A recent Catalina report analyzed 25 new CPG products launched in 2010 to learn which consumers were most important for new product success.  They report, “Heavy category buyers, and even more so top brand buyers in the case of line extensions, are more likely to be high-value for new products.”  Evidence for this claim comes from data showing that category and brand buyers were three to six times more likely to purchase a new product relative to other shoppers.  They also found that brand-buyers were not highly cannibalistic and often spent incremental dollars or shifted spending from the competition.

On one hand, you could argue these results are obvious.  In nearly all of the line extension testing done in my career, there has been higher purchase interest among current category and brand buyers.   On the other hand, these results do not necessarily fit with new product goals, which often seek to attract new buyers and create significant category growth.  Digging deeper into Catalina’s results, I found some additional data that may provide more valuable clues on how to target new products.

One important finding was that two of the largest new product launches in 2010, an enhanced water and Greek yogurt product, attracted significantly more new category buyers compared to the average (27% and 49% vs. 18%).  Brands investing in truly breakthrough new products would likely want to invest in gaining trial among non-category buyers; with limited investment to help category users gain awareness at the shelf.  Rather than using Catalina’s historical data to guide targeting, brands may be better served designing concept/product testing to assess their likelihood of attracting buyers from outside the category.  If there is significant new buyer interest, substitute products could provide better behavioral targets than the current category buyer.

Another statistic in the report is that, “Just 1.5% or 1 out of 67 shoppers drove 80% of sales for an average new product.”   While Catalina uses this data to point to targeting heavy category buyers, my assessment leads to a different conclusion.    Grocery stores today typically have over 100,000 items giving shoppers lots of choices.  In order for new products to stay on the shelf, they need to have a unique point of difference to generate trial and repeat purchases. Since heavy category buyers are the most likely to be satisfied with current offerings, they may not always be the best target to find a point of difference that will grow the category.

New product teams may want to conduct early new product research to identify a light or lapsed category user with unmet needs.  By understanding this target’s behavior outside the category, marketers can potentially build a breakthrough new product.  However, they will need to engage in a different type of behavioral targeting.  For example, one of the two top-selling new products featured by Catalina was a Greek yogurt.  Knowing Greek yogurt provides the benefit of more protein, a savvy marketer could target users of other products that tout protein as a benefit.  This is particularly true if category penetration is low or the new product experience is unique enough to attract prior category rejecters.

While the Catalina report provided some rich data, their approach of looking at the average new product masked the complexity of their findings.  Some new product launches are designed to generate news within a product category, and keep an existing brand energized. Breakthrough innovations are meant to drive category penetration.  When focusing on breakthrough innovation, brands should use a wide variety of approaches such as consumer anthropology or brand co-creation to discover untapped markets where a target’s needs aren’t being satisfied.  The result is successful new products that extend beyond existing heavy category users and current brand buyers.  What are your thoughts on successfully targeting new products?

For lack of a better phrase, I call it the Empowerment Economy.  Back in my early days at General Mills, there was a trend watcher who talked about how people have moved from buying cake mix, to buying cakes, to buying birthday parties.   They said “wake up, it’s not just about convenience, it’s about the experience.”   Well, no one stood up at this conference and said, “it’s not about experience, it’s about empowerment.”  Or did they?  Here are a few stories I heard that now make me think empowerment is a word successful brands need to embrace in order to win in today’s marketplace.

A speaker from The Family Room, LLC kicked off the conference by telling us that moms no longer have the final say.  In fact, three in four moms make decisions together with their kids and/or provide options and let the kids decide.  Later in the day, the folks from Pepsi talked about how Quaker Granola bars capitalized on mom’s decision behavior by finding the “highest common ground.”  They designed their entire new product development process with the aim to help mom feel more empowered in her kid’s product choices.

Udi’s, a gluten free food company, also presented the incredible story of their brand’s success through empowerment.  In two years, they have grown from a 3% share of a $38MM category to a 44% share of a $96MM category.  Their brand grew, in part, by recognizing that customers are highly engaged with the product category and seek deeper support among people outside the medical community.  In fact, Udi’s reached 600,000 consumers in Facebook by sharing an event where celebrities ate their products at the Sundance Film Festival.  Both this event and the product experience empowered consumers to feel normal again.  They no longer have to stand out or sacrifice taste to live gluten free.

Both the Natural Marketing Institute (NMI) and Stonyfield presented information related to consumer concerns with the food supply.   A recent NMI study found that two-thirds of consumers believe that reducing toxins in their body is critical to staying healthy.  But the big a-ha from their research was that consumers not only want healthier foods, they also want healthy eating to be achievable.  NMI predicted that negative messages like “no pesticides” are NOT the future of satisfying consumers.  Instead, brands that talk about better ways to grow food and provide positive organic messages that “help consumers feel that they are doing their part” will succeed as leaders in their category.

Finally, Kraft and Coca-Cola talked about how they’ve had to relinquish some control of their new product development efforts in order to succeed at innovation and marketing in this new economy.  Kraft’s example with Philadelphia Cream Cheese showed that by engaging with their consumers in a cooking contest and giving them control of the conversation, they built a much deeper brand relationship.  The on-line contest allowed families to both engage with their brand and create their own experience.  Coca-Cola’s example highlighted their acquisition strategy and proposed that sometimes brands need time to “emerge” based on consumer interest and engagement rather than being pushed out through big advertising.

These examples drove home the idea that successful brands are empowering their consumers in their approach to both innovation and marketing, My favorite quote was from Gary Hirshberg of Stonyfield who summed up this new empowerment economy with the comment, “The best way to predict the future is to create it.”

How do you think brands can better empower consumers to create their own future?

• “I can’t remember the last time I bought a fast-food hamburger or a sandwich without seeing a request for a survey on the receipt. I don’t always have that much to say about a purchase.”
• “I resent the assumption that I’m interested in helping this company beyond making a purchase. Giving them your money is enough”
• “When the survey-taker can’t veer from a ‘totally satisfied, somewhat satisfied, not satisfied’-style script, its impossible to see how they could ever be of any use.”
• “I don’t mind being asked for input on such a big-ticket item as a car or a cruise. But ‘my goodness, after an oil change?’”
• “It often makes more sense to comment on (travel) sites than to take surveys. ‘This way, both potential customers and management can benefit.’”

At the heart of the issue is a gap between consumer media habits and data collection trends.  Consumers are reading and posting feedback at their favorite websites or engaging in brand discussions via social media; while researchers continue using traditional survey methods and struggle with social media technology and inaccurate data mining tools.

Here are three ideas on potential new approaches for customer satisfaction feedback:

1. Use the approach Godaddy took on a recent call.   They simply invited me to provide comments via email, website or social media and even provided me a specific person to contact.  Even better if they would have offered an incentive.
2. A new beta-site called suggestionbox.com allows customers to provide feedback in a suggestion box format.  Customers can select a specific retail location to post to.  They can also view comments from others and companies can review and post if/when a suggestion is implemented.
3. For more in-depth information, we’ve found great success recruiting panels customers to participate in a private Facebook group.  Participants find it easy and enjoyable to provide feedback, and a panel can be set up for multiple weeks so consumers can move beyond transactional feedback to competitive comparisons or even co-creation of new and improved product or service solutions.

What do you think companies should do to better approach brand loyalty and customer satisfaction measurement?

What are Secret Facebook Groups?

Secret Facebook Groups are private Facebook groups created by organizations. Participants are Facebook users who signed up for the group over the course of 2 to 6 weeks. Companies can recruit participants from existing customer databases or using outside recruiting databases.  In their white paper, the students outline two case studies on Secret Facebook Groups, one for an appliance company looking to create an innovative brand loyalty program, and one for a CPG company looking to develop new food products.

How are they different from traditional research techniques?

Several key differences were noted in the approach to this research vs. traditional focus groups or ethnography.

• Participants recorded and shared their daily activities through diaries/photos over a period of weeks; a technique typically cost prohibitive with other approaches.
• Participants viewed each other’s posts and photos and provided feedback, ideas, and questions in real time.  Similar to bulletin board groups, this is more collaborative than ethnography and more in-depth and self-directed than a focus group.
• Discussion and observation was able to evolve over time as we reviewed their postings.  This allows companies to engage in co-creation activities where consumer could react and build on the defined problem or product development platform.

What were the key benefits?

Across the two case studies, the following benefits emerged:

1.     SEGMENTATION: You can interact with a larger number of people than in traditional focus groups or ethnography.  You can easily create separate groups based on customer segments, which might be difficult to recruit in a single market.

2.     INCLUSIVENESS: No travel is required; Participants can be located anywhere, and clients can observe the research from anywhere with internet access.  This allows for a more inclusive NPD process.

3.     MORE CONTEXT: You can monitor each participant’s wall to gain context on his or her day-to-day life outside of the Secret Facebook group. More in-depth demographic and personal information on the various segments of the participants can also be obtained via their profile, wall posts, etc.  This gives better grounding of how your product or service fits into the large context of personal interests, activities and social norms.

4.     REAL TIME ACCURACY:  Participants capture real situations as they come up rather than reflecting on the past or forcing a situation at a time you can observe.  Overall, more occasions get captured per household, and less frequent occasion get captured more accurately allowing a more complete picture of consumer needs.

5.     CO-CREATION:  Social aspect of site allowed participants to share thoughts and ideas with each other, reacting ideas or problems that arise.  Companies could also seek feedback on possible solutions or ideas that might be the basis for a new product platform.

6.     MORE FLEXIBILITY: Photos and videos posted to site provided real life uses of product and occasions.  Other tools like an on-line survey were easily conducted by posting it as a task to the Facebook groups.

We also found strengths in pairing secret Facebook groups with traditional focus groups and ethnographic approaches based on differences in consumer targets or information needs.  We’d love to hear your thoughts and feedback as we all continue to innovate NPD methods!

The idea of electric and hybrid cards certainly isn’t new, although these products appear to have innovative technology like lightweight doors that compensate for battery weight. Particularly interesting is their vision of using the BMW i apps and services to stay relevant to their affluent, savvy target.

But, by the time these cars launch in 2013, will the “i” brand name be as innovative as the product?  I recently read a Betanews article suggesting that the word “Smart” is becoming passé. They argue the word smart joins other prominent but dated buzzwords like “e” from the 90’s and “micro” from the 80’s. So what about “i”? Should BMW rethink it’s use of “i” for its sub-brand name? In fact, should all companies be wary of burnout of the “i” brand acronym?

Elevance is an ergonomic bathtub that was cleverly designed to target the growing number of aging Americans renovating their homes.  Here is a link to a video that will give you a sense of how well they tied their design features to aging consumer needs: http://www.youtube.com/watch?v=4S9XznXZAjo

One impressive aspect of this new product is how well Kohler leverages their brand strength to differentiate themselves.  By using their “Bold” brand positioning and design capabilities, this new product leapfrogs the current industrial looking senior/disability bath products, delivering something the affluent baby boomers might actually want in their home.

What also makes this launch stand out to me is how well the product is integrated into their business strategy.  Kohler features Elevance within a complete product line they call Aging In Place.  By building a dedicated micro-site (kohler.com/bold-independence), they have created a one stop remodeling solution for aging consumers.

Kohler appears to have invested both product and business model innovation, when most companies were retrenching without investing in R&D.   What other examples of innovation are you seeing in the New Year?  Do you think we will see more significant product launches in 2011?

How do we transform our market research processes to get useful consumer information faster and cheaper?   I’m just starting on this journey, but here are a few ideas as thought starters…

1. PREDICT THE FUTURE: Tap into social media statistics to help define key opportunities for your organization.  Don’t wait for them to ask you about a trend, tell them what’s hot, using tools like Google Trends, BlogPulse, Tweet Grid, or Quantcast.

2. STAY CLOSE TO THE CUSTOMER: Utilize your connections in Facebook, Twitter, and Linked-In for early product definition or feedback on marketing ideas.  Tap into everyday conversations using a tool like Tweet Deck.

3. CATER TO YOUR CORE: Build a conversation with your brand fans through survey tools on social media sites.  Your website subscribers or Facebook fans may not represent all consumers, but they often reflect your core buyer.

4. CO-CREATE NEW PRODUCTS: Consider building a secret Facebook page to dive deep into your customer’s lives.  Smaller private groups give you the ability to confidentially learn about consumers and gain reactions to new ideas.

5.  MANAGE YOUR BUDGET ROI: Say no to lower-risk tactical research, and focus your spending on high ROI projects.  Strategic initiatives such consumer segmentation may become even more important as you seek to dissect and interpret a wide variety of social media content.

What are your ideas for evolving your market research for greater speed and efficiency?

AMD touts price-performance ratio with lower-price on new gamer graphic card

AMD’s new graphic card shows re-value engineering as a way to compete by creating incremental value-oriented product updates.  While these products may become short-term price leaders, they shift the company’s new product energy toward initiatives that are likely to be quickly copied by competition.

Microsoft gets NYC software deal, forced to unbundle apps

Microsoft’s move to unbundle applications doesn’t involve product innovation as much as a change in the value proposition. It is likely a short-term remedy for the Google’s Apps platform, which has a business model that inherently provides a lower price point.  The long-term challenge, according to Electronista, is Microsoft’s unbundling approach parallels one that “helped marginalize Corel/Novell WordPerfect.”

Both of these examples suggest that re-value engineering may be trading short-term gains for long-term advantage.  However, rejecting the re-value engineering prediction without considering the implications would be unwise.  This kind of “new economy” thinking could have significant impact on your margins, especially if your competition pushes to commoditize your category.  So, what should you be doing?

Economist and business consultant Kay Plantes argues in her blog, that rather than re-value engineering individual products, companies need to push toward changes in their overall business model…

“They need to decide upon a relevant, hard-to-copy value promise of the parent brand (e.g., Kraft) and/or build new corporation-wide advantages that increase customer value and provide advantage across all the business units and brands of the corporation.”  She suggests that companies should “step into their truly highest value role – innovating their corporation’s business model.  If they can’t, they better set out to dominate the design, manufacturing and distribution of store branded products.”

What do you see as the best way to optimize your brand value in the “new economy”?  Should you invest in Re-value Engineering?

1.     Re-Value Engineering – Companies will embrace the “new normal” by focusing on taking out less important features and lowering the price rather than adding value and cost into products

2.     Speed vs. Perfection – Companies will use social media channels to build less accurate but cheap/lightning fast research approaches that allow more instant decisions

3.     Rebirth of Experimentation – Companies won’t take large financial risks for big new product ideas and will instead trade off confidentiality for real in-market data and smaller scale launches

4.     Research Savings to the Bottom Line – Companies will spend significantly less on market research and expect more from business partnerships

5.     Research is marketing – Entirely new combined research and marketing platforms will be created using “opt-in” programs that link social media, web browsing, and phone apps to monitor and influence our entire purchase cycle.

And with these changes comes a whole new skill-set required by those of us involved in making decisions from research.  It isn’t about one piece of research to answer one question.  Or even about one decision at a time.  To succeed, decision makers need to hone their skills on synthesizing disparate information, telling a cohesive story given less definitive data, and taking a stand to act quickly rather than waiting for perfect information.

Over the next few weeks, I will be exploring several of these topics in greater depth and exploring the “so what” and “now what” of this changing business environment.  Which changes do you see as most important to your business?  Why?

Just like building a new product, building a research department really requires understanding the benefits that the company will derive from research. Three classes of benefits that research typically provides are:

1. Efficiency – Is the company under performing relative to their potential? Are they targeting the right customers or usage occasions?  How effective are their efforts to gain awareness, convert prospects to customers, or retain customers? Are their current channels effective?  What media and message gets them the most for their money?
2. ROI – Even if a company thinks they can identify growth opportunities, the devil is in the detail. If they want to maximize the return on investment, they need to know which of their great ideas to pursue. Which features and benefits should they build into their products? How much can they charge? How should they go to market?  How much volume/market share could they realistically obtain? What should they invest and what return can they expect?
3. Growth – Growing a business is about not just knowing your current customer, but identifying your future customer. Where is the market going? How are their customers needs changing? What “platforms” should the innovation team pursue? What are the big problems that if they solved, could double their business?

Figure out where there current “pain” is. What is keeping the CEO and leadership team up at night. Also, figure out what they think they know. Often companies are very close to their core customers. And, they have an expertise or strength the feel confident they can tap into. Convincing a company to build a research department means defining your turf and acknowledging your role. Focus on getting them to better informed decisions. Make sure you really explain how you will integrate with the team to build on what they know and who they are. If they think they know how to come up with great ideas, that is great! You can help them identify where to “dig”. Or you can help them optimize those ideas to maximize their ROI.

Also, don’t forget to ask them what experience they have had with research in the past. Most of my clients show me past research that is far from usable. Not because the research wasn’t executed well, but because the research company didn’t understand the clients business and couldn’t get them to “so what?” and “now what?”. Show them case studies that help them see how you can get them to decisions rather than insights. Show them by example that you work cross-functionally to understand the business question in depth and can fill in the knowledge gaps with complete answers that make the right decision clear.

Armed with a mutual vision for what research will accomplish,  help the team better define what their needs are.  From there, build a plan including research objectives, budgets, and how measures successful outcomes.  Ultimately, an effective research department is an internal “brand strategy consultant” with a strong research toolbox.  Whether you build a research department internally or use outside consultants to help build strategy, great research translated into great strategy can mean difference between profitable business growth and the slow deterioration of sales and profit.