SAN FRANCISCO (AdAge.com) -- Given that innovation is the only sustainable advantage these days, advertisers need to allocate at least 10% of their marketing budget to foster it, even in these economically challenged times, said former eBay and Best Buy CMO Mike Linton, who spoke to an audience at the Aberdeen Group's Chief Marketing Officer Summit here yesterday.
Innovation, by Mr. Linton's definition, is any action taken by the brand that changes consumer behavior in favor of the company, and that can range from a new product to a new way to service customers. While it's no surprise that Starbucks has managed to build a massive social-media audience, considering that it gives away latte coupons on Twitter and Facebook, innovation is also when a toilet-paper brand can get consumers to tweet about how soft its product is and show brand in a new light.
Any marketer standing still at a time when the consumer is ahead of the brand is bound to lose, said Mr. Linton, now a Forbes columnist. And amid the wide array of choices that consumers have today, fickleness represents a greater challenge than ever and loyalty dissipates that much more quickly. "Without innovation, you end up in a defensive position," he said.
Yet at a time when marketers are challenged to produce immediate returns, how can they balance the need to innovate against the pressure to produce bottom-line quarterly results?
Mr. Linton offered a few tips for driving innovation that don't require rich resources:
1. Just go for it.
If it's true innovation, you won't know everything about it, including how to measure it. Don't spend precious resources planning and testing your new approach or product until everything's in perfect alignment, he said. Though it can be a bit scary to navigate in uncharted territory, the price to pay for holding back is that your competitors may be on the verge of launching the next big thing that could render your brand passé.
"You have to keep pace with the market, and [that means] the marketers have to get comfortable with the ambiguity," Mr. Linton said.
2. Give your team incentives to innovate.
One tactic Mr. Linton has leaned on is to compensate his teams not only by how they measure specific functions, but by the totality of the customer experience, such as store sales, customer complaints and other metrics.
"I paid my team on total ROI first," Mr. Linton said.
If you pay your search-engine optimization guru solely by click-throughs or the media buyer strictly on media efficiency, you're encouraging them to think in silos and not outside the box. For example, if you set the success metric for customer-service reps to handle incoming calls within five minutes, you could be compromising their level of care in handling more time-consuming, complex customer-service issues.
3. Make sure you have at least one new thing every year.
As you prepare your annual business plan, ask yourself if you have anything new in the roadmap that wasn't there last year. You have to constantly ask: "Are we on the offensive? Who's our real competition?" Mr. Linton said.
"What are you doing that's new this year? If you don't have something new, someone else will," he said.
4. Use the 70% rule.
If your team feels there's a 70% chance that an out-of-the-box initiative based on rough math and intuition will deliver significant learning and success, you should go for it. "You have to have a belief that it's going to work for you," Mr. Linton said.
5. Don't be blindsided by the competition and get lost in what innovation is.
Record labels still believed they were each other's competition even as they engaged in legal battles with music download, peer-to-peer sites and the consumers who used those sites. They didn't see that consumers were bypassing the $19.99 CD en masse while Apple created a colossal digital-music franchise.
By the way, innovation isn't printing $1 coupons when the 50-cent coupons don't work. "If you temporarily buy your way to greatness, that's a problem and it's not going to solve the long-term problem," Mr. Linton said. "Pricing only solves long-term problems if you only compete on price."