Economists are predicting entrenched inflation and some even a recession. In these challenging times, innovation departments and leaders face difficult choices. Will you redraw parts of your innovation pipeline? Will you renovate your current product portfolio to reduce costs? Or will you invest in and launch inflation-resilient innovations?
Innovating during inflationary times is tough but a thorough scan of your current product portfolio or innovation roadmap will help you navigate more successfully through these uncertain times. As this might not be enough, we recommend innovation and R&D leaders to gear up their teams and focus more on pricing, to install tools and accommodate the new environment, and finally to adjust product features to the new buying behavior. Here are 4 ways to re-strategize innovation and put your company in the driving seat to shape the future.
Develop the art of price setting during your development process
An analysis can plot your current price positioning in the market and evaluate if there’s still room to increase prices without losing market share and volume. Of course this should be an investigation of customers’ willingness to pay relative to comparable products, allowing you to evaluate the consequences of price changes in volume and margin. It will ensure your customer relationships and balance them with an increase in profits. It’s also important that you check the cross-elasticity with your biggest competitor product. Why? A price increase in your product might lead to a large volume switch to a substitutable product from a competitor.
You might also want to re-adjust the planned innovation portfolio as not every planned product might have the same price elasticity and therefore not every product you had in mind will be eligible for a similar price increase. Does every product have the same price elasticity, resulting in a -1% volume change when a +1% of price change is implemented? You can either stop some projects, or reconsider the features compared to intended price levels. Now more than ever, adjusting your innovation portfolio is a profitable strategy to consider.
Download the perspective to read the following ways to re-strategize innovation by auditing your innovation portfolio, accommodating the new innovation context and adjusting to new consumer buying behavior