Getting Tactical With Tech and Data in Consumer-First Product Development
The notion of consumer-first product development is not new, but technologies like generative AI are scaling personalization efforts and bringing innovative products to market faster — and with the user experience in mind.
Nearly half of consumers (47%) increase their spending with companies that deliver a better experience than their competitors, according to a recent consumer insights survey.
“Today, consumers have abundant choices, and their readiness to switch brands when dissatisfied is exerting immense pressure on CPGs,’’ Nadira Kalliecharan, a managing director at EY, tells CGT. “Prioritizing customer-centricity and delivering products that truly delight customers where they are is the priority.”
Some 88% of CPG executives said it’s more difficult to stay relevant to customers today than it’s ever been, due to speed-to-market issues, according to a recent AI survey from Accenture.
Also, half of CPG executives acknowledged their companies struggle with discovering and testing new products, services, or business model concepts today compared to three years ago.
Change begins with deeper scrutiny of product development — no easy task. CPGs are recalibrating product development to be even more consumer-centric.
Using AI/ML in Personalization
Instead of face-to-face testing in focus groups, CPGs have been using smoke testing: taking a broad concept and putting a representation of it on social media to gauge consumer interest by looking at click-through rates, notes Oliver Wright, a senior managing director and the global lead for consumer goods and services at Accenture.
This unstructured data from social media traffic and customer email interactions is harder to convert into demand signals. With GenAI, companies can do that and create large language models to draw information in and create a picture of their customers.
Another technique that’s growing in popularity and expediting speed to market is grouping synthetic data from dummy consumers that replicate the buying characteristics of real consumers, a process that’s gone down from two years, to two to three weeks, to just a few hours.
“What we can then do is run a query against that set of synthetic consumers to see what is the likely interest in a product or an idea or the likely reaction to an ad on a website,” says Wright.
Efficient product idea testing is a key roadblock in the CPG industry. Half of surveyed executives in an Accenture survey said they are having difficulty effectively discovering and testing new products or business models.
A Case Study in Data-Powered Systems
General Mills is tackling the issue head-on. In a February investors presentation, the company said their team of data scientists has increased 40-fold since 2018, and they have gone from running 2,000 models per month to running more than six million models that generate more than 500 million individual predictions every month.
CEO Jeff Harmening said the company uses data-driven marketing within its Nature Valley brand to get more targeted and rapidly create, deliver, and iterate value-oriented messaging to test what resonates best with consumers.
“Based on this message testing, we can deliver optimized incentives to drive purchases of Nature Valley products,” he explained
As a result, General Mills has seen a high single-digit lift in advertising effectiveness for Nature Valley and expanded this strategy for nearly 70% of Nature Valley spending.
The company has also deepened personalization and engagement on sites including BettyCrocker.com, Pillsbury.com, Good Rewards, and Box Tops for Education, interacting with more than 16 million consumers every month.
CPGs are modernizing product development with AI for greater customer centricity and expanding A/B testing and ML-driven analysis to streamline product iteration, said Kalliecharan. “[They are] utilizing AI for precise customer understanding with more granular audience segmentation, shopping, and purchasing behavior analysis that accelerates product development and optimizes forecasting and how products are sold."
- Sustainability and Ethical Considerations
Sustainability and ethical sourcing and production are becoming increasingly important to consumers. About 14% of U.S. consumers are active green consumers, according to Forrester’s 2024 Green Consumer Segmentation.
Thomas Husson, VP and principal analyst at Forrester, noted he's seeing more CGP brands integrate sustainability into product design to meet the needs of these consumers and rethink the value chain. As part of this, B2C marketers at CPG brands would be wise to orchestrate product innovation with sustainability, R&D, design, and procurement teams, and he pointed to such brands as Decathlon, Groupe SEB, and IKEA for inspiration.
How Legacy CPGs Can Stay Competitive
AI implementation aside, brands must also change their operating models to become more agile. This might mean borrowing tactics from other companies.
“Consumer centricity demands an ability to work cross-functionally and take calculated risks to systematically and rapidly test and pivot new solutions — skills [that] come naturally to most insurgent businesses,’’ according to Bain & Company.
Compared with insurgent brands, large CPGs face the challenge of ambidexterity when looking to engage with consumers at a more granular level, per the firm. "They must continue to operate traditional business models, grounded in mass brand reach and broad physical availability, while simultaneously building new consumer-centric capabilities at scale.”
Colgate is one CPG that demonstrated a consumer-centric approach focused on millennials when it launched its Hum smart electric toothbrush. Millennials were not typically targeted as the ideal demographic for other electric toothbrushes, but as they frequently use digital platforms, Colgate saw them as the logical choice.
Aviva Buivid, manager of digital design at Colgate said the toothbrush comes with an app designed to facilitate ongoing relationships with people; something that isn’t possible with strictly physical products.
The Challenges and Benefits of Expedited Iteration
To develop faster iteration processes and expedite speed to market, CPGs must reinvent their entire research and development process, says Wright.
In the past, product managers had to go through a lot of different sources to coalesce data for better consumer understanding — such as competitive research, their own research, and digging through press clippings — to put together an analysis of what’s going on in the market, adds Tony Plec, a principal analyst at Forrester.
As that information is brought into tools like generative AI, this will enable product managers to get deeper analysis on whatever they are researching, and faster, so the process of building products will get better, and become more and more streamlined. Plec says.
The downside is that with GenAI, for example, tools can hallucinate and misread consumer data in the early stages of product development. Prototypes must be closely monitored and tested to ensure nothing inappropriate is brought to market, Wright says, noting that companies are becoming wise to the risk of errors and putting safeguards in place.
- Strategies for enhanced consumer-focused product development from EY’s Kalliecharan:
- Shift focus from a project to product orientation to center on maximizing customer value
- Establish a robust data fabric to fuel innovation
- Implement usage-based feedback programs like social media listening, early access, and loyalty initiatives that provide usage and performance-based intelligence that feed product optimization and improve forecasting.
Technology To Transform Product Development
Technology continues to evolve at near-lighting speed, and CPGs must evolve to remain competitive.
“The modernization race is on, with today's available tools presenting companies with unprecedented opportunities to innovate and disrupt product development,’’ Kalliecharan said, adding that the challenge is in activating this change within organizations stuck in old ways of working.
