Many businesses believe they need to rebrand frequently or innovate constantly to keep consumer interest and increase reach, penetration, and sales. Recent research, however, suggests that consumers are creatures of habit rather than necessarily always responders to innovation.
Cumulative Advantage as Important as Competitive Advantage
An article in the current Harvard Business Review observes that the truism that rebranding and innovation are necessary stems from the theory that companies constantly need to be building and maintaining a competitive advantage.
The authors, however, posit that consumers are just as driven by what they term “cumulative advantage” – the familiarity and ease of purchase found in products that meet the consumer’s needs and can be repurchased without new decisions. People are creatures of habit if their needs are being met.
The laundry detergent, Tide, for example, has a 40% market share in the U.S. largely because it cleans clothes and is findable on nearly every shelf that sells detergent, whether that shelf is in a grocery store, drug store, or convenience store. Its maker, Proctor & Gamble, tried innovation when liquid detergents came to the fore in the 1970s, with the introduction of Era, the first liquid detergent.
Sales of Era were not robust, and it eventually faded from the shelves. Instead, Tide was reconfigured in a liquid detergent form, and its sales took off. It combined the comfort and familiarity of cumulative advantage with a competitive advantage.
Facebook Versus Myspace
A digital counterpart can be found in the tale of Myspace. Myspace was constantly revamping its product offerings. If competitive advantage had been the only criteria consumers were using, Myspace might have been able to lead the social media pack.
Instead, its offerings were so diverse, and so often changed, that they likely confused the customer base, or at least kept them off-balance about what they’d see when they next logged on. Myspace eventually vanished.
Contrast its offerings with those of Facebook. Although Facebook revamps its design and policies, it has offered, since its founding, essentially the same service. You can connect with people using the platform. You can update your status and see the status of friends.
Whether you’re accessing news, a radio station, or your ex-partner’s relationship status, Facebook offers a reliable supply of what you’ve come to expect from it. It thus fits the definition of a company with a cumulative advantage.
The HBR authors note that companies need to follow four basic rules to realize a cumulative advantage. They are:
1. Establish early popularity. For people to see the value proposition in your product or service offering, it helps to be established early. Then your cumulative advantage can beat out minor competitive advantages.
2. Design for habit. Consumers need to be able to feel that they know how to get the goods and services they desire. Whether it’s looking for an orange plastic bottle that will enable them to wash their clothes or the ability to like a friend’s post, companies with cumulative advantage don’t throw their confusing curveballs to consumers.
3. Innovate inside the brand. Make any innovations easy to follow and coherent with the brand. Netflix, for example, was originally a mail-order service for DVDs. It now digitally streams and originates content. Huge differences? In some ways, yes. In other ways, the service is still more convenient that having to drive to a retail mail for DVDs. It comes direct to your home in both initial and current iterations, so is consistent within the brand.
4. Keep communication simple. The subconscious mind is simple, and it’s what perceives cumulative advantage. Business leadership should communicate advantages simply, in a manner that can’t be confused.
Cumulative advantage is at least as important as competitive advantage for American businesses. Combined, they are an unbeatable powerhouse.