Ep. 61 – Why Your Business Strategist Should Work With Real Consumer Data

JANUARY 1, 2022

Welcome to episode 61, Why Your Business Strategist Should Work With Consumer Data. So if you’ve been networking in the CPG sector at all, it should be apparent that the US is oversupplied with advisors and experts and mentors of varying kinds and of wildly varying competency, many of whom will advise you for free, or as mentors inside the burgeoning ecosystem of accelerators if you can get accepted by them.

Look, most of these mentors are well-intentioned folks and they’re very willing to advise you on growth strategy per their knowledge and specialization. And those that do this in my experience tend to have marketing or sales backgrounds. Some are even working right now at big public firms. Yet I would venture to say of the available folks willing to advise you and your business on growth strategy, very, very few will work with any consumer data before they give you advice.

This is true, even if you provide it to them in a formal paid engagement, but mostly it’s because strategy advice tends to come in free or informal mentoring form, which let’s be real, does not permit the time to dive into this material. A majority of these well-intentioned folks, I hate to say, I wouldn’t know what to do with this data, even if they had it, not the sales consultant guy, not a buyer, not a broker, not even most designers who work primarily with early-stage brands.

Historically, CPG startups have had no real burning need for consumer data. All the executional touchpoints were done by more or less gut instinct or educated guesses. And most founders have historically managed their CPG startups as B2B businesses, anyways. Let’s be honest. Prior to the onslaught of direct-to-consumer sales on Amazon. And the retailer stands in the way between the brand and the consumer, historically in CPG, making it a pain in the butt to get consumer feedback of any kind. And then there’s the issue of, oh dear, founder narcissism, which hasn’t changed that much and can prevent some folks from hearing anything other than “We love you.”

I’ve waited a long time to bring up the topic of using consumer research here on this podcast. But I’m done waiting because I see too many folks avoiding it in a market where a huge competitive advantage will be handed to your equally small peer who actually knows how to go get it and use it. 

Advanced early-stage brands in phases three and four, now generally have internal folks who work with varying consumer data. That doesn’t mean they know how to interpret it well, but they generally tend to obtain it. However, this is not always the most strategically valuable consumer data. Too much of it fits into the validate my tactic genre of consumer research, which is really as old as the discipline itself.

And even when there is consumer research conducted, in my experience, founders rarely go out and study their fans in an open-ended exercise. Most of the time consumer research in early-stage brand-building efforts is operating at a startlingly primitive level compared to the top CPG companies in the world. I’ll explain what I mean here in a bit.

Prior to the internet, it was very expensive for a CPG brand to contact its own consumers, big or small. You had to find a research company that was able to actually go and recruit, by phone, their consumers. And a small brand’s consumers literally just can’t be found through any of these old school databases in recruiting panel techniques. Before email, the only way to meet your fans was at store demos or at events, both of which are really bad fora to obtain objective and deep feedback on attitudes and usage related to your product line.

So consumer research has historically been treated as an unrealistic luxury for CPG startups and younger early-stage brands. Fast forward to 2021, folks, and we have now most brands developing serious sized email lists right from the start, accruing if they’re exciting, thousands of followers on social platforms who can all be pinged and polled and not to mention the real-time purchase data from brands’ DTC channel sales on their website.

So now I hate to say it, but you have no bloody excuse at all not to collect basic information from your consumers, especially from your fans. It is neither expensive nor time-consuming to do it any more folks. And consumer intel has so many different uses, not even covered in my book and not even related to formulating your competitive strategy, which is what I do with clients. So many uses, in fact, I probably can’t even list them all in this episode. And I’m not going to try.

But first, some history in the murky world of consumer research. So just to be clear, in this episode, I’m deliberately ignoring cash register scanner data on sales and panel data on how also a level purchasing dynamics such as purchase volume, basket contents, purchase cycle, yada, yada, yada, yada, BigCo.

 I’m talking about data that goes deeper than the bloody cash register, data on consumer attitudes and consumption behavior related to your brand specifically. But also while you’re at it to the category more broadly in which you’re competing for their money.

Most consumer research in the CPG sector has been initially ordered by the marketing folks to assist in advertising decisions. How? Generally speaking to validate messaging or to vote on various ad reels and cast the final vote. Yawn. In other words, the consumer has historically been used as the political fall guy in a lot of consumer research, especially at big companies that are big on advertising. “Why did your ad fail to grow sales, Lisa.” “No idea, Hector. The consumer said they loved it in the focus groups. Dumb consumer.” 

As if there was an incompetent executive named Mrs. Consumer who had sat in some marketing strategy meeting and nodded. Come on.

The same goes for traditional research to support new product launches. “Hey consumer, which of our awesome ideas do you like the most?” Nielsen has a multimillion-dollar revenue, misforecasting launches and launches performance all the time.” Please don’t sue me. Yet everyone still buys these forecasts. Do you know why? They need a political fall guy, the consumer.

All this shit data, pardon me, not, is not the consumer information that you need as a practical founder, trying to optimize your exponential growth and ride the Skate Ramp. This is bureaucratic horseshit. 

Consumers are not political tools for your internal decision-making. They are not marionettes. And if that, honestly, is your view of business strategy as a scrappy little CPG startup, then please don’t contact me or my company because I have no interest in helping you. In fact, I want you to fail really badly. What you need is an honest relationship with your fans who will hand you your strategy if you listen to them. What you need is scientific evidence that helps you understand why your innovation matters to the people who make you the most money.

From this, you then need to filter out a symbolic argument and attribute an outcome signal that will make it rapidly intuitively appealing to at least 10% to 20% of American households, perhaps less if you’re super niche, even at a price premium. That’s the magic of skate Ramp Brands, folks. It’s built on unlikely, intense consumer enthusiasm.

Consumer research will tell you, A, if this is happening and more importantly, why it is happening and who is converting. A deep behavioral understanding of your consumer, though it’s a rare activity in big companies, is something that public firms in CPG actually do pretty frequently for their core businesses, even though it’s a tiny part of their research budgets. It’s basically not part of any budget I’ve seen in the vast majority of early-stage brands I encounter. They may have a line item for Spins data, but that’s about it with one exception, “Oh, we’re going to redo the package. So let’s get some fan insights. So let’s get consumer research.” That’s a pretty progressive thing that I’m seeing among very few folks.

I just don’t understand this issue in 2021, but it’s still going on. No, I’m not talking about why there’s no consumer research budget. The fact that it’s not even a budgetary item on the P&L being discussed blows me away completely. The what, why, and who questions that a social scientist like me would ask of your fans are really not hard or weird at all, folks. This is not like learning Greek. Most of those questions and lines of questioning require no more than a middle school command of any native language, which was the extent of my fluency in Tamil when I did interviews 20 years ago in Southern India. I think, I think it’s actually just the words “research” and “survey” that just seem to terrify folks who get into entrepreneurship in CPG for reasons I’ll never quite know. And if I’m right, then let’s just switch it up a bit, folks.

Look, this is about hanging out and listening to your fans, people who love you. I’m not asking for you to take on the haters. That’s a big boy and girl, thick-skin activity that big companies do. Surely it’s called rejector research. People do it all the time. How many of those rejectors can I convert now with my new product which sucks as much as the last one, sorry!

Surely that can’t be hard, folks, to get you to listen to your fans. No, on the contrary, I know from my own client work that it’s supremely f_ing motivating to talk to your fans. All four of you pounding and grinding away on your business, wondering if anybody’s listening, Bueller? Bueller? Bueller? Yes, this is why you get involved in your fan research. Number one is that it will jazz you up while you are learning critical things like the what, the why, and the who behind your fans.

And I’ve seen this happen in my own work because when you hire me and most of you won’t, when you hire me, I will force you to do the qualitative phone interviews on my behalf as part of our planning work. Yes, that’s right. My clients pay me to turn around and tell them to do a whole bunch of work so that I can then help them. It’s a thing. It’s what I do. It’s also why I’m 25% the cost of a major consulting firm like L.E.K. who’ll do it all for you. Oh, those darlings of private equity.

The cost of consumer understanding is really not a lot of money, folks, even when you hire me. It’s the cost of having an attitude of curiosity, of empathy, of acceptance that only consumers build brands, not owners. And if that’s true, you might want to talk to them because they may have a clue that you need to optimize what you’re doing. And that could be something as dramatic as, what the fuck are you doing in the center store, Aisle 12? You should be in the perimeter in a chilled case. Oops.

Literally though, jokes aside, it’s the cost of a survey monkey or pollfish account. This is not that much money, folks. Coupons are free products to use as incentives for your qualitative phone interviews and your survey completion and possibly some social media ad fees to top post your survey link among followers, to make your consultant happy or yourself. And the rest is just time. Literally, it’s a couple grand to execute what I’m talking about.

So for God’s sakes, put it in your P&L and do it, do it for yourself. I put a course together. Yes, I’m selling and I’m not going to apologize, I put a course on my website. It’s my most popular course, six hours of training on how to do the phone interviews and how to do a five-minute attitude-and-usage survey that will blow your Board’s mind because it was so simple and elegant and useful. All of this will help you optimize your package design, locate your key attribute-outcome signal, which is going to help you figure out what the hell to put on the package. But more importantly, refine your competitive strategy so you know who the hell you’re actually competing against in your category and outside your category. Rather important.

And it helps you prove to retailers, those fan insights that you actually seem to be deadly serious about activating your business outside of the store and are going to push people into their stores. And it also is going to help you figure out which retailers your shoppers are already shopping for your category at so that you can literally line up who you need to be approaching and hand them the data?

Hundreds of companies limp along selling wholesale with no real fan behavior at all, selling to tiny chunks of first time triers again and again for years and years, in-and-out of Costco, playing sales whac-a-mole to keep their business stagnant. The stagnation is reframed as success merely because multiple years of persistence have been achieved.

I think it’s sad. And good God knows if you’re listening to this podcast, do not accept this situation ever. No, no, no, no, no, no. “Wait James, look, I understand what you’re saying, man. But like I have time to play anthropologists among my fans. I’m chasing brokers, buyers, suppliers, accountants. What the hell, man? You’ve just added another task to my plate. Oh, and your fee includes me doing more work for you. Come on.”

Look, my point in this episode is that you may not have time for it, and I don’t give a shit. You better make time for it if you want to obtain the kind of added competitive advantage that your overfunded arrogant peer won’t have because they’re playing the B2B game. They’ll just declare their little baby a winner from the beginning, shove it into the market, steal a bunch of shelf space, drive you batshit crazy. And basically, well, you know this from my book, they’re going to disappear, the chance of attaining scale and surviving as you do it. When you do the shove fire hose approach, you’re basically no better than a cointoss. Is that how you want to run your business? If so, have fun with that.

Look, I’m going to close by reiterating one thing. There is no budgetary reason you can’t learn some strategic insights from your fans. I just gave you the budget. Insights I insist will optimize your package design, consumer receptivity in marketing and messaging, the quality of your trial, the placement in retail, and the overall velocity growth trend of your business.

Anyone mentoring you on your long-term growth strategy really should have the kind of consumer research on your fans that I’ve described to align your strategy with the actual consumers making your business profitable. And you don’t have to hire anybody to do it. You can DIY it with the course on my website. Go to www.premiumgrowthsolutions.com/webinars. It’s the first one. So get out there in 2022, meet your fans and learn what they know about how to scale your business. They love you and they’re waiting.