The Importance of Innovating in a Recession and How to Do it Well

  • The 80/20 Formula
  • The Value of Innovation Testing

On a recent podcast with System1, Mark Ritson remarked that this recession is the first many corporations are entering with proper appreciation of the importance of not cutting marketing spend to the bone. Case studies abound of ‘austerity now, pay later’ through reduced growth vs competitors as recovery comes. This knowledge, articulated from the HBR to Peter Field’s Advertising in Recession: Long, Short or Dark, has seen brands like Coke step up their marketing investment heading into 2023.

Yet for brands that maintain spend, fast comes Bill Bernbach’s adage that nothing kills a bad product like good advertising. There are fewer truly bad products than once there were (though I’m sure we can all name an exception or two!). However, at a time of double-bind in the form of cost-of-living squeeze and recession, how do you ensure the products advertised truly meet consumers’ needs?

The 80/20 Formula

We all have the instinct that our category or brand obeys different rules to the rest of the marketing world. To this we can add our human tendency to believe everything has suddenly changed, especially in tumultuous times such as these. However, in over two decades of innovation testing, through good economic times and bad we’ve found the things consumers are looking for to be remarkably consistent.

Their system 1 instinctive emotional response to the product is, of course, key. No matter the economic conditions, if I feel nothing, I’ll do nothing – least of all make a purchase! Tuning into consumers’ needs in the present circumstances will of course drive that emotional response. Yet, fascinatingly, time after time our in-market validations also show the power of how quickly consumers can process the nature of product. It’s here, in the ‘one second world’ of system 1 at shelf (or scrolling through an app) that products live or die.

Readers of Hit Makers: How to Succeed in an Age of Distraction by Derek Thompson will be familiar with his exposition of MAYA – the notion of Most Advanced Yet Acceptable, which emerged from studies of product performance proving neither typicality nor novelty explained success; rather it is the combination of these two factors. Likewise, our data suggests it is fluent innovations – those which are 80% familiar and 20% new – which really take off. What’s more, it’s key to keep innovating – especially now. Notin Nohria’s 2010 work published in the Harvard Business Review, “Roaring out of Recession,” shows it is not only retaining marketing spend but also R&D investment which is key to survival.

Innovation is a must then – but the innovations which win will be those with emotional appeal through meeting needs in the now – and which successfully apply the 80/20 new rule to these challenging circumstances. Think of Waitrose’s introduction of its Essential range over a decade ago. Bringing new products in a coherent range from a familiar and trusted brand achieved the 80/20 balance of ‘familiar but new’. Tuned to current consumer and market needs, this combination enabled a lower price point to be offered without damaging Waitrose through crashing core brand pricing. Indeed, it set the company off on its most successful year ever, increasing total sales by nearly 15%/ £600 million.

The Value of Innovation Testing

How can marketers be sure they’re on the right track, getting the balance about 80/20 for a truly MAYA concept which meets consumers’ current needs? Inevitably, it calls for testing – but keeping it light and early stage. At System1 we advocate testing a number of concepts to hone in on the sweet spot. What is consumers’ system 1 emotional response? How quickly do they process the concept, the yardstick of fluency? And harnessing their aggregated wisdom, which would they back to succeed in the market?

We’ve also broken with consultant convention and taken our own advice. Time and again in our validations we see the wisdom of crowds accurately predict the market potential for new ideas. However, we also heard clients say testing with their target sample is the most fluent way for them and their stakeholders. Applying MAYA thinking to ourselves, we made it easy to add custom samples for testing – a feature many are now embracing.

More than that, we created our own Essential Waitrose of early-stage screening, making testing automated and modular, with researcher guidance an optional bolt-on; providing the key metrics on appeal, market potential and fluency, faster and cheaper than ever before.

So even when you’re feeling the pinch in your pocket, you can still find your MAYA for these challenging times.