NYT: Social Media Act as a Guide For Marketers

The below article in the new York Times advertising section this week is timely and in line with what we learned the past two weeks about social media. Notably, it shows how social media allows marketers to quickly and cost-effectively segment their advertising—for example, narrowing taste/flavor preferences down by parts of the country or state. The Frito-Lay social media example also is a good example of how the brand is asking for consumer input also making it very quick and easy for consumers to give such input to ensure they will participate. While social media can tell marketers exactly what their customers are interested in and bring together smaller sub-groups that may not live near each other, companies will still have to determine if the niche has enough people/power to make an impact on the brand. Finally, as we learned in class, marketers are keen to use social media to gather a wealth of customer demographic data not easily or affordably gathered on other media mediums.

Social Media Act as a Guide For Marketers
by Stephanie Clifford
The New York Times*
July 31, 2012

Frito-Lay is developing a new potato chip flavor, which, in the old days, would have involved a series of focus groups, research and trend analysis.

Now, it uses Facebook.

Visitors to the new Lay's Facebook app are asked to suggest new flavors and click an ''I'd Eat That'' button to register their preferences. So far, the results show that a beer-battered onion-ring flavor is popular in California and Ohio, while a churros flavor is a hit in New York.

''It's a new way of getting consumer research,'' said Ann Mukherjee, chief marketing officer of Frito-Lay North America. ''We're going to get a ton of new ideas.''

While consumers may think of social media sites like Facebook, Twitter and Foursquare as places to post musings and interact with friends, companies like Wal-Mart and Samuel Adams are turning them into extensions of market research departments. And companies are just beginning to figure out how to use the enormous amount of information available.

When Wal-Mart wanted to know whether to stock lollipop-shaped cake makers in its stores, it studied Twitter chatter. Estee Lauder's MAC Cosmetics brand asked social media users to vote on which discontinued shades to bring back. The stuffed-animal brand Squishable solicited Facebook feedback before settling on the final version of a new toy. And Samuel Adams asked users to vote on yeast, hops, color and other qualities to create a crowdsourced beer, an American red ale called B'Austin Ale that got rave reviews.

''It tells us exactly what customers are interested in,'' said Elizabeth Francis, chief marketing officer of the Gilt Groupe. Gilt asks customers to vote on which products to include in a sale, and sets up Facebook chats between engineers and customers to help refine products. ''It's amazing that we can get that kind of real feedback, as opposed to speculating,'' Ms. Francis said.

Wal-Mart acquired the social media company Kosmix last year for an estimated $300 million, chiefly because of Kosmix's ability to extract trends from social media conversations.

The unit, now called @WalmartLabs, looks at Twitter posts, public Facebook posts and search terms on Walmart.com, among other cues, to help Wal-Mart refine what it sells. Its technology can identify the context of words, distinguishing ''Salt,'' the Angelina Jolie movie, from salt, the seasoning, for example. It sets baselines for what a normal level of buzz around, say, electronics or toys is, so it can measure when interest is getting high. It also analyzes sentiment, because if people overwhelmingly dislike a new video game, ordering pallets of the game is not a great bet.

''There's mountains and mountains of data being created in social media,'' said Ravi Raj, vice president for products for @WalmartLabs, adding that the company used the data to decide what merchandise to carry where.

In one of its first analyses, performed last summer, @WalmartLabs found that cake pops -- small bites of cake on lollipop sticks -- were becoming popular. ''Starbucks had just started getting them in their cafes, and people were talking a lot about it,'' Mr. Raj said.

His team alerted merchants at Wal-Mart headquarters. The merchants had also heard about the product, and decided to carry cake-pop makers in Walmart stores. They were popular enough that the company plans to bring them back this holiday season.

More recently, @WalmartLabs found that enthusiasm for ''The Avengers'' and ''The Dark Knight Rises'' was surging before the movies were released, and suggested that stores increase their orders of related merchandise. And after Walmart started carrying a spicy chip called Takis, @WalmartLabs found that most of the positive chatter about it was coming from California and the Southwest.

The merchants, judging that they could sell additional products in those states, commissioned a similar spicy chip from Walmart's private-label brand and hurried to introduce another, called Dinamita, from Doritos. Walmart began selling both lines in California and the Southwest earlier this year, and is now adding them to other stores.

For Frito-Lay, seeking product ideas on Facebook, via the Lay's Do Us a Flavor app, has a few advantages.

Once the company sees what is popular and where, it can tailor its products to specific areas of the country. While Frito-Lay will produce three of the flavors from its contest and give a $1 million prize to the creator of one of those flavors, Ms. Mukherjee said the company would also study other suggestions. ''This is a real competitive edge for us,'' she said.

Frito-Lay has already run the contest overseas, resulting in chip flavors like hot and spicy crab in Thailand and pickled cucumber in Serbia.

The social media approach also attracts younger customers. People who sign up for focus groups or consumer panels are generally not young fad followers, but Facebook users often are, so adding social media to the mix lets Frito-Lay get a wide range of consumer feedback.

Kohl's, which started asking its Facebook fans in July to pick products for inclusion in sales, said those fans were more heavily represented than its overall customer base in the 18-to-24 demographic.

Marketers are trying to find a balance between privacy concerns and the rich data available online. Mr. Raj said Wal-Mart analyzed only Facebook posts that users made public. On the other hand, apps like Frito-Lay's require access to a user's location, gender, birthday, photos, list of friends and status updates; the products for which he or she has clicked ''like''; and more.

For the most part, when someone uses a brand's Facebook app, the brand can obtain a range of personal information, said Mark LaRow, senior vice president for products at the software company MicroStrategy. MicroStrategy has built its own app, Wisdom Network, that can gain access to about 13 million private Facebook profiles once a user gives it permission.

The app gathers information about users and their friends. Marketers might use the data to see what current or potential customers do and like, or what rich customers prefer versus poorer ones. (MicroStrategy cross-references app users' job titles and locations, part of the standard information Facebook asks for, to estimate their likely salaries.)

For instance, Mr. LaRow said that if the soccer team FC Barcelona, a MicroStrategy client, saw that a large number of its fans liked the actor Vin Diesel, it might pursue new partnerships.

Not everyone is a believer in data alone. ''Data can't tell you where the world is headed,'' said Lara Lee, chief innovation and operating officer at the design consultancy Continuum, which helped design the Swiffer and the One Laptop per Child project.

But companies using data from social media said the ability to see what consumers do, want and are talking about on such a big scale, without consumers necessarily knowing the companies are listening in, was unprecedented. ''This is like the biggest focus group someone could ever imagine,'' Mr. LaRow said.