Direct-to-Consumer’s Impact on Market Research (Full Transcript)

[00:00:00] Speaker 1: Hey friends, Katherine here from Research Rockstar. Thanks for joining me here today. And today's conversation is really focused on a topic for people who do market research related to consumer brands. And so for those of you who do business-to-business research, this might be interesting academically, but this conversation is really about a topic that is near and dear to the hearts of people who do consumer research or will be near and dear to their hearts very, very soon. So I'm going to start with a question, which is for those of you who do market research for consumer brands, what do you think is the most disruptive trend in consumer marketing today? So there are a lot of trends happening in consumer marketing, but what's the single most disruptive trend today? Direct-to-consumer. The direct-to-consumer trend is huge. And the question becomes, how will direct-to-consumer impact market research needs? And direct-to-consumer is more than just Amazon, right? There is a lot of evidence, there's ample evidence of a lot of different brands using direct-to-consumer marketing. And the whole way that consumer brands sell has really shifted. So I think when people think about direct-to-consumer, a lot of folks do think first of Amazon, but there's so much more to it than Amazon. It's really focusing on the brands themselves, not necessarily the marketplace. So let's first start by looking at some proof points so that I can demonstrate and really show you how direct-to-consumer marketing is the most disruptive trend in consumer marketing today. And then we'll tackle the topic of what does it mean for market research needs? That is, as brands do more direct marketing and direct sales, how does that impact their need for market research? So first of all, those proof points. Direct-to-consumer is booming. Now, a lot of people, when they think about brands that sell direct-to-consumer, they think about some of the kind of cool and trendy brands, Casper for mattresses, Glossier for beauty, Warby Parker and glasses. Maybe you think about the Dollar Shave Club, which was a very innovative company that was acquired by Unilever. So a lot of people, when they think about direct-to-consumer or D-to-C marketing, they think of those kind of cool, disruptive, innovative brands. But the truth is that those cool, disruptive, innovative brands have got the eye of the major consumer marketing brands, and they're making investments in that area too. Some of the brands that are sort of well-known, established, iconic brands that are investing in direct-to-consumer include Adidas, Nike, Campbell Soup, yes, Campbell Soup, and NYDJ fashion brand, a women's fashion brand. And those are just a few examples. What's really interesting to me is in reading articles about the D-to-C phenomenon, you see a lot of quotes, a lot of references to the executives from the biggest brands. So for example, here's a great quote from the July issue of Marketing Week from the CEO of Unilever, Paul Polman, who stated, if you look at e-commerce, we have grown that at a 60% to 70% rate, well over the 30% to 40% rate that the trend is growing. So basically, the CEO of Unilever is saying, we're actually outperforming the average. This is a source of growth for us. That's a pretty powerful statement from a company like Unilever. This is the brand that brings you, or the company that brings you brands like Dove, and Lipton, and Hellman's, and Breyer's Ice Cream, right? So everybody knows Unilever brands, and these are the types of companies that are investing in going direct-to-consumer. Procter & Gamble, the company that brings you such well-known household names like Bounty, and Gillette, and Pampers, and Crest, and Dawn, they reported over $3 billion in e-commerce sales in their 2017 fiscal year. Let me restate that because that's pretty powerful. Procter & Gamble had over $3 billion in e-commerce sales in its 2017 fiscal year. So again, the direct-to-consumer thing isn't just about cool, innovative brands that are disrupting. It's also about big companies that own really well-known brands. They're also going direct-to-consumer. Now, I'm not saying that companies like Unilever and Procter & Gamble are going to be abandoning grocery stores. That's not going to happen. I don't think that that's going to happen in my lifetime anyway. But their ratio of sales is going to change. They are investing in direct-to-consumer efforts. It is changing the business models for really huge companies. So it really is something that's happening. And it's funny because I think a lot of people, when they think about direct-to-consumer, they think about nichey little products here and there. But even if we just look at grocery, just the grocery category, this is huge, just specifically in grocery alone. So the Food Marketing Institute did a research study that was conducted by Nielsen in 2017. And based on that study, they predicted, or the Nielsen study has a forecast that says that by 2025, online grocery sales are predicted to capture 20% of total grocery sales. That's up from 5% in 2017. And it's also equivalent to $100 billion. So by 2025, it's not that long from now, it's seven years from now, online grocery sales are predicted to account for $100 billion in consumer sales. So clearly, it's not just about specific brand categories here and there. This is a really widespread trend. So hopefully with these data points, I've established that direct-to-consumer is a huge trend. It's not something that's isolated to little niches. It's not something that's isolated to innovative, isolated, little disruptive companies. It's something that's being embraced by the biggest companies in the world, like P&G and Unilever. The question then becomes, as the business models for consumer brands change, how does it impact their market research needs? That's what I'm really interested in, right? So what does this going to mean for me? So direct-to-consumer does mean that brands can more directly collect first-party data, right? So if I'm a brand and now I'm doing a lot of sales, either through my own e-commerce site or my own stores, then I'm collecting a lot more data. I'm collecting a lot more data about how much people are buying, what's going on with their shopping behaviors, all sorts of seasonal data, individual data. I'm getting a lot of data. It also means that I have the ability to easily conduct experiments. Up to now, frankly, for a lot of companies, if they wanted to do, say, for example, pricing research, they really did have to do it as primary research in the form of doing a survey or something else along those lines, right? So if it was going to be quantitative, it was probably going to be a survey. And myself and I know many other colleagues have done hundreds of studies that were in the form of a discrete choice exercise or something along those lines, where we did a survey to get consumers from a target market to tell us which attributes they would basically trade off so that we could analyze what's the right combination of attributes and attribute levels, or if the product includes feature X, can we charge a premium, all of those things. But now these companies can do experiments. So rather than rely on the hypothetical responses of people self-reporting through a survey, they can actually do an experiment and find out, hey, if we offer this product standalone and we also offer it bundled with a complementary product, can we charge a premium for the product if it's bundled with this complementary thing? Or can we charge more for the product if we are offering it as a subscription as opposed to a one-off? Or what are all the different pricing models? And actually experiment, do tests, and see what happens as opposed to relying on people to go through a discrete choice exercise, for example. So direct-to-consumer means that brands can more directly collect first-party data and conduct experiments. And that's really kind of cool, right? So if I'm a brand, I'm really happy about this. This is a lot more cool data that is clearly authentic data that I can analyze. Now related, a lot of experts in the marketing field predict that as big brands go direct-to- consumer, that they're also going to bring advertising in-house, or at least more of their advertising in-house. So not good news for ad agencies, and certainly not good news for market research agencies that partner with ad agencies. And by the way, there's a related kind of trend. Have you ever heard of the phrase programmatic ad buying? If you haven't heard about programmatic ad buying, it's something you might want to search, because if you do a lot of research or you do some research related to advertising, that's something else that's disrupting how all of this happens, and is also something that relates to the trend of many big brands bringing advertising, or at least more of their advertising in-house, because of programmatic ad buying. Anyway, the point I want to make is that if big brands increasingly bring their advertising in-house, it could mean good news for in-house insights teams. So for those of you who work at a brand, and you're in the insights team at the brand, if your company is going to be doing more direct-to- consumer, they may be bringing more advertising in-house, that may mean new opportunities and more opportunities for really cool analysis that the in-house insights team will be asked to conduct. So if you can demonstrate, for example, as part of an in-house insights team, expertise in, say, social listening or digital marketing analysis, that's something that will become increasingly of value if your brand is going to be doing more advertising in-house and more direct-to-consumer. So for the insights teams in-house, I think that this can be a really interesting opportunity to get to do more innovative research, and you're going to also have access to all sorts of new data. So I think for a lot of insights teams, depending on what kind of company you've worked for, you may have up to now done a fair amount of research using panels or other types of data sources, but now you're going to have access increasingly to in-house data sources that really do have some wonderful benefits and attributes. At a higher level, what does this mean for the ratio of in-house research to outsourced market research? So big brands for several years now have done a fair amount of research both with their market research agency partners and in-house, and I know a lot of big companies, frankly, that have really beefed up their in-house insights teams, hiring people who are highly skilled, investing in fantastic tools. So there's already been a shift in terms of the amount of work and the types of work that are done in-house versus through an outsourced market research agency, but this direct-to-consumer thing is really going to be disruptive for that ratio as well. So in what way is the trend towards direct-to-consumer going to impact use of market research agencies? Well, for those of you who work for market research agencies, if the primary value that you're providing to your clients has to do with data collection, I think that there's a lot of vulnerability there. So if what the primary value is, if what people come to you for is for your panel, for your data collection capabilities, if your clients are now going direct-to-consumer, that's going to be a lot less valuable to them going forward. Sure, there's still going to be some of that. I don't want to say it's going away entirely, but there's going to be an impact there. If, however, your superpower is related to analysis, then I think that there's still enormous opportunities because these companies now have more and more data, and they're going to need partners who can augment their in-house teams with different types of analysis skills or, frankly, just to help with the sheer volume of analysis. So again, market research agencies who primarily rely on data collection, I'm afraid there's going to be a lot of vulnerability with consumer brands, but those of you who really do offer a lot of analysis and synthesis skills, I think there's actually some really good potential upside here. So overall, what I would say is this is an opportunity for all market research and insights professionals to be proactive. Whether you're working with internal clients because you work at a big brand or whether your clients are external, you work at a market research agency, now is a good time to have conversations about, is this a brand that is planning on going direct-to-consumer? Now, if you work for a brand that's already gone direct-to-consumer, you are already well aware of these issues, but if you work for a consumer brand that hasn't done it yet, chances are it's at least being considered. So now is a good time to find out, hey, are you thinking about going direct-to-consumer? And if so, what kinds of data and analysis skills are going to help us in that situation? What can the internal insights team be doing proactively? What types of skills should we be investing in so that as these new types of data sources are becoming available that we can really be ready to do the types of analysis that are going to be helpful? And if you work at a market research agency that works with consumer brands, if you're not sure whether your clients are planning to go direct-to-consumer, again, I think now is the time to be proactive. Be consultative. Show them that you understand the business context. You know that if they're not going direct-to-consumer, you know that their competitors probably are. They're certainly aware of the trend. And now is a good time to have conversations about, okay, well, if you go direct-to-consumer or if you're weighing those decisions, how can I, as your market research partner, assist with that? What's the value that we can provide? So I know it might feel a little bit scary because there's a lot of change going on, but I always would rather be proactive and get ahead of it, right? And again, being aware of the direct-to-consumer trend is a great way for you as a market research and insights professional to be consultative, whether it's being consultative with your internal clients or your external clients. I hope this conversation has been useful for folks. If you have any questions, please do leave them here or certainly contact me. You can get my contact information at researchrockstar.com. And if you found this type of conversation helpful, please do like it or review it or share and subscribe. Whether it's on YouTube or on iTunes, the more people who review and subscribe, it actually helps us to be found in the YouTube and iTunes search engines. So getting likes, getting subscribes, really helps me out a lot. I really appreciate your support. Again, if you have any questions, please post them in the notes or feel free to contact me directly. Thanks, everybody.