Social media becomes product test ground; Companies trade focus groups for social media

March 14, 2014 12:35 pm

Companies trade focus groups for social media

By Hannah Kuchler in San Francisco and Neil Munshi in Chicago

Social media is replacing the clipboard, the focus group and the pencil-chewing designer, as companies listen in on consumers’ conversations in the hope of creating the products they really want.

Facebook, Twitter and Pinterest – as well as a whole host of community message boards – are being scoured for ideas for new products from cars to wine, in an attempt to cut product development costs and boost sales.

From Kraft Foods to carmaker Nissan, via French supermarket Groupe Casino and Australian clothes maker Lorna Jane, companies are getting excited about using social media for much more than marketing.

Michael Lazerow, chief marketing officer of Salesforce.com’s ExactTarget Marketing Cloud, which helps companies monitor customers on social media, said the challenge is turning ideas from hundreds of millions of sources into products on the shelves.

Nissan, for example, decided to use social media to create a buzz around its 370Z sports car. It waded through Facebook comments and wall posts to choose fans’ suggestions for a special, souped-up version of the vehicle, nicknamed ‘Project 370Z’, one of which was manufactured three months later.

The carmaker is now looking to repeat the trick with its Titan pickup truck. But sales of the 370Z have fallen about 15 per cent since the crowdsourcing effort.

Mr Lazerow says local businesses have always relied on instant customer feedback but global ones had struggled until social media. “All of a sudden the community, the town square, is global and connected,” he said.

“It is the end of the focus group as we know it,” he added. “The new focus group is collaborative, an always-on conversation between you and your customers.”

Businesses have embraced social media for marketing – sending profits at Facebook soaring – but are now looking for other ways to mine this large and ever-changing set of data. Analytics companies are plugging the fire hoses of every tweet or post ever made into sophisticated computer programmes to find what customers are looking for.

Each generation of new products and services developed by listening will be a lot sooner, quicker, faster

– Stuart Ogawa, Marketwired

More than half of the almost 300 global consumer product companies surveyed by EY said social media was changing the relationship between the manufacturer and the consumer. Respondents from companies with more than $1bn in revenues were even more likely to think social media is shifting control of brands to consumers.

A report by Kalypso, product development consultants, said companies using social media to create new products were cutting the length of the time it takes to get to market and cutting product development costs. Compared with products not designed using social media, they saw faster adoption rates among consumers, a 6 per cent higher market share on average and improved revenue from the products by 5 per cent.

Stuart Ogawa from Marketwired, a social media research firm, said decades ago companies could never have imagined the impact of feedback at this scale.

“I think each generation of new products and services developed by listening will be a lot sooner, quicker, faster,” he said.

But most companies are still experimenting with using social media in their product development, dipping their toes in with specific projects and competitions. Unilever held a competition for the next Cup a Soup flavour on Facebook, while General Mills removed high fructose corn syrup from its Yoplait yoghurt brand because of a social media post.

Tesco, the UK supermarket, ran an online competition last year for a social created wine using the hashtag “#tescosocialwine” and inviting wine bloggers and a random selection of social media followers to a tasting. Shiraz and Chardonnay varieties of the Enaleni’s Dream brand are now available.

Paul Banas, director of consumer insights and strategy at Kraft Foods, has become an evangelist for so-called “social listening”. In a blog, he describes listening for sources of “tension” in the conversation, problems consumers are having that could be solved by new products, be it feeding picky children or searching for snacks low in salt.

For those whose ideas are being borrowed, it could be good – they get the product they want – or bad, as they usually don’t share in the intellectual property. Edison Nation helps consumer and health companies run online competitions for ideas while ensuring the inventor shares in the proceeds.

Louis Foreman, chief executive of Edison Nation, which is also a US television show, warned sharing ideas on social media meant the clock started ticking for inventors to file for a patent.

He warned mining social networks for information may be good business for the company, but not the consumer inventor. “Bringing patented products to market can prevent others from selling it for a 20-year period – that’s the real value of intellectual property.”