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China 2016: BUILDING BRAND VALUE | 4 . INNOVATION

Innovation drives brand value and greater market penetration

Innovation, real innovation, accelerates brand value growth. Adding another variant may be justified and generate some additional revenue, but it will not stick in the consumers’ mind as a stroke of creativity that elevates the brand nearer to the pantheon of brands that bring into the world something brand new, or at least smart and exciting.


Brands that introduce genuinely innovative products or services that help improve the lives of consumers in some meaningful way rise faster in brand value, potentially. Potentially, because it is important not only to innovate, but also to efectively communicate the reason for the innovation and the benefits it provides. Brands that innovate and then communicate efectively grow much faster in brand value.

BrandZ™ research compared two sets of brands, those that consumer’s viewed as innovative, as trendsetters, and those they considered “unique.” Over a three-year period, 2014 to 2016, the most innovative and unique brands increased almost 30 percent in brand value, while the less innovative and unique brands increased less than 5 percent. In other words, the most innovative and unique brands grew in brand value eight times faster than the least innovative and unique brands.
Along with accelerating brand value growth, innovation also correlates with market penetration. In a related study, Kantar Worldpanel compared the efect of a “new launch” (an addition that did not exist, a new product, function or packaging, for example) and a “re-launch” (an update on something that did exist). Brands that launched more and re-launched less experienced greater market penetration.
This result can be interpreted as a quality vs. quantity story. A strategic launch can have more impact, possibly for less financial investment, than a series of relaunches. Less can be more, much more. Innovation is important in any country market, but it is especially important in the new normal of today’s China with slower growth and more sophisticated consumers who continue to spend, but are much more discerning about the products and services they purchase. 
 

 


Implications for Brands

Innovation is not a one-of. The global telecommunications giant, Huawei, which entered the BrandZ™ China Top 100 Most Valuable Brands this year at number seven, is regarded by consumers as an innovator, not because of one particular smartphone model, but because of the brand has made a habit out of introducing new equipment and services. 
Apple is the gold standard for forming a brand identity from habitual innovation. But the point is not that all brands should be, or could be, like Apple. Imitation is not innovation. Rather, a brand needs to innovate in ways that are true to its particular identity. The investment in innovation pays a dividend in accelerated brand value and market penetration.