A true understanding of how consumers define, perceive and value innovation affords companies and brands the chance to directly and positively impact brand reputation and purchasing behaviors. At Ketchum, we call this brand mindset the Innovation Kernel. The 2015 Ketchum Innovation Kernel Study, the first multi-country survey to calibrate the importance of innovation as a brand attribute, provides a clear roadmap to achieve this end. Exploring the mindsets of more than 4,000 consumers across five markets the U.S., the U.K., Spain, Hong Kong and Mainland China the Innovation Kernel study examines consumer perceptions on the importance of innovation across a range of industry sectors, the factors that contribute to people s opinions of companies and products, and offers guidance on the implication of these insights for marketers and communicators.
3 O2 The Innovation Valuation: How Perception Boosts Pricing Q. If you consider a brand innovative, are you willing to pay more for it? 19%+ 25%+ 17%+ 21%+ 21%+ 24%+ The bar chart element of this graph shows the percentage of respondents willing to pay more for innovation. The upper line graph illustrates how much more those consumers are willing to pay for a brand they consider innovative. 58% 63% 64% 68% 80% 89% SOURCE: 2015 Ketchum Innovation Kernel U.K. U.S. SPAIN AVERAGE HONG KONG CHINA 68 percent of consumers are willing to pay on average 21 percent more for innovative brands The good news for companies is that effectively communicating innovation will still net rewards. Innovation fatigue has not taken over. The Innovation Kernel study shows that 68 percent of consumers are willing to pay on average 21 percent more for a brand they consider innovative. Nine in 10 say innovation is important to their brand preference. This Innovation Valuation is amplified most in China, with nearly nine in 10 (89 percent) reporting they would pay more for a brand s innovative product, followed closely by Hong Kong (80 percent). Interestingly, U.S. consumers, who are often thought to be enthusiastic early adopters of new products, were the second-lowest when it came to willingness to paying more for innovation, followed by the U.K.
4 O3 The Innovation Valuation Respondents were categorized by their familiarity with technology, falling into one of four categories: Tech Evangelists Very tech savvy; confident about tech knowledge; first to try new technology; use technology frequently and give technology advice to others; will pay for top-quality electronics Active Techies Feel technology is important to their lives; use technology for entertainment and utility purposes; own a range of connected devices and use them daily; likely to be interested in knowing more about connected devices Moderate Techies Use technology daily; feel less knowledgeable about technology specifics than early adopters or heavy users; use smart phone and tablet daily; do not use laptop daily Passive Techies: Last to buy new technology; feel technology is useful but not an important part of their lives; brand loyal when it comes to tech products because they are not comfortable comparing other options
5 O4 The Industry View: Innovation in Healthcare Is Most Critical While innovation clearly still matters in the hearts and minds of consumers, the study finds that innovation is not a silver bullet across every industry sector. The extent to which it is valued varies by consumer demographics, including their country of origin. While the healthcare industry is considered by many in the technology industry as lagging behind when it comes to technology and innovation, it rated highest in terms of industries where innovation is very important (54 percent). THE IMPORTANCE OF INNOVATION IN HEALTHCARE AVERAGE U.S. U.K. SPAIN HONG KONG CHINA Very important 54% 60% 47% 74% 29% 45% Somewhat important 35% 31% 40% 21% 49% 45% Not very important 9% 7% 10% 5% 21% 9% Not at all important 2% 2% 3% 1% 2% 1%
6 O5 The Industry View: Innovation in Healthcare Is Most Critical The importance of innovation in healthcare was the only category to intensify as consumers aged, growing 10 points from people 35 to 44 years old (54 percent) to people over 65 (64 percent) a fitting trend among a global population that is living longer and experiencing more chronic diseases. Healthcare innovation is also more important to women (59 percent) than men (48 percent). Healthcare is the only category where the importance of innovation intensifies as consumers aged. The exceptions to healthcare outranking consumer tech for importance of innovation were in China (45 percent) and Hong Kong (29 percent), where innovation is by far the most important for computers. At play is a clear love of gadgets, like consumer electronics and computers a segment where product design and functionality advances are more tangible, faster-paced and thus more easily recognized. The continued use of Chinese medicine alongside Western medicine in both of these markets may also lead people to see the healthcare industry as more traditional than innovative. Interestingly, it is the least technology savvy group, dubbed the Passive Techies, who rank healthcare innovation as their top priority, with 44 percent citing it as very important compared to their second ranked choice, computers, at 18 percent. Whether it is due to the new generation of wearable technologies, ingestible sensors or the potential of more personalized therapies through Big Data, healthcare innovation is seen as having strong promise and appeal for consumers across multiple ages and geographies.
7 O6 Innovation is Still Key FOR Computers and Consumer Electronics Despite healthcare being the number one category where consumers value innovation, healthcare companies are not necessarily perceived as being innovative. Computers and consumer electronics including mobile phones, gaming systems, TVs and audio products are still categories where innovation matters. The importance of innovation is higher among existing owners who are looking for new improvements at a faster rate. At the product level, innovation is deemed most important in computing and smart phone categories (and to a lesser extent for tablets and TVs), which may be in part explained by the fact that this market is also undergoing a significant softening. Gaming is an interesting category, because only 39 percent of gamers deem innovation as very important. Gamers may be at the point that they no longer want to continue investing in new consoles, as the shelf life of these systems is getting shorter with increasingly higher investment requirements for new hardware and software. Q. How important is it to you that each of the following consumer technology products is labeled as innovative? Computer Smart phone Tablet Television Cell phone 34% 33% 38% 50% 48% The bar chart shows the percentage of consumers who ranked innovation as very important for each type of consumer technology product. Household appliance 31% Connected home system 28% Gaming system 23% Music equipment 21%
8 O7 Rating Innovation beyond the Technology Sector The value of innovation across such categories as airlines, consumer packaged goods and automotive was ranked least important among consumers across all geographies surveyed. While consumers have benefitted from innovation in these categories (such as with Wi-Fi on planes, mobile boarding cards, auto navigation systems and other tech-enabled features that deliver safer, more effective, better quality products), consumers see these as improvements and not innovations. In fact, when it comes to the airline industry, nearly onethird say innovation is not very important or not at all important. And, although connected home devices have received a lot of attention, only 30 percent of those polled indicated innovation in connected home devices as very important. Compare that to computers at 49 percent. However, for Tech Evangelists, the importance of innovation for the connected homes category jumped to 50 percent, demonstrating that this category is still an early adopter market. Modernday conveniences improved through technology innovation are almost taken for granted in non-tech categories, and many may likely attribute the innovations to a tech company behind the scenes instead. VS
9 O8 How Consumers Define Innovation: It s Not About First-to-Market Anymore Being first-to-market used to be a critical element in determining the industry innovators, but while being the first to bring a technology product to market may have its business advantages, it does not bear as much weight on consumers perception of a company s innovative qualities. Instead, consumers today cite a company s proven track record of launching successful technology products as the most important factor (47 percent) that influences their opinions. This may be due to the fact that as the technology market has matured with more rapid product commoditization cycles, first-to-market has a much shorter timeline advantage. Also in a more globally competitive manufacturing environment, innovation is less about timing than it is about a company s proven track record in delivering new products that don t disappoint. This new consumer definition of innovation is creating new challenges in the technology market with companies having to balance first-mover advantage against risk issues that will tarnish their reputation and proven success track record. Not only does first-to-market no longer hold the innovation cachet it once did, but the idea of producing a steady cadence of new products throughout the year is no longer important to consumers. Nearly half of respondents expect new products to be launched when there are meaningful advancements (47 percent) and not based on a yearly schedule (27 percent). Only one-third of those surveyed indicated that a company s ability to introduce new products over the course of a year contributes to their opinion of innovation. Not surprisingly, the more tech-savvy the consumer, the higher the expectations for regular products releases. Game-changing product innovations boil down to quality of life impact. Based on the responses, it is clear that consumers don t necessarily expect product innovations to change the ways they do everything, every day. Instead they want innovations that will help improve their quality of life, allowing them to be more efficient and to do something they thought was impossible. Fifty-eight percent cited quality of life improvement as contributing to their opinion on product innovation, with making your life more efficient a close second at 57 percent.
10 O9 AsiaN Markets View Innovation Differently While there are similarities across the general population, there also are significant regional differences by market. Consumers in both the U.S. and China place a significant amount of weight on a company s legacy success, product design, speed to market and the talents of the company s leader. Conversely, consumers in Hong Kong place the least value on those qualities. The value of innovation to Chinese and U.S. consumers may be linked to the rapid adoption of technology and the pervasiveness of technology marketing in those countries. In Hong Kong, consumers are more brand loyal, decreasing the influence of innovation marketing on their perception. FACTORS INFLUENCING CONSUMER PERCEPTION OF COMPANY INNOVATION AVERAGE U.S. U.K. SPAIN CHINA HONG KONG Proven Track Record Of Launching Successful Technology Products Introduce Products That Have A New/ Different Look And Feel 47% 58% 45% 42% 61% 31% 42% 47% 37% 41% 57% 34% First To Market New Products 42% 45% 35% 42% 59% 32% The CEO Is Very Visible And Seems Innovative 34% 38% 28% 28% 54% 27%
11 10 Overall, across markets, Hong Kong and China stand out in their differing views of innovation While healthcare came out at the top for importance of innovation among most markets, innovation is more important in computers for Hong Kong and China While globally, consumers typically expect companies to innovate whenever new advancements become available (47 percent), Hong Kong consumers expect new products every year (30 percent) and upgrades every six months (28 percent) Eighty percent of Hong Kong consumers and 89 percent of China consumers are willing to pay more for brand innovation which is significantly higher than consumers in the U.S., U.K. or Spain Trust in and use of professional reviews is notably higher in Mainland China than in other markets, with the exception of Spain, in which professional reviews also ranks high Social platforms are the most frequently consulted channel in Hong Kong and are used at a similar rate to professional reviews Hong Kong In Mainland China, sources of trusted information are divided nearly evenly among professional reviews, media articles, advice from friends and family, and social platforms
12 11 Innovation Should Be Earned, not Bought Consumers today are exposed to an extraordinary volume of marketing clutter - upwards of 5,000 ads alone in any given day (Yankelovich). So it s imperative that companies know their audience and the channels that are most relevant when telling their innovation story. Survey respondents say they are most likely to get trusted innovation information on a company from professional reviews (56 percent), articles in the media (52 percent), and advice from family and friends (48 percent). The exception to this is Hong Kong, where respondents rely most on social platforms (56 percent). Trust in and use of professional reviews is notably higher in Spain, Hong Kong and China. Males lean toward professional reviews and media articles as trusted sources, whereas females tend to rely more on friends and family members. Marketing and advertising were among the least trusted sources of information for evaluating how innovative a company or product is, indicating a disconnect between how brands market their products and the channels their target audiences value. And despite the fact that social media has provided consumers with closer brand intimacy, social platforms did not score highly in markets outside of Hong Kong and China. With only 5 percent basing their innovation perception on corporate advertising With only 5 percent viewing advertising or marketing as the most trusted source, it s clear that companies can t buy an innovation reputation. or marketing, it s clear that companies can t buy a reputation for innovation. Rather, consumers will trust and value a brand s innovation story most when it is credibly communicated through third-party influencers. This means it s time for companies to rethink taglines and instead focus on developing business and communications strategies that pay off with innovation attributes that customers care about through channels they trust. Companies will be best positioned to succeed when innovation is core to their DNA and reflected in all the ways they connect with their target audiences, not just used as a marketing strategy. With consumers seeming to take technology innovation for granted in non-tech categories, marketers and communicators outside the tech sector have an opportunity to improve the innovation valuation associated with these nontechnology brands. Those who will be most successful in telling their innovation story will know that for consumers, innovation credit must be earned, not bought.
13 12 5 Rules for Today s Consumer-Right Innovation 1 Don t rush to market. First-to-market is no longer the bar; consumers prefer a pedigree of proven success 2 Innovation credibility should be earned, not bought. Educate the influencers with the most clout: reviewers and media 3 Looks matter. Innovation is now as much about the design as it is the technology 4 Think big. Consumers would rather wait longer and get meaningful advances than see frequent releases of minor upgrades 5 Go beyond early adopters. Technology has become mainstream and so has the lure of innovation
14 13 Survey Methodology M/A/R/C Research and Ketchum Global Research & Analytics conducted an online survey among 4,094 working adults in five markets from Jan. 16, 2015 to Jan. 25, These markets included the United States, United Kingdom, Spain, Hong Kong and Mainland China. All respondents were screened for eligibility, which included being full or part-time employed, owning a consumer electronic product, and having broadband internet access. The global margin of error is +/-1.3 percent. The research explored how respondents view innovation in terms of role, definition and value. All data collection was handled by M/A/R/C Research. For more information, visit
15 14 About the Author Susan Butenhoff Partner and Director, Ketchum s Global Technology Practice susan.butenhoff@ketchum.com Susan leverages her 30 years of PR experience and deep connections with Silicon Valley to help firms transform from technology companies into power brands. Working with the agency s technology specialists around the world to provide global and scalable expertise and services, Susan helps companies navigate challenging corporate reputation issues and create positive visibility that drives growth and revenue. Susan began her career at Ketchum and then founded San Francisco-based Access Communications in 1991, which became a division of Ketchum in 2008.
16 15 Ketchum 2015 Ketchum is a leading global communications firm with operations in more than 70 countries across six continents. The winner of 11 Cannes Lions and an unprecedented four PRWeek Campaign of the Year Awards, Ketchum partners with clients to deliver strategic programming, game-changing creative and measurable results that build brands and reputations. For more information on Ketchum, a part of Diversified Agency Services, visit
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