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FEATURE23 July 2015

The innovation premium

Automotive Features Innovations

We recently conducted a study of 1,000 US consumers on their feelings about innovation: the idea was to explore what the public thought made a company or a brand innovative and how important it was to them. 

We also wanted to explore the drivers of innovation; what aspects create a perception of innovation for the consumer across different industries. We expected, in the current climate, that technology would play a significant role in this perception. However, the results of the study challenged our expectations.

Do consumers appreciate input from research?

There seems to be general anecdotal consensus in the market research industry that the public’s perception of MR is people standing on street corners with clipboards bothering members of the public with endless questions. Under the leadership of Steve Jobs, innovation powerhouse Apple famously dismissed consumer research when launching the first iPhone and later, the iPad, with the belief that involving the public in the development process would hinder innovation.

Obviously, as researchers we disagree; we have at our fingertips countless products improved or developed with public involvement, and we understand the need for research and the exciting and fascinating new methodologies open to us. And as our study bears out, the public would agree that Apple and Steve Jobs are the exception. 

The way in which consumers communicate with brands has changed. Through social media, the rise of online communities and the use of new technologies, the relationship between the brand and consumer is closer than ever. In many cases, it has evolved into one of co-creation.  Because of this, the feedback loop for brands is more immediate and more public. The findings from our survey challenge the frequently overheard complaint at research gatherings, that the public doesn’t recognise the contribution of research to company invention. First, 67% said that they believe companies are more innovative than they were five years ago. Then, 69% of respondents agreed that research is needed to create innovative products.

Additionally, when we asked consumers to rank the drivers of innovation, ‘coming up with new ideas for products and services’ was unsurprisingly the most important factor. Interestingly, ‘listening to customers’ was the second most important, selected by 33% of the respondents. The survey also showed that consumers believed that listening to people, understanding and responding to their needs, and continuing to improve current products are also what make a company innovative.  Somewhat surprisingly, 66% of the respondents agreed with the statement that a company can be innovative without technology. 

At this point in time, consumers have a much clearer perception of the value of research in the innovation process and are indeed more keen to share and be involved in that process than ever before.

Innovation is worth a premium to consumers

When combined with other results from the survey, the potential return on investment in being perceived as innovative becomes clearer. The survey asked respondents how much more, if any, they would be willing to pay for products from companies that they felt were innovative across a selection of industries.  Perhaps unsurprisingly, the innovation premium is greatest for electronics purchases: 83% of those surveyed say that they would pay more for innovation of these types of goods. 15% of those said would pay more than 40% more.

The next most important category for innovation is automotive, with 75% of respondents willing to pay an innovation premium and 10% willing to pay over 40% more. Grocery store items scored highly for rewarding innovation – 67% of consumers said they would pay an innovation premium on these products. And even with insurance and gas, Lab42 found an innovation premium uplift with 54% and 52% of consumers willing to pay more, respectively.

The message, then, is that the ROI on innovation is tremendous in terms of differentiation, jumping ahead of the competition and in securing customers who are happy to spend more. And consumers not only see the connection between research and innovation, but value those brands that develop products and services from a close understanding of their needs.

Jonathan Pirc is founder and VP of Product at Lab42

2 Comments

4 years ago

Great study. You mentioned insurance as an industry you asked respondents about willing to pay a premium, did you also ask about other areas of financial services like financial services firms or financial advisors?

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4 years ago

Hi Bill - great question. We didn't dive into specific areas of financial services. Rather, we focused on more general industries, including health & beauty, electronics, clothing & apparel, restaurants, grocery store items, gasoline, Insurance, hotels, air travel, pharmaceuticals, automobiles and local travel. It's nice to hear that there is interest in more specific industries, so we might look at doing this for our next survey. Please don't hesitate to reach out with any additional questions.

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