Note: This is the second post covering takeaways from The Mixing Bowl’s June 20th conference on Food IT: Soil to Fork. The first post focused on Pantry Labs and the potential for smart refrigerator technology.
A particularly interesting afternoon session at the Food IT conference centered on the question, “How is IT being applied to the marketing and selling of food?” The panel addressed the full spectrum of steps required to bring a new food product to market: product conceptualization, formulation, customer testing, design, packaging, and scaling. Given the work I do for my day job (management consultant at Bain & Company), I have significant experience in the customer research step of the process and am therefore intrigued by opportunities to make the customer research step quicker (and cheaper) through the use of technology and shifting market dynamics.
The panel included:
- Mark Broduer, Global Head, Digital Marketing Innovation, Nestle S.A. – Major multinational food and beverage company headquartered in Switzerland
- Chris Cornyn, CEO, DINE Marketing – Food and beverage branding agency based in Foster City, CA
- Aihui Ong, Founder & CEO, Love With Food – Subscription direct-to-consumer discovery platform for natural and organic snacks
- Adam Sah, Co-Founder, Buyer’s Best Friend – Wholesaler of local and artisan food products
- Sunita de Tourreil, Founder, The Chocolate Garage – Palo Alto-based community space for artisan chocolate education, tastings, and sales
The Focus Group: The Traditional Tool for Customer Research
Chris Cornyn kicked off the panel by describing the value DINE Marketing can bring to the table. His premise? Nine out of ten new food products fail. The majority of these products fail – despite being heavily researched and tested – because they “get the insight wrong.” That is, they gather data on customer needs, wants, and desires, but fail to understand the true driving forces behind those needs.[i] According to Chris, a brand needs to understand not just the most explicit functional consumer needs (i.e., the need for sustenance) but also the nutritional, emotional, social, and cultural needs that drive purchase decisions. But how can a company best do that?
Until recently, the primary method for understanding customer needs was focus groups. Focus groups are a form of research in which a company recruits target customers, places ~5-10 of them in a room together with a trained facilitator (usually with a one-way mirror allowing for observation), and gathers qualitative data on the customers’ perceptions, attitudes, and beliefs towards a specific brand or product. In my day job, I’ve structured, organized, and attended focus groups for multiple CPG/restaurant brands. My main takeaways? They’re expensive, time-consuming to execute, and static (it’s a one-time shot to get the data you need; if you want dynamic reactions which evolve over time, you need to set up a series of focus groups, and with few scale-driven cost savings).
As an example of the costliness of focus groups, I conducted one set of six groups across three US cities at a total cost of ~$45,000[ii] – not necessarily a significant cost for the big brands out there, but certainly a barrier to entry for smaller CPG start-ups. Based on my experience, I was particularly interested when Mark Brodeur from Nestle claimed that, “The days of focus groups are over. Now it’s about leveraging social platforms.” So, what options do brands have for gathering consumer research without costly focus groups?
Radian6 and Bottlenose – Social Listening Tools
Social listening tools, or social media monitoring tools, allow a company to observe what’s being said about them, their brand, and their products in the social media world. This was the option Brodeur seemed most excited about, however he acknowledged the limitations to this approach: there is a massive amount of data out there on social platforms (Twitter, Facebook, etc.) but the challenge lies in synthesizing the data into actionable insights. When pushed for examples of specific companies meeting this need, Brodeur was at a loss. He cited the incumbent leading solution Radian6 (acquired by Salesforce.com in March 2011) and an audience member chimed in to recommend the smaller start-up Bottlenose, which emphasizes its ability to execute real-time trend analytics. (For a detailed discussion on the pros, cons, and alternatives to Radian6, check out this quora topic.)
DINE Marketing – iPhone Video Ethnography
As another alternative to focus groups, Cornyn shared a lower-tech solution that still relies on the qualitative reactions of consumers without the high price tag (I’m assuming). DINE Marketing conducted a study on behalf of a powdered mashed potato brand using crowd-sourced iPhone videos. Participants were asked to answer a series of questions via video about their favorite powdered mashed potato product (e.g., What do you like/dislike about the packaging? How do you store the product?). These videos revealed a serious flaw in current packaging (hard to open, impossible to seal once opened) that allowed DINE to innovate and create something much better. The relative lower cost of this path depends on what a company like DINE charges to gather the data, but it certainly seems easier than executing focus groups (although you do lose the benefit of a group dynamic, which allows participants to build upon one another’s’ ideas).
For brands, an attractive alternative to hiring consultants and marketers to conduct research is to get in touch with the customer directly. That’s a challenging task given that many consumers don’t see the value in filling out surveys for brands (and those that do are likely not a representative cross-section of a brand’s customers). However, one food startup is making that connection much easier: Love With Food curates monthly boxes of natural and organic snacks and ships them, for $10 per box, directly to consumers around the country. Customers get to discover new and unique products each month, and also receive a handful of coupons and discounts for purchasing more of the featured snacks.
The value proposition on the brand side is perhaps even stronger: brands get to introduce their product to a sizeable group of new customers nationwide (Love With Food boasts customers across all 50 states) and, even better, receive valuable marketing data based on customer feedback and follow-on sales. Customers are incentivized via a point system to log-in and review the specific products they received. Customers can then redeem points in the online store to buy more of the products from the boxes. The feedback and sales data are packaged for brands in a marketing report. Founder and CEO Aihui Ong elaborates on the value of customer data to brands, “Most brands are very interested on how attractive and easy-to-open their packaging is.” Brands also test new product concepts, explains Ong, “One brand in particular, Little Red Dot Kitchen (maker of Asian BBQ jerky), used the survey to find out what new flavors customers are open to trying. This company took the data collected and developed a new flavor offering with very little time and money spent on R&D.”
By building a relationship directly with the customer, Love With Food is creating a platform with massive potential. They’ve garnered a ton of press coverage and continue to grow rapidly. The company announced a seed funding round of $1.4M this June. Ong states that Love With Food will use the funds to, “expedite growth, expand the team, and launch new product offerings like a gluten-free option.”
Beyond making it easier for smaller food companies to gather customer research, Love With Food is focusing on another mission: alleviating hunger. For each box shipped or product purchased, Love With Food donates a meal to a food bank in the US. To date, they’ve donated over 250,000 meals. Good luck Love With Food!
In sum, there are multiple exciting options out there which provide alternatives to the traditional focus group model. Social media generates a nearly infinite amount of data, smart phones allow for quick and easy video interviews, and new platforms like Love With Food are offering companies an unprecedented opportunity to connect directly with potential customers. I’m not sure if I’d join Brodeur in saying that, “the days of the focus group are over,” but it certainly seems like we’re headed in that direction. I’ll have to tell my clients that the next time I’m commissioned to conduct focus groups…
[i] One excellent example of the failure to understand people’s needs comes from my time at the Stanford Design School (d.school), which employs an empathy-driven design process. We were told a story about women in the developing world who spent laborious hours every day using stones to crush nuts into a fine meal. Western visitors to the community brought in a machine that crushed the nuts for them in a fraction of the time. Once the machine was in use, the visitors discovered that the women were miserable. The time-intensive process for crushing nuts had provided those women with ample time to sit with each other so they could talk and bond. The “laborious” act was at the center of an entrenched social ritual. By bringing in the machine, the visitors had “missed the point” entirely.
[ii] For those who are curious, here’s a bit more detail on the economics of focus groups (rough estimates based on one set of focus groups I conducted, encompassing six groups across three US cities). The predominant costs are as follows:
- Moderator: (~$10,000) A company typically hires a third-party trained facilitator with extensive experience leading groups (though larger CPG companies may have these people in-house). The moderator advises throughout the set-up of the groups (e.g., recruiting strategy and criteria, discussion guide) and is the point person shepherding customers through the desired topics.
- Facility fees: (~$5,000 per facility) Across the country, there are hundreds of facilities designed to host focus groups (here’s one example). They charge a stiff fee for the use of one of their rooms, complete with one-way mirror and recording capabilities. Typically the fee includes the labor cost of participant recruitment (facilities often have their own database of locals they can tap based on specific needs), as well as a hefty overhead fee for junk food snacks and catering
- Recruiting incentives: (~$175 per recruit) This covers the cost of incentives for potential focus group participants. In terms of number of recruits, we always over-recruit in case there are no-shows and to allow us to whittle down the group to the best possible fits based on assigned homework the recruits submit
- Travel expenses: (~$3,000-4,000 per attendee) For team and moderator, billed at cost (hotels, meals, flights)