How consumers can help you create new products

In  2011, Faceboook 600 million active users; and the number is growing. Many are watching for the company to go public: its estimated IPO is being pegged by some at $35–40 billion. Why? The reason is simple. Social networking sites such as Twitter and Facebook are now a first source for up-to-the minute news, from people reporting personal news to a network of friends — to global agencies reporting events such as Middle East uprisings or the Japanese tsunami and earthquakes. But it’s more than that. And that’s where your business comes in.

Consumers use their mobile devices to snap pictures, make comments and tweet them to the world; often they report on the products they use. Similarly, blog writers offer snappy commentary on everything available in today’s marketplace. This trend attracted my attention along with four fellow researchers from other universities. Wayne Hoyer, Matilda Dorotic, Manfred Kraft, Siddharth Singh and I asked, “What is the role of social media in new product development?”

A new framework

Tying the use of social media to new product development (NPD) is an area that is still quite new. We have offered some insights in ‘Consumer Cocreation in New Product Development’ (Journal of Service Research 13, no. 3, 2010). In our research, we looked at the stages, scope and intensity of the NPD process including concept, product development, commercialisation and post-launch activities and examined what role consumers can play at each stage.

We found that many companies (quite possibly, your own) are overlooking the potential benefits that can come from using social media to enhance existing processes for developing new products. We say that even if your business deals primarily with other businesses (B2B), the lessons we gained about how business-to-consumer (B2C) firms learn directly from their customers have potential value for all companies. How so?

First, it has been clearly recognised that successful NPD best meets customers’ needs when the information digs deeply into a customer’s desires. Discovering what those needs are is not always identifiable through traditional marketing research methods. Social media offer firms the opportunity to listen to consumer comments on a real-time, continual basis.

Threadless.com is a T-shirt manufacturer and a good example of a company that relies on immediacy of consumer input. The company obtains graphic designs for new shirts from consumers, online; other members of the Threadless.com community vote on submissions with the winners moving quickly into production and sale. (Designers with winning entries get a royalty and keep the rights to their work.) What’s clear is that this approach moves products to market much faster than any ‘normal’ approach to designing new products.

Motivated to help

A second value of using social media for NPD is that companies often receive a level of consumer input that is far beyond the average consumer. There are certain types of buyers who have high levels of knowledge and skill and who are willing and able to participate in new product development — if you ask them. For example, when a firm launches a new product (even on a trial basis), there are lead users (those who were willing to buy and try right away) whose input would be invaluable in terms of changing the product before it hits the general marketplace. The input of lead users is matched by market mavens, consumers who have tried many similar products and, thus, can offer a comparative judgement about a new one. Or they may see a trend in similar products and can offer their vision of an ‘ideal’ product yet to be developed.

What motivates a consumer to be so helpful, to become a cocreator? Early adopters, for instance, have probably encountered needs that others have yet to experience. They will be motivated to participate by the promise of getting that need met. Other consumers will take pride in being ‘in the know’. And, yes, some cocreators will want rewards of either monetary prizes or profit sharing; but the opposite is also true: there are those who will freely share their ideas and comments without any compensation. Then, there are those who offer advice based on a desire for self-expression and pride.

While manufacturers must take into consideration the unusual level of interest these types of consumers bring to the process — after all, they may not represent the typical customer — the important point is that such input can only be obtained from some type of communications loop that goes beyond traditional focus groups or hiring a research firm to poll consumers. Not that these techniques are not effective; they well may be. But they are also much slower than the input that can be derived from cocreators who are willing to post their input electronically on a 24/7 basis.

Risky business?

So, what does the firm risk in developing such cocreator relationships? One obvious danger is that some companies may be giving away product secrets by engaging with consumers. Such businesses are less likely to engage with cocreators. If consumer ideas are used and the process is a vague one, questions may arise as to who owns the intellectual property produced by the collaboration.

Another difficulty is that companies can simply become bogged down with information overload and find themselves faced with screening millions of potentially winning ideas. Unfortunately, some of the ideas may turn out to be infeasible from a production standpoint. Then, too, when you ask for feedback online, you may not hear what you were hoping to. A vehicle manufacturer test-marketed a creative customer feedback site only to have their new SUV sarcastically criticised for poor mileage.

Moreover, unpaid cocreators may demand flexibility in their scheduling and are unlikely to share the blame when products fail. In a worst-case scenario, cocreators may become competition by developing their own versions of the firm’s products.

On the plus side

These risks are counterbalanced by some notable pluses. Social media saves advertising and promotional dollars by creating a ‘buzz’ when new products are launched. Furthermore, the online community provides credibility — a quality not easily bought. Customers discussing their reactions to products among themselves give companies a chance to listen in on the conversation and thus rapidly adjust and respond to negative criticism if necessary.

Del Monte is already testing this concept with two online consumer communities, ‘I Love My Dog’ and ‘Moms Online Community’. Here consumers can interact with each other and with the company. The hope is that this will strengthen its relationship with consumers so they will stay loyal to the product. The metrics that can monitor this type of lightning-speed activity have yet to be developed.

The trade-off for the benefits of social media will likely require relinquishing some control of the brand management. Consumers aren’t the only stakeholders, and balancing everyone’s interests can be tricky. Companies have to keep the best interests of employees, shareholders and other types of consumers in mind.

To be sure, as manufacturers embark on the wild frontier of social media, many questions still remain. My associates and I have illuminated some areas of concern and, in our paper, pose other important questions. But one thing seems to be clear: the role of social media should be at the forefront of your plans for developing new products in the future.

London Business School - Rajesh Shandy