What modern brands can learn from Häagen-Dazs
How to use value innovation to grow in a saturated market
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In the 1960’s in the Bronx, two Polish-Jewish immigrants, Reuben and Rose Mattus, created Häagen Dazs.
The Mattus’ knew they were entering a saturated ice cream market. Their strategic focus wasn’t to outcompete the existing ice cream brands, but to make them irrelevant by creating a fundamentally new and superior value in the market.
This new and superior value was social and cultural aspiration. Häagen-Dazs’ European-sounding name gave cultural biography to the brand that didn’t have any. It turned a mundane product into an aspirational one by enriching it with the connotations, associations and references linked to its name.
Aspiration is buyer value. In case of Häagen-Dazs, it lends the buyer a sense of discerning taste that was once restricted to social and cultural elite. Häagen-Dazs name conveys sophistication, tradition, heritage and the old-world artisanship. Its original packaging featured a map of Denmark, despite the fact that “ä” doesn’t exist in Danish and that the words don’t mean anything. Häagen-Dazs shifted consumer preferences and created a market for itself around this aggregate consumer demand.
Value innovation redefines growth. It moves the growth strategy from “what are my competitors doing” on the supply side to “what matters to my customers and how can I deliver it to them” on the demand side. By introducing new value, this growth strategy avoids the “faster horse” trap. As the increasing returns and economies of scale kicked in, Häagen-Dazs successfully stood out. It took almost 40 years for other artisanal ice cream brands to invade its market.
Value innovation is the backbone of the aspirational economy. When the economy based on manufacturing moved to producing culture, design, luxury, art and experiences, value innovation focused on taste, aesthetics, identity and one’s social standing. Value innovation is indispensable in the economic landscape where products, services and experiences are all comparable in value: a weekend in nature can be equally desirable as a bottle of vintage bourbon as a pair of sneakers as a meditation class.
Traditionally, growth is achieved through lowering prices and extending distribution, both of which move a company towards mass market and direct marketing. In contrast, value innovation-based growth focuses on how to gain and retain pricing power. Consumers happily pay more when they perceive they are getting value that matters to them and that they can’t find anywhere else.
Here are several value innovation options:
Identity. Value innovation is the opposite of imitation. It is a pursuit of singularity and incomparability. Häagen-Dazs tagline is “made like no other.” First-best brands, like Amazon, Apple or Hermès, invest in their own identity that transcends categories. They do not focus on what their competitors are doing. Kanye doesn’t compare himself with Nike or Prada; Damian Hirst doesn’t compare himself with Andy Warhol.