Flat rate on books illustrates effective marketing innovation
(Photo © Mofibo.com)
By Claus Rosenkrantz Hansen, CBS Library
'Spotify for eBooks' is the slogan adopted by the e-book service Mofibo, which for a monthly flat-rate subscription offers its customers unlimited access to all the books they can read or listen to.
As such, Mofibo's use of a flat-rate payment system is not unique. The flat-rate model is popular among streaming content providers of music and movies, fitness chains and mobile phone companies.
However Mofibo sells books, and therein lies the novelty.
Christoph Grimpe researches in business strategy and innovation at CBS. He describes Mofibo's combination of a flat-rate subscription and books as an innovative marketing measure that is keeping the company one step ahead of its competitors.
"Our study reveals that companies which invest in innovative marketing sell more new products than companies that do not make that kind of investment. This is a useful finding for Danish businesses, which are not taking sufficient measures to utilise available potential. Only 28 percent of Danish companies invest in innovative marketing – in Germany, the equivalent figure is 45 percent," explains Grimpe.
In a new study Grimpe along with three other researchers asked 866 German companies about where they stand with regard to innovative marketing. The data collection was made i 2007-2008.
More than just a new packaging colour
So what does innovative marketing mean?
Grimpe notes the importance of distinguishing between technological innovation and marketing innovation. While technological innovation centres on R&D in connection with the product itself, marketing innovation leaves the product as it is and focuses instead on pricing, distribution and marketing.
"But it also requires a special ingredient," explains Grimpe.
"We can only really talk about an instance of innovative marketing when a company hits on something that seriously deviates from standard practice so far. Such as in the case of Mofibos, where the combination of pricing (flat-rate subscription) and the product (books) is the key."
Customers need to understand the product
However the findings of the study also show that if a company opts to invest in innovative marketing, it should avoid focusing on technological innovation at the same time. If a company focuses on both areas at once, it will not reap the full benefits of its technological investments.
The explanation for this varies according to whether its looked at from the customer or the company angle.
"From the customer angle the explanation is that products that are novel both in terms of technology and marketing simply become too complex. Customers want to be able to assess the product before deciding whether to buy it. If you can’t understand a product because it’s too complex, you’ll typically choose a product that’s more simple and easier to grasp,” says Grimpe.
The company angle has to do with size. Smaller companies in particular should be wary of being innovative on both the technology and marketing fronts at the same time.
"Smaller companies often lack the management resources necessary to make the right decisions if they are promoting innovation on both fronts. For that reason smaller companies gain from not focusing on both types of innovation simultaneously."
This is the case with Mofibo, which is not putting unnecessary strain on management resources by introducing a novel product and a novel marketing measure at the same time or by confronting customers with anything unnecessarily complex, but is combining a tried and tested product such as books with a novel method of payment.
Read more research news in the newsletter Research Reporter - April
For more information contact Associate Professor Christoph Grimpe tel:+45 3815 2530 or e-mail: firstname.lastname@example.org
The article ”Novel but too Complex: The Importance of Marketing Innovation for Performance” is written by Christoph Grimpe in collaboration with Wolfgang Sofka, Rabikar Chatterjee and Mukesh Bhargava. The article is forthcoming.
This article was published with the support of the CBS Competitiveness Platform. The purpose of the platform is to unite and enhance CBS research and education as well as interact with the business community on the issue of competitiveness.
Christoph Grimpe is Associate Professor at Department of Innovation and Organizational Economics at CBS.
Wolfgang Sofka is Associate Professors at Department of Strategic Management and Globalization at CBS.