The 4 Types of Customer-Centric Innovation Explained

This article is an excerpt from the Shortform book guide to "Ten Types of Innovation" by Larry Keeley, Helen Walters, Ryan Pikkel, and Brian Quinn. Shortform has the world's best summaries and analyses of books you should be reading.

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What is customer-centric innovation? How can you make your customers satisfied with your product?

The customer is the most important person to make happy when it comes to creating and distributing products. In Ten Types of Innovation, Larry Keeley and his co-authors identify four types of innovations that relate to how your customers perceive and interact with your company.

Find out how to enforce customer-centric innovation in your company.

1. Distribution Innovations

This type of customer-centric innovation focuses on ease of purchasing—making it easy to distribute your product to your customer. With these tactics, you either make your product easy for your customers to purchase or make the purchasing process stand out in a good way. For example, you might set up special stores dedicated to showcasing your products and giving your customers a memorable white-glove experience. Or you might partner with a distributor that your customers already trust (in which case you’d be combining a distribution innovation with relational innovation). The authors note that effective distribution innovations often involve developing multiple distribution channels to reach different classes of customers.

Standard Distribution Channels as a Starting Point for Innovation

In Crossing the Chasm, Geoffrey Moore discusses several different distribution channels that are useful for reaching different types of customers. Although these are standard distribution channels, not novel ones, understanding them can provide you with a starting point to consider novel variations or combinations of them.

One approach, of course, is to distribute your product yourself. Moore breaks this up into several “channels” depending on which part of your company interacts with the customer: For high-value business-to-business sales, he recommends that your executives meet directly with the customer’s executives to arrange the transaction. For larger-volume, lower-value sales, it may be appropriate to sell your product directly through an online store or to use a hybrid model that combines some of the automation of an online store with a live sales team that helps customers determine exactly what they need.

Another approach is to market your product through “value-added resellers,” or VARs. A VAR is usually a local company that provides repair, tech support, training, consulting, or other supporting services and expertise in addition to acting as a vendor for products. Moore notes that VARs are particularly useful for marketing high-tech products to users who are less tech-savvy because these users need more support and feel more comfortable having someone they can turn to locally if they have problems.

2. Support Innovations

This type of innovation means supporting your customers in their use of your product in exceptional ways. For example, if your product can only be repaired by a small number of certified technicians, you could instead design it with easy-to-obtain spare parts so that any technician can fix it when needed. Or you could guarantee zero downtime and offer to reimburse business customers for any revenue they lose if your product does go down.

(Shortform note: In Raving Fans, management experts Ken Blanchard and Sheldon Bowls essentially argue that this is the most important type of innovation. Although they don’t explicitly discuss managing innovation projects, they say that impressing your customers through superior service and support is the most important part of business management. And they assert that to impress your customers, you have to do things for them that they don’t expect. Elements of customer service that provide novel or unexpected value to your customers are, by the authors’ definition, innovations.)

3. Branding Innovations

Through branding innovation, you find a way to make customers ascribe additional value to your products based on your brand identity. Maybe they’re willing to pay more for your products because they trust you to stand behind your products more than they trust other companies. Maybe something about how your company does business resonates with their values. Or maybe your brand conveys social status in a way that others don’t.

(Shortform note: Another term for branding innovation is “positioning strategy.” In marketing parlance, “positioning” refers to how customers think about your product or brand—where they place you on the market landscape. “Positioning” can also refer to actions you take to influence how customers think about your product or brand.)

4. Gratification Innovations

This type of innovation revolves around understanding your customers’ values and aspirations and designing your product so they get more gratification from using it. For example, you might let users customize the appearance of your product when they buy it so that your product becomes a form of self-expression for them.

(Shortform note: In Blue Ocean Strategy, Kim and Mauborgne describe a closely related form of innovation as “adding function or emotion.” People tend to view some products objectively and others emotionally. But if you can find a way to make people see your product in a different light than they view other products in the same category, they may find a different form of gratification in it, creating a new market. For example, most people view house paint relatively objectively and cosmetics more emotionally, and most companies that make these products cater to these expectations. But if you introduce a cosmetic product and show users how it is objectively better in some way, or if you introduce a line of house paints that customers can get more emotional about, your product would stand out.)

The 4 Types of Customer-Centric Innovation Explained