Dec 14

Innovation Machine P&G: 1 Billion $ for Consumer Insights

How much is it worth to you understanding your customers? One billion US$ ? The innovation machine P&G responds to this question with a resounding “yes”. Since 2001 P&G has been investing more than one billion US$ in a better customer understanding and in improved consumer insights.

Insufficient customer understanding and lacking customer insights continue to be quoted by the companies´ top managers as key barriers on the road to more successful innovations. I often observe that an unexplainable lethargy which tries to avoid the “exposure” to the customers settles in in the course of the innovation process. That is why one of the main tasks of management consists in always requesting new market input from the innovation teams. P&G´s CEO A.G. Lafley has coined a simple and strong message for that: „Consumer is boss“.

The objective ist to get the true opinion of the customers. The closer we get to the customers, the better it is. In doing this, methods of consumer interviewing are increasingly complemented or replaced by methods of consumer observation (also called ethnographic methods). The “tree of truths” indicates the methods of qualitative market research that get us closer to the true opinion of the customers as we progress from the top to the bottom of the tree:

The “Tree of Truths” for the discovery of the customers´ true opinions

(Source: Wentz, RC.: Die Innovationsmaschine. Springer Berlin-Heidelberg 2007)

When Lafley took the helm as P&G´s CEO at the beginning of this decade he and his team came to the conclusion that P&G did not have sufficient competitive advantage in the five areas that are critical to winning in consumer products: consumer understanding, innovation management, brand-building, go-to-market capability, and scale. That is why since 2001 P&G has invested more than a billion US$ in consumer understanding. Today Lafley calls P&G a “powerhouse” in consumer understanding. External benchmarking is said to confirm: P&G has its industry´s strongest suite of proprietary consumer research tools and methodologies.They enable P&G to learn faster and more effectively, and, above all, to discover the unarticulated needs and aspirations of the consumers which lead to breakthrough innovations. What exactly is the secret of P&G´s proprietary market research tools and methods?

In general, the top innovator Procter & Gamble has dramatically expanded its market research arsenal in two directions over the last few years:

  • Methods of customer observation (ethnography). Here Procter has significantly refined its instruments, not the least thanks to the support by external consulting firms such as IDEO which has been emphasizing consumer observation as a market research method for a long time („Innovation begins within an eye“). Examples of P&G innovations that were developed through observational methods are Mr. Clean MagicReach and Swiffer CarpetFlick.
  • Online research. Already in 2001 P&G conducted 50% of its US consumer surveys online. The main benefits that P&G realizes hereby: 75% faster consumer feedback at half the cost of conventional methods.

Oftentimes P&G combines both methods.

In 2001 P&G acquired a stake in the start-up company Market Tools in order to gain access to Market Tools´ proprietary market research methods. Via Market Tools P&G can listen to the consumers online, can observe them online, and can interact with them online. For this, Market Tools offers its customers an online text analysis, online communities, and online surveys.

Market Tools conducts its text analysis internet-wide. In order to understand what is important for the target group, Market Tools analyzes the contents of 50 million blogs, message boards, and other web sites. Market Tools also offers its customers the service of building and maintaining for them proprietary communities or online communities that companies share with each other. These panels are composed by Market Tools in accordance with target group criteria provided by Market Tools´ customers. P&G can “eavesdrop” on these communities, can communicate with them, and can take polls on selected topics. Market Tools also enables P&G to collect feedback from the consumers on innovative concepts, and to instantaneously improve these concepts accordingly. Finally, Procter can directly query the panel by means of questionnaires for purposes of quantitative market research.

In the meantime P&G has emancipated itself to a considerable extent from the external service providers, and has developed proprietary market research tools of its own.

Tremor is one example of such a proprietary market research instrument for purposes of improved consumer understanding and innovation management. P&G founded Tremor (tremor.com) in 2001 for a dual purpose: as a means of word-of-mouth advertising, and as an innovative market research tool. Through a proprietary process, Tremor recruits so called “connectors” based on eight character traits from amongst the target group of 13 to 19 year old teenagers. “Connectors” are young people with an extensive social network and a propensity for sharing new ideas. Today 250.000 “connectors” belong to the Tremor panel in the USA. These teenagers regularly receive newsletters about innovations and samples to try out new products. Tremor of course hopes that the “connectors” speak out for the innovations in their social networks. P&G observes the behaviour of the “connectors”, deduces relevant consumer insights from it, and draws conclusions for the innovations that it intends to introduce. Furthermore, it collects the rich e-mail feedback which it receives from the youngsters, condenses it into actionable consumer insights, and evaluates them for its innovation management. In the meantime P&G has started to offer the Tremor service also to external customers. Companies such as Kelloggs have already used it successfully.

At the end of 2005 P&G has complemented Tremor by a similar panel called Vocalpoint for mothers with children. Vocalpoint works in a fashion analogous to Tremor. It recruits mothers that possess a strong network and that are very communicative. Today 450.000 “connectors” belong to the Vocalpoint panel in the USA.

Apart from the word-of-mouth tools Tremor and Vocalpoint, P&G maintains various web sites as communication platforms whose discussions it can tap into and from which it can derive important consumer insights for its innovation management. Examples of these web sites are the girls web site beinggirl.com or capessa.com, a website for women which is produced by P&G for Yahoo´s health section. Similar to big focus group discussions, the innovation machine Procter monitors the online discussions and tries to better understand what the consumers in these target groups like or dislike, and what is really important for them in the various stages of their lives.

(c) Rolf-Christian Wentz