Costovation — Delighting Customers, Cheaply

By: New Markets Advisors

Costovation is innovation in pursuit of cost leadership. Rather than seeking innovation to differentiate a product and potentially earn a price premium, managers embracing costovation are aiming for radically lower price points. 

Although this quest inevitably involves trading off some features that some customers may appreciate, it is distinct from simply economizing. This is not about removing the olive from the salad, to take American Airlines’ (in)famous example, but rather about broadly re-imagining the offering to attack often hidden drivers of expense.

Importantly, Costovation can delight customers even while it takes a parsimonious approach to business. By carefully targeting customers over-served by existing alternatives, costovation provides a well-defined customer type with a handful of welcome features even while stripping away other, superfluous benefits. Case in point: the YOtel hotels found within European airports that provide a miniscule room, yet one which is steps from the gate, abundant in power ports, and complete with a Monsoon shower. For more detail on approaches to pursue costovation, see our piece for Forbes.
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Story by Steve Wunker.