Finance Seek – Innovation and business investment

Finance Seek – Innovation and business investment

Innovating business strategies is one of the main tools that companies can implement to achieve a more efficient allocation of resources. Moreover, only through a strategy of innovation designed to meet the needs of specific market segments, will optimize emerging opportunities in different sectors of the population. You may then enunciate two different strategies: managing the innovation process towards a target of consumers with high incomes or to those who are at the base of the pyramid.

In the international arena there are two trends. On the one hand, the challenge of growing sales and profits imposed by the stock market, many companies are facing innovation processes to develop in the saturated markets of Europe and North America. In addition, in line with this strategy limited, are penetrating more and more globalized in countries where the majority are poor, but competing for the consumption of 20% of the world population owns 80% of income.

In addition, other companies began to direct their business strategies to consumer segments of low-income and lower middle class. These are approximately 4 billion people worldwide, of which there are over 380 million in Latin America and 28 million in our country.

This marketing strategy undertaken by companies such as Minka in Peru (Romero Group) or Medical Savings in Mexico, is one of the most important changes that occur not only at commercial managements of the companies but also in business relations and society: these companies continue to generate profits and segments of poor population will benefit from deals for you. However, Argentina is still at an early stage in the development of this market segment, not yet seen any company positioned as a very successful business in that area.

In a survey of 64 managers in the areas of marketing and sales of 44 consumer companies of Argentina (who billed a total of 12.448 million pesos in 2004), we observed that 10% of marketing budget for 2005 will be invested market research. This would suggest that companies would be doomed to know and understand the variables that define the market, allowing them to identify new opportunities and drive business innovation.

What’s Next:

However, other data that fell from the survey indicates that the next release will focus on the segments of higher socioeconomic status. This result suggests that in our country there are few companies with “expertise” to target consumers with lower purchasing power.

To the extent that companies recognize the value of those segments and implement innovation among them, develop products to meet your needs. This is very important not only economically, but also will make one of the most important roles of business and marketing: to collaborate in developing and improving the quality of life of society.

Much of the strategy for achieving this objective is summarized in innovation, aimed at the poorest segments so far marginalized in the marketing budgets of companies of mass consumption. According to research results presented at the Third Meeting of mass consumption, consumers want products emerging brand, technology and good quality as much or more (the risk to try it again is very high, since you can not afford lose) that consumers of higher socio-economic segments. Therefore, the simplified version of expensive products are not the formula for success in these markets.

On the other hand, when asked about the amount of total business investment, executives indicated that it represented in 2004-on average over that percentage, 18.8% of turnover. Predicted for this year, a bigger budget commercial, 20.8% on revenues expected also higher (23.1% higher than 2004).

An increase in budgets and investment in marketing is good news for industry executives. But that’s just the first part of the equation, which is completed with greater efficiency in business investment.

Before deciding how much to invest in each marketing tool that companies would be interesting to reflect on the segments which will direct the offer: how much is known about them, how consumers live and think, how competitive is the business segment? The deep understanding of these points, and allows a more efficient budget allocation, it is useful to identify new business opportunities and facilitate innovation in particular.

Market research is central to this task and, contrary to common perception, is affordable. Investing money is only part of the slogan. The other is to make a thorough diagnosis and analysis of trade, which could lead to a competitive advantage for the company.