TAKING SOCIAL TO THE SHELF The power of social media in the consumer packaged goods industry

David McCarty is IBM’s portfolio director for Consumer Products Industry Solutions. In this role, he is responsible for IBM’s Consumer Products strategy for developing and deploying solutions to solve industry-specific issues. McCarty has nearly 25 years of experience in consulting and implementing technology solutions in new product development, trade promotions, and supply chain management.

Compass: What opportunities do you believe social media offers to today’s consumer packaged goods (CPG) companies?

D. MCCARTY: A recent IBM study of more than 1,700 chief marketing officers (CMOs) reveals that most CMOs feel underprepared to manage the impact of key changes in the marketing arena. While 82% say they plan to increase their use of social media over the next three to five years, only 26% are currently tracking blogs to shape their marketing strategies. But even at this early stage of development, a leading industry analyst estimates, companies can cut their market intelligence spend by 20% to 40% and reduce traditional advertising costs by 40% to 60% using social media-based methods. The CPG industry is definitely in a transformational period with the rise of the “empowered consumer.”

Social, mobile and localization technologies are providing consumer products manufacturers with an unparalleled opportunity to create a relevant, direct connection with their consumers. Social technologies are an effective way to reach consumers and maintain contact for marketing and brand engagement, as well as for fostering 1:1 engagement.

We read a lot about CPG companies shifting marketing dollars from traditional advertising to digital. For example, P&G announced earlier this year that it plans to cut $1 billion from its marketing budget by 2016, in large part by leaning more heavily on lower-cost digital marketing.

But while we hear a lot about social media in relation to marketing, there doesn’t seem to really be quite the same level of discussion around new product development (NPD). There are some really good use cases out there, though. Social media technologies can help companies gather critical insights that can be used in product development, and consumer product companies definitely need to utilize social as an efficient input into NPD. Social media offers a way for companies to generate new ideas and innovations from the ground up. IBM’s 2012 CEO study found that a majority of CEOs were interested in building open and collaborative work environments.

What can innovative companies do in this arena?

D.M.: The NPD process certainly provides a very compelling opportunity to drive improvements. It’s a very interesting area, given the many challenges to be successful in the marketplace for new products. Social media can provide a means to better understand the needs of consumers, to quickly get a heads-up on untapped needs, to identify up-and-coming markets and category segments, and to test ideas in a rapid and cost-effective manner. Using social media in new product development can also help companies reduce time to market and the cost to develop new products.

How are companies using social media to develop more relevant products?

D.M.: Vitamin Water is a good example. Its flavor “Connect” was developed by the company’s Facebook fanbase. More than 2 million Vitamin Water Facebook fans participated in the online contest, and one Facebook fan reaped $5,000 for her role in the process. The competition asked fans to develop all aspects of the product, from selecting the flavor to designing the packing and naming the product.

82%

of CMOs say they plan to increase their use of social media over the next three to five years.

IBM study

You mentioned using social media to help reduce the time to market and/or cost to develop new products. Do you know of any CPG companies that have tried it?

D.M.: Industry studies have stated that engaging directly with consumers on social platforms to observe what they say about products and features can cost as little as one-fifth as much as conventional research using focus groups or surveys. There are some great examples in the public domain of how companies can use input from social technology to test product ideas, generate ideas externally through crowdsourcing, and bring them to market faster. One good one comes from Kraft. The company formed an online community that included 150 opinion leaders in health and nutrition, along with 150 consumers struggling with weight loss. While observing online conversations, Kraft found women had trouble maintaining their diets throughout the day and wanted packaged foods that conformed to their diet’s requirements for meals and snacks around the clock. As a result, the South Beach line of products was developed in 16 months, a significantly shorter time than for traditional development.

What should companies interested in using social media do?

D.M.: CPG companies interested in social media shouldn’t be afraid to experiment or think outside the box. Conferences can provide insight on best practices. Over time, however, companies will eventually need to develop an enterprise-level approach as social media becomes the mainstream.

by Lisa Roner Back to top
by Lisa Roner