Brand Loyalty Isn't Enough For Products Anymore

October 4, 2011
Brand Loyalty Isn’t Enough
For Products Anymore
by J.P. Gownder
for Consumer Product Strategy Professionals
Making Leaders Successful Every Day
For Consumer Product Strategy Professionals
October 4, 2011
Brand Loyalty Isn’t Enough For Products Anymore
Product Strategists Must Build Total Product Experiences To Combat Consumers’
Declining Brand Loyalty
by J.P. Gownder
with James L. McQuivey, Ph.D., Chris Stutzman, Chelsea Hammond, Seth Fowler, and Sander Rose
EXEC UTI VE S U M MARY
Brand loyalty has long been a critical pillar of product strategy, but its power is in relative decline.
Technology and a recessionary economy have threatened the value of brand loyalty, especially in the past
five years. While brand still matters, it’s not sufficient in and of itself to position products in the market.
Consequently, product strategists need to start thinking differently about brand loyalty, starting with
the notion of total product experiences. Creative product strategists will build total product experience
chains — product strategies built on links of brand, gaming, and product customization — to help
reinvigorate loyalty. Product strategists must build alliances with their peers in other industries, and
learn a new set of technologies, to make this happen.
TABL E O F CO N TE N TS
2 Product Strategists Can No Longer Count On
Brand Loyalty Alone
Product Strategists Aren’t Living In Hirschman’s
World Anymore
5 Craft A Total Product Experience Chain To
Reinvigorate Loyalty
A Total Product Experience Chain For Clothing
A Total Product Experience Chain For Home
Decorating
A Total Product Experience Chain For Weight
Loss
RECOMMENDATIONS
14 Build A Total Product Experience Based On
Today’s Adjacent Possibilities
N OTE S & RE S OU R CE S
Forrester leveraged data from its North
American Technographics® Benchmark Surveys,
2006 to 2010.
Related Research Documents
“It’s Time For Mass-Customized Clothing And
Apparel Products”
July 5, 2011
“Mass Customization Is (Finally) The Future Of
Products”
April 15, 2011
“How To Prepare For The Era Of Experience”
October 18, 2010
15 Supplemental Material
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based on best available resources. Opinions reflect judgment at the time and are subject to change.
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Brand Loyalty Isn’t Enough For Products Anymore
For Consumer Product Strategy Professionals
PRODUCT STRATEGISTS CAN NO LONGER COUNT ON BRAND LOYALTY ALONE
Famed economist Albert O. Hirschman developed a framework for understanding the struggles that
firms (and governments, and other institutions) have with their customers. The year was 1970, and the
book was called Exit, Voice, and Loyalty.1 In that work, Hirschman explained how each of three factors
affect how customers react when they are in some way dissatisfied with a firm and its products:
· Exit. The first option that dissatisfied customers have is to stop buying the product, stop
subscribing to the service, or resign their membership in the organization. This is the exit
option, which underlies traditional economic competition: Customers walk away, and
uncompetitive companies fail.
· Voice. The second option is to communicate criticism to management or other authorities, in
the hope that this feedback will effectuate change. This is the voice option, often associated with
traditional political action but also associated with customers who have long-term relationships
with specific firms.
· Loyalty. Loyalty is, as Hirschman puts it, “a key concept in the battle between exit and voice.”
2
For product strategists, it’s useful to think of loyalty as a combination of two factors: first,
anything that reduces the substitutability of alternatives (product non-substitutability). Second,
loyalty functions through brand, which acts as a kind of promise to buyers that, even though
there are challenges, at the core the proposition will have long-term value to them. Brand loyalty
staves off exit and promotes the use of voice in buyers.
Product Strategists Aren’t Living In Hirschman’s World Anymore
While Hirschman’s model offered helpful guidance for a long time, his world is gone. Social
media allows consumers to exercise voice — at low cost and with few inhibitions — even as they
simultaneously exit. At the same time, product strategists can’t count on loyalty anymore. In a
digitally disrupted economy, consumers have too many substitution options from direct and
indirect competitors and, as a result, can switch among products with little or no effort.3 If we follow
Hirschman’s model to the letter, this would all suggest that brand loyalty is no longer sufficient in
and of itself to prevent exit, mollify voice, or ensure overall loyalty. That’s exactly what we’re seeing
in Forrester’s Technographics® data:
· Brand loyalty has declined. Consumers show demonstrably less interest in brand loyalty —
for example, in choosing the best brand for products they purchase (see Figure 1). Based on
the years chosen for analysis — 2006 and 2010 — we know of one major culprit: the Great
Recession, which has unnerved consumers and lowered purchasing power, leading to increased
price consciousness. We should be clear here that brand loyalty (the propensity to repurchase a
brand) is different from the power of branding itself: In fact, more competitive branding (more
choices, more competition, and better brand communication) can actually reduce brand loyalty
by enticing consumers to try different (and independently strong) brands. The bottom line is
that, while branding remains strong, loyalty, in Hirschman’s sense, is eroding.
October 4, 2011
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Brand Loyalty Isn’t Enough For Products Anymore
For Consumer Product Strategy Professionals
· Technology optimism correlates with lower brand loyalty . . . But it’s not just the economy:
Technology use erodes loyalty, too. Think of a smartphone app such as ShopSavvy, which
literally creates price pressure on the spot and offers alternative products (along with peer
reviews) at a buyer’s fingertips. To test whether technology erodes loyalty in consumers, we
analyzed indicators of technology attitudes and brand loyalty (or, where appropriate, recodes of
brand disloyalty) (see Figure 2-1). We found a negative correlation between the two attitudes:
The more enthusiastic consumers are about technology, the more disloyal they feel toward
brands (see Figure 2-2).4
· . . . and this effect has only been growing over time. Even harder to swallow for product
strategists who either target tech optimists or who use technology as a hook for brand loyalty,
this erosion effect has grown over time. Technology optimists like to have the latest and greatest,
and they’re more likely to switch to new brands because of their high expectations and strong
desire to be leading edge (see Figure 2-3). Given these trends, Hirschman’s loyalty effect isn’t
merely jolted — it’s in secular decline.
Figure 1 Interest In Owning The Best Brand Is Declining In Importance
“Owning the best brand is important to me.”
(Responses on a scale of 1 [strongly disagree] to 5 [strongly agree])
2006
35%
33%
24%
23%
2010*
26%
28%
13%
11%
4%
1
2
3
4
Base: 63,363 US and Canadian adults
*Base: 40,950 US and Canadian adults
(percentages may not total 100 because of rounding)
2%
5
Source: Forrester’s NACTAS 2006 Benchmark Survey
*Source: North American Technographics® Benchmark Survey, Q2 2010 (US, Canada)
Note: “No answer” responses have been removed.
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October 4, 2011
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Brand Loyalty Isn’t Enough For Products Anymore
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Figure 2 Technology Optimism Contributes To An Erosion Of Loyalty
A spreadsheet with additional data is available online.
2-1 Consumer technology attitudes and loyalty attitudes
Technology attitudes:
Technology is important to me.
I like technology.
Loyalty attitudes:
I like to shop around before making a purchase.*
Price is more important to me than brand names.*
Owning the best brand is important to me.
I am influenced by what’s hot and what’s not.*
When I find a brand I like, I stick to it.
I am always willing to try or do new things.*
*Note: reverse-coded
2-2 Loyalty correlates negatively with technology optimism
Overall, the more technologyoptimistic the consumer, the
less loyal she was in her
attitudes.
Loyalty
Correlation: -0.164
Technology
optimism
Base: 41,315 US and Canadian adults
Source: North American Technographics® Benchmark Survey, Q2 2010 (US, Canada)
Note: ”No answer” responses have been removed.
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Brand Loyalty Isn’t Enough For Products Anymore
For Consumer Product Strategy Professionals
Figure 2 Technology Optimism Contributes To An Erosion Of Loyalty (Cont.)
2-3 Loyalty is eroding among tech optimists over time
2006
-0.05
2007*
Year
2008†
2009‡
-0.07
From 2006 to 2010, the negative
correlation between tech
optimism and loyalty became
more pronounced.
-0.09
Correlation -0.11 -0.106
coefficient
-0.13
-0.15
2010§
-0.135
-0.143
-0.137
-0.17
-0.164
Base: US and Canadian adults
Source: Forrester’s NACTAS 2006 Benchmark Survey
*Source: North American Technographics® Benchmark Survey 2007
†
Source: North American Technographics Benchmark Survey 2008
‡
Source: North American Technographics Benchmark Survey, 2009 (US, Canada)
§
Source: North American Technographics Benchmark Survey, Q2 2010 (US, Canada)
Note: “No answer” responses have been removed.
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Source: Forrester Research, Inc.
CRAFT A TOTAL PRODUCT EXPERIENCE CHAIN TO REINVIGORATE LOYALTY
To combat consumers’ dubious loyalty, product strategists need to think differently. A great
starting point is something Forrester has been writing about for more than a year: building a total
product experience (TPE).5 With a TPE, a product strategist takes advantage of digital technologies
and devices to build holistic experiences around products — from pre-purchase discovery and
marketing all the way through to post-purchase support. Expanding on TPE, product strategists
can think more creatively about how to construct what we call “total product experience chains” to
promote loyalty (see Figure 3).6
What do we mean by TPE chains? We want product strategists to develop creative new product
strategies that link together three components:
· Brand link. Brands themselves remain important, even as overall brand loyalty declines.
Product strategists should tie brands together in new ways, creating partnerships with
complementary brands. Brands communicate essential truths about the proposition at hand:
What is the product? What will the experience be like? What does my ownership of this product
say about me as a person? Brand remains a touchstone for framing these issues.
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Brand Loyalty Isn’t Enough For Products Anymore
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· Simulation link. While it was once the case that brand advertising promised a product
experience in the hope that the target consumer would then anticipate the product enough to go
acquire it, it is now possible to give people a direct simulation of the product experience even
before they buy it. Using digital tools, product strategists can create a link between the brand and
the product that simulates the product experience and generates a fuller anticipation of the actual
product experience. This can be done in many ways — by creating social communities around a
product, providing limited digital access to a product (as when Amazon.com gives sample
chapters to Kindle readers), or gamifying the product in some way. Simulating the product
experience creates a sense of anticipation for owning and using the product among buyers.
· Product link. At the end of the day, product strategists want to generate a sale. The product
link can involve everything from discovery (using the game as a choice mechanism for buyers)
to configuration (using the game as a design mechanism for the product itself — delivering a
mass-customized end product to buyers). This link also implies the developing of products with
an eye toward the other links in the chain — from the ideation of the product concept all the
way through to its delivery into the market.7
Figure 3 Forge A Total Product Experience Loyalty Chain
Brand link
Simulation link
Product link
Combine
complementary
brands as a touchstone
to frame the
experience.
Leverage gaming
platforms and social
media to create
games and contests.
Design products
(mass customization)
or choose products to
purchase based on
the games.
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A Total Product Experience Chain For Clothing
So how does this all work? We’ll start by proposing a plausible total product experience chain for
clothing products.8 Here, we offer a thought experiment for product strategists at a company such as
Gap.
· Brand link. Product strategists at Gap could link up with a media brand such as Lifetime’s
Project Runway (see Figure 4). What does this move do? It creates an expectation of a design
contest. What should product strategists do about that? Give customers a design contest,
leveraging a platform such as Xbox Live with Xbox Kinect, allowing a group of friends to
compete with one another in a contest to design (for example) their fall fashion wardrobes.
· Simulation link. Leveraging Project Runway themes, product strategists would offer this
experience in the form of a game. But the game entails real clothing design, because mass
customization is the future of products in an age of customers, and Xbox Kinect has the
potential to be an ultra-configurator.9 Each contestant designs his or her own outfits, based on
configurable clothing from Gap.
· Product link. Ultimately, fans of a show such as Project Runway who participate in their
own gamified simulation don’t just want a game; they want to receive real clothes. Mass
customization would allow Gap and its partners to sell actual clothing at the end of this total
product experience chain.10 Customers could plausibly buy any design that contestants have
concocted during the game — presumably with a bias toward the winning outfit.
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Brand Loyalty Isn’t Enough For Products Anymore
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Figure 4 Designing A Project Runway Design Game
Brand link
Simulation link
Product link
Mass
customization:
Buy your own
design and those of
your friends.
Play and design clothing with Xbox Kinect.
Source: Lifetime, Gap, and Microsoft websites
Source: Forrester Research, Inc.
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A Total Product Experience Chain For Home Decorating
We hope that a few light bulbs went off in the heads of product strategists in the clothing/apparel
space just now. But total product experience chains aren’t limited to just one product category. So
let’s talk about another scenario, pitched at product strategists at a company such as Ikea. Specifically,
let’s think about consumer purchases of home decor for a kitchen (see Figure 5).
· Brand link. To build a total product experience chain, product strategists at Ikea could link up
with a media brand such as HGTV’s Design Star. Design Star pits interior designers against one
another to compete to win their own design show on HGTV. In this chain, Ikea would unite its
brand with this media brand’s experience.
October 4, 2011
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· Simulation link. In this case, product strategists again use a gaming metaphor for the
simulation. Gaming doesn’t have to happen over a console; indeed, Facebook-based social
gaming reaches a far broader audience. To create a compelling game, product strategists should
render up a real (virtual) room. The next generation of smartphones, such as the HTC Evo 3D,
ship with 3D cameras, which allow measurement of depth perception. In this game, a person
who wants to re-design her kitchen uploads all the real measurements of the room to her social
contacts. Her friends — the contestants — compete to create the best real-world kitchen design
in a virtual replica of her real-world kitchen space.
· Product link. To bring this contest to a conclusion, the would-be buyer can solicit votes from
friends on Facebook to help her choose the best design. Product strategists at Ikea wouldn’t
have to stretch too far to turn this into a purchasing experience: Ikea already offers a kitchen
and home planner 3D design tool.11 But augmenting the purchasing process with a Design Starinspired experience, turning it into a game, and crowdsourcing opinions about the design turns
this into a total product experience chain.
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Brand Loyalty Isn’t Enough For Products Anymore
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Figure 5 Creating A Design Star Game
Brand link
Simulation link
Compete with
friends to design
your own room of
the house
(virtually).
Product link
Buy the goods you
and your friends use
to decorate your
room, including
build-to-order
furnishings.
Use 3D camera
phones to create
a virtual canvas for
the game.
Source: HGTV, Ikea, Facebook, and HTC websites
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A Total Product Experience Chain For Weight Loss
At this point, some product strategists might be saying, “I can’t see turning my product into a game.”
Well, you don’t have to: Gaming might be the most obvious example of how to use new digital tools and
partnerships to stimulate product experience — linking brand and product together in a simulation
chain — but it’s not the only way. Let’s riff off of a real-world example to show you an alternative.
Lose It is a weight loss app accessible across platforms (Web, iPad, iPhone, Android). While we
believe that product strategists at FitNow, the company behind Lose It, still have opportunities
they’ve yet to develop with the product, it’s a good starting point for thinking about a total product
experience chain for weight loss:
October 4, 2011
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Brand Loyalty Isn’t Enough For Products Anymore
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· Brand link. Let’s call this a continuing opportunity for product strategists at FitNow. They’ve
chosen to go the organic route, building their own brand on an (admittedly) catchy name.
They’ve also, to some extent, aligned themselves closely with Apple’s brand(s), though they
also recently branched out to Android devices. Product strategists here have the opportunity
to associate themselves with the brand and products from companies such as Jenny Craig or
Weight Watchers International— as they have done to some extent with restaurants such as
International House of Pancakes (IHOP) and food brands such as Michelino’s.12
· Simulation link. Lose It provides menu tools that allow dieters to visualize the different
possibilities for their daily meals — before they actually choose what to eat (see Figure 6-1). The
link between this simulation and “appetite” is literal, in this case. The food choice navigation
process is vividly displayed, with users able to simulate various options before settling on a meal
(and associated calories and impact on their diet) — and also sharing experiences with those
meals with social buddies. Finally, the simulation link includes numerous progression-towardgoal tools to help dieters understand where their efforts fall and where they have to go (see
Figure 6-2).
· Product link. Today, the product is the service. Tomorrow, the product could be the delivery
of the food (the aforementioned restaurants and food brands), the exercise services (gyms
and trainers), or even health providers (doctors and health maintenance organizations). These
product links for weight loss demonstrate how a total product experience amplifies discovery
and leads to product fulfillment — and user delight.
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October 4, 2011
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Brand Loyalty Isn’t Enough For Products Anymore
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Figure 6 Lose It Offers Product Strategists In Weight Loss A Total Product Experience
6-1 Building a total product experience chain for weight loss
Source: Lose It website
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Figure 6 Lose It Offers Product Strategists In Weight Loss A Total Product Experience (Cont.)
6-2 Lose It helps dieters visualize their menus beforehand
Source: Lose It website
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R E C O M M E N D AT I O N S
BUILD A TOTAL PRODUCT EXPERIENCE BASED ON TODAY’S ADJACENT POSSIBILITIES
The total product experience chains we’ve described here don’t come without an element of
danger: It’s tempting to try to build flashy, futuristic total product experiences that are more
fanciful than business- and customer-relevant. That’s not our recommendation here, though.
We want product strategists in all industries to leverage digital tools to simulate and stimulate
anticipation for their products, even if this means navigating an unfamiliar world of partnerships
and technologies. The starting point for product strategists is to assess today’s landscape of
complementary brands, plausible simulation tools, and product delivery methods that could form
links in their chains. This exercise is achievable by looking to the adjacent possibilities.13
· Start with an assessment of brand. While brand loyalty is in relative decline, brand itself
remains critical. Product strategists should assess their own brands and then think about
how they can partner with other brands to create complementary positioning. This will vary
by product area. Where a product strategist at Gap might look to Lifetime’s Project Runway,
a product strategist at a restaurant chain such as the Cheesecake Factory might turn to the
Food Network. These media representations of the product category — often presented
in narrative and/or game show format — create a segue to the simulation link. Doing this
exercise will help you rediscover some of the power of Hirschman’s brand loyalty.
· Hire a guru to help navigate new digital platforms. An increasing number of product
strategists we talk to have gurus to help them develop their strategies on different platforms:
“We have an iPad guru,” said one. One noteworthy frequent omission (so far): Product
strategists also need to start taking gaming platforms seriously. Xbox, with its Xbox Live (a
social media network in its own right) services and innovative Kinect interface, is the obvious
starting place.14
· Explore a mass-customization strategy . . . It’s not a simple field to master, so product
strategists should look to buy (pure plays) as well as to build mass-customization capabilities.
In its purest form, the total product experience chain is well suited to the delivery of highly
individualized product designs that characterize mass customization.
· . . . or use total product experience chains as discovery engines. At the end of the day,
total product experience chains can be used to assemble non-built-to-order product choices;
the Ikea kitchen tool isn’t technically delivering anything that’s built to order. Think of these
as discoverability aids, which articulate — via digital experience — the nature, forms, value,
and usage of the product you are delivering.
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SUPPLEMENTAL MATERIAL
Methodology
Forrester conducted a mail survey, the North American Technographics Benchmark Survey, Q2
2010 (US, Canada), fielded in February and March 2010 of 42,792 US and Canadian households
and individuals ages 18 and older. For results based on a randomly chosen sample of this size (N =
42,792), there is 95% confidence that the results have a statistical precision of plus or minus 0.5%
of what they would be if the entire population of North American households and individuals ages
18 and older had been surveyed. Forrester weighted the US head of household data by age, gender,
household income, household size and composition, education level, region, and market size
(combined statistical area). The weighting criteria for the US individual respondent data included
all of the above with the addition of employment status. The survey sample size, when weighted,
was 34,866 North American respondents at the household level and 42,785 North American
respondents at the individual level. (Note: Weighted sample sizes can be different from the actual
number of respondents to account for individuals generally underrepresented in mail panels.) The
sample was drawn from members of TNS’s panel, and respondents were motivated by a sweepstakes
drawing. The sample provided by TNS is not a random sample. While individuals may have been
randomly sampled from TNS’s panel for this particular survey, they have previously chosen to take
part in the TNS panel.
ENDNOTES
1
The German economist worked as an academic for half a century. Exit, Voice, and Loyalty remains his most
famous work.
2
Source: Albert O. Hirschman, Exit, Voice, and Loyalty, Harvard University Press, 1970.
3
In the age of the customer, barriers to entry have fallen across the board, which in turn gives consumers
faster and cheaper alternatives for just about every product and service on the market. See the June 6,
2011, “Competitive Strategy In The Age Of The Customer” report. An example of the increasing options for
substitutability comes from video distribution. The value of brand has diminished in the video distribution
business (think of Comcast, Blockbuster, and Netflix, all of which live or die on the value of the service, not
the brand promise). See the August 23, 2011, “What Netflix Should Do Next” report.
4
Correlation is the degree to which two or more attributes or measurements on the same group of elements
show a tendency to vary together. Correlation coefficient is of one of a number of measures of correlation,
usually assuming values from +1 to -1. Source: Dictionary.com Unabridged (http://dictionary.reference.
com/browse/correlation) and (http://dictionary.reference.com/browse/correlation+coefficient)
5
Forrester developed the notion of a total product experience, which is the use of digital technologies to
simulate the usage of, and stimulate demand for, products and services of all sorts. The Xbox Kinect, for
example, can be used to design a total product experience. See the October 18, 2010, “How To Prepare For
The Era Of Experience” report.
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6
Product strategists should compare notes with their marketing colleagues. Marketers look at the world
through a customer life cycle (CLC) lens that loosely maps, at least in part, to our total product experience
chains. Like the CLC, TPE engages customers before, during, and after the moment of purchase. See the
February 8, 2011, “Customer Life-Cycle Marketing Demands New Metrics” report.
7
Product strategists have five key job duties: ideation (developing product concepts); design (creating actual
products based on concepts); business planning (constructing business models and plans to monetize
products); go-to-market (determining how to sell the product); and competition (analyzing and acting
against competing products). TPE chains touch each of these job responsibilities. See the December 20,
2010, “The Job Responsibilities Of Consumer Product Strategy Professionals” report.
8
To give credit where it is due, this scenario was proposed to me by a client, who will remain anonymous.
9
Mass customization’s time has come, due to new customer-facing digital technologies. See the April 15,
2011, “Mass Customization Is (Finally) The Future Of Products” report.
10
It’s time for product strategists in clothing and apparel to start offering mass-customized products. See the
April 15, 2011, “Mass Customization Is (Finally) The Future of Products” report.
11
Source: Ikea (http://www.ikea.com/ms/en_US/rooms_ideas/kitchen_howto/NA/plan_your_kitchen_in_3d.
html#lnk-2-5).
12
The menu planner includes branded restaurants and food products. Source: Whitney Klinkner, “Lose It!
3.6.3 For iOS,” Lose It!: The Blog, August 25, 2011 (http://blog.loseit.com/2011/08/25/lose-it-3-6-3-for-ios/).
13
For product strategists thinking about this problem, we recommend the approach we call “innovating the
adjacent possible.” See the August 4, 2011, “Innovating The Adjacent Possible” report.
14
Xbox Kinect has infinite potential as a revolutionary device with implications for product strategy, eBusiness,
and customer experience. See the October 18, 2010, “How To Prepare For The Era Of Experience” report.
October 4, 2011
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