"Emotional Functionality" Should Be On Your Innovation Radar

By Mary Beth Lake and Brian S. Lunde

Every year, The Conference Board publishes the results of their survey identifying the top concerns of hundreds of CEOs around the world. Once again, the 2007 report puts "stimulating innovation/creativity/enabling entrepreneurship" among CEO's top ten concerns. Even more interesting in the 2007 results is that when asked about challenges to their company's innovation performance, chief executives cite "improving customer relationships" as the second most significant challenge, right behind acquiring and developing the right talent. These results reveal a crucial insight: innovation doesn't create lasting business value unless it improves customer experience and, thereby, the strength of customer relationships.

Historically, goods producers focused on innovation in phases or spurts. It was typically the entrepreneur or the genius working alone who was expected to produce the big ideas and push the envelope. Large companies, especially those with a strong record of success, were sometimes more reluctant to change. They focused on new ideas with short-term payoff rather than long range innovation planning because of the associated financial and business risks. Some companies focused on basic expectations such as reliability, believing this would lead to stable customer relationships. But as we know, the new consumer has become much more demanding and less satisfied with the status quo. While the number of new products introduced to attract consumer interest and dollars each year is growing rapidly, the failure rate continues to be very high; studies often find it is as high as 70-80 percent in some categories.

If a company doesn't constantly innovate, customer value will migrate to its traditional competitors who are, or to new market entrants who are not anchored to conventional wisdom.

Most companies now seem to understand that they need to innovate, and have generally accepted that innovation must be a continuous process with the best ideas coming from groups of people working together rather than the ideas of one or a few. They also realize that innovation provides them with constant opportunities to reengage customers, to build and cement their loyalty. If a company doesn't constantly innovate, customer value will migrate to its traditional competitors who are, or to new market entrants who are not anchored to conventional wisdom. Virgin America is a recent entrant to the US domestic airline business with an unconventional formula to win market share: low cost combined with a strong emphasis on a branded customer experience. This differentiation on experience is the core innovation that Virgin hopes will disrupt the entrenched players who have been in a race to customer experience mediocrity, as frequent U.S. air travelers know only too well.

But product innovation success is not measured only by blockbuster inventions that change markets. Big "home runs" are rare and require management (and investor) tolerance for a high level of financial risk. For the vast majority of companies, winning with innovation is a game of continuous improvement, and creating new value for customers should be its lodestar.

There are two basic ways to improve products so that customers experience greater value. By far the most common path is to improve what we might call "rational functionality." These innovations tap into customer's rational motivations for loyalty, which are based on the "give and get" associated with acquiring, using, and maintaining a product. Put simply, rational functionality is how well the product performs or produces its intended result.

Product quality is one of the core elements of rational functionality. Innovation that improves a products' technical performance, durability, efficiency, maintainability, longevity, or any of dozens of other attributes is successful innovation if these differences are visible (or can be communicated) to customers. Intel is an example of a company that has continuously innovated around the rational functionality of its products, and it works hard to communicate the improvement in customer value that its innovation produces.

"Emotional functionality"... refers to the ability of a product to produce, enhance, or sustain a positive emotional outcome for its user.

But there is a second, far less common product innovation path that can create greater customer value: let's call it "emotional functionality." This refers to the ability of a product to produce, enhance, or sustain a positive emotional outcome for its user. Products with strong emotional functionality take advantage of the other—and often much stronger— source of human motivation: emotional needs.

In his book Emotional Design, Donald A. Norman writes "...we now have evidence that aesthetically pleasing objects enable you to work better...products and systems that make you feel good are easier to deal with and produce more harmonious results." As modern brain science is proving, our rational problem- solving ability is significantly impacted by our emotions. That is why, as Norman summarizes, "Attractive things work better." In the popular imagination, Apple is probably the current poster-child for the economic value of emotional functionality, and note that Apple competes in product categories that are highly technical.

Customer loyalty is evidenced by a range of behaviors that demonstrate the customer's favorable pre-disposition toward the brand or company. From our work with clients in many industries, we have strong empirical evidence for the significance of emotional motivation in driving these loyalty behaviors. Focusing innovation on the emotional functionality of products is therefore a promising avenue for creating stronger bonds with customers.

But how? A place to begin is to understand the current emotional motivation of your customers, and this can be deduced from well-designed research. This work can identify to what extent your products are activating this powerful loyalty driver.

Emotional motivation is a multi-dimensional construct that includes such things a social approval ("people who matter to me would approve of my choice of this product") and internalization ("my values and this product's are very similar"). In product design, this is captured by what is called reflective design. Reflective design is the conscious focus of the designer on form and aesthetics to reflect certain values and meanings such as simplicity, economy, novelty, etc. Reflective design is about evoking what a product says about its owner. A consumer who wears a "funky" watch with an unusual time display has chosen it because, either consciously or subconsciously, she values how the watch reflects something important to her—perhaps that she is creative, or that she is fiercely independent of general conventions. Marketers in both consumer and business markets should understand what their products "say" about their users, and look for innovative ways to turn up the volume on that message through reflective design.

Of course, innovative emotional functionality in a product is not a silver bullet. There are a vast number of influences on innovation success, from macroeconomic conditions down to competitor's actions in local markets. Fortunately, there are new research tools available that help companies more accurately predict what will really happen, in ways that are both practical and scientific. For example, there are simulation tools that allow marketers to play with various marketing dynamics (awareness, distribution, promotion) and product characteristics (concept, features, packaging, price) to see what the product's market potential would be if any of these variables changed and see the immediate impact for different scenarios. This enables companies to see the product's full potential early on in the development process, minimizing risk and helping to make smarter decisions while the idea is evolving.

Understanding both emotional functionality and the effects of other major variables on product innovation success is a powerful capability that can shift the odds further in the innovator's favor. Developing such a capability is crucial for every firm that wants to build customer loyalty and win market share through product innovation.

About the Authors

Mary Beth Lake is the CEO of MarketQuest, Synovate's product design and development specialty practice; she may be reached at marybeth.lake@synovate.com. Brian Lunde is Sr. Vice President of business development and marketing for Synovate Customer Experience and may be reached at brian.lunde@synovate.com

© Reprinted with permission, American Marketing Association's Marketing Management, March/April 2008 Issue. All rights reserved.