Hasker also appeared on Fox Business News on December 31 to discuss internet video, new devices and the measurement of media multitasking. [watch here]

SUMMARY: Purchasing decisions in 2010 will be affected by factors such as brand innovation, retailer assortment, proliferation of store brands, and healthy eating preferences. Walmart’s “Project Impact” strategy and other similar retailer initiatives will test consumer preferences for clean aisles and lower prices vs. broader product selection. In the first few months of 2010, sales of healthier eating alternatives should be a good indicator of consumer confidence. As 2009 brought an increase in coupon activity, CPG manufacturers will look for more efficient and effective ways to reach consumers vs. traditional trade spending. Time will tell if new product innovation will be enough to drive shoppers back to traditional brands.

Throughout the recession, retailers and manufacturers have stepped up efforts to bring about innovation that seize the moment and “drive the recession wave” rather than “ride the recession wave”. Winners in 2010 will continue to innovate in the form of new formats, service offerings and differentiated products—a list of best bets for 2010 is described below.

Winning Brands Will Innovate and Differentiate
Sales of store brands have grown by $12 billion (up 17%) vs. two years ago as shoppers focus on value. As the economy improves, value is still important, but smart marketers are differentiating brands through innovation—with new products, new flavors, new packaging and with marketing/media campaigns with a heavy emphasis on social media to build rapid awareness and product trial. Brands that fail to innovate may also fail to win buyers back from store brands.

Product Assortment is a Point of Differentiation
Some retailers have followed the lead of Walmart’s “Project Impact” with cleaner aisles and limited assortment. Others have an opportunity to set themselves apart with a wider selection of products. Supermarkets that struggle to compete with Walmart’s prices will find an advantage with shoppers looking for variety. The trick is finding which categories require the broadest selection.

Healthy Eating Is a Solid Measure of Consumer Confidence
As the economy improves, consumers will focus on health and wellness priorities. An increase in sales of foods labeled “organic”, “natural” and “high fiber” as well as diet aids and reduced calorie/fat frozen dinners and entrees will be an indicator that consumer confidence is growing. Look for the first signs after the holidays, when consumers tend to start those New Year diets.

Manufacturers Get Stingy with Trade Promotion Spending
A whopping 50 million products each year—43% of supermarket purchases—are sold with a feature ad, display or price reduction funded primarily by manufacturers. An increase in coupon activity and new advertising opportunities such as cell phone apps and in-store TV networks will stretch promotion budgets. Retailers need to demonstrate sales performance to get their fair share of trade funds.

Direct to Consumer Options Thrive
Online price wars and the squeeze on in-store assortment will fuel large and small manufacturers to give consumers options to buy direct from manufacturers or from online services from the likes of Amazon, Drugstore.com and Alice.com.

2010 U.S. Outlook

Part 1: Cross Media

• Big Screen, Smart Screen, Small Screen: Top 5 Cross-Media Trends
• You Can Take It With You: Future Trends In Media

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Part 2: Consumer

• Winner Winner Chicken Dinner – Top 5 Consumer Goods Spending Trends
• Innovation Creates Opportunities for CPG Growth
• Aging Puts a Wrinkle in U.S. Marketplace

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Part 3: Advertising

• Talking Back – Top Five Advertising Trends
• Get Ready for the Audience-Centric Web
• What Would John Wanamaker Say Today?

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Part 4: Entertainment

• There’s No Business Like Show Business – Top Five Entertainment Trends
• Game On – The World is Watching More Than Ever
• Video Games in Play

Chris Adrien, Vice President, Product Development, Nielsen BASES
Rob Mooth, Vice President, Client Consulting, Nielsen BASES

SUMMARY: Much has changed in the world of innovation and successfully launching new products has become more challenging. For many marketers, current metrics and action standards to gauge in-market acceptance are not quite enough to guarantee success today. Nielsen BASES has evaluated 500+ recent in-market cases globally to understand what it takes to win in an ever-changing marketplace—and has developed the next generation success models that address all facets of the consumer adoption process.

It has become increasingly challenging to bring new products to market. Over the past decade, significant changes have occurred—consumers are more sophisticated, the value equation is shifting, retailers are more powerful and the communication models have been revolutionized. Additionally, product development time is now shorter, competition is fiercer than ever, and there is continued fragmentation at the shelf. Despite these changes, many new product development processes and metrics have not been adapted.

Game changing metrics
It is no secret that most new products fall short of expectations for a variety of reasons. The ones that achieve in-market success do three fundamental tasks really well:

1. Master the Trial Build Chain: Successful new products must have strong consumer appeal and be supported through quality distribution and awareness.
2. Ensure Strong Ongoing Volume: Successful new products deliver on their consumer promise, with strong performance and on-going marketing support.
3. Maximize Franchise Incrementality: Successful new products attract new triers or generate new usage occasions in order to minimize cannibalization of established franchises.

While these fundamentals have not changed, the media and retail landscape has, and the current metrics and action standards used in the past are no longer enough to guarantee success today. To gain a fresh understanding for new product dynamics in the context of current marketplace conditions, Nielsen BASES analyzed 1,900+ recent product launches globally and examined how each initiative did in the marketplace against its goals. The net result was a compilation of 500+ cases of in-market launches that were used to develop the next generation success models, providing a strategic framework for how to win in today’s marketplace.

Success is multifaceted
There are many ways to define success. From achieving volume goals and hitting strategic targets to averting risks and surviving in the marketplace, performance can be measured in a number of ways. While current pre-market performance metrics typically compare a product’s overall performance relative to the competition, the next generation success models analyze the entire adoption process by isolating areas of weakness or readiness for every key measure of success. In this way, you move beyond just measuring how a product compares relative to the competition by overlaying whether this comparison is likely to be meaningful to ultimate success. This adds important new power to competitive comparisons and allows you to focus on issues that will truly make a difference in the outcome.

Five new secrets of innovation
By applying new key measures of success and action standards, BASES in-market test cases demonstrate the potential to improve your success rate. The way to bring stronger products to market is by following five new rules of the road.

1. What worked yesterday might not be good enough for tomorrow.
Make new product development decisions based on the most up-to-date, multifaceted models of in-market success. Relying on the performance standards from the past without adjusting for current market conditions is likely to result in blind spots that can get in the way of success. The current models will help you anticipate issues more effectively and bring more sound propositions to market.

2. Consumer adoption may be complex, but the steps of the process are clear.
Measure and optimize all that matters to success by covering the entire consumer adoption process. The current key measures of success—such as purchase intent, units per purchase and frequency of purchase—continue to be critically important and are key to accurate estimations of volume potential. But there are a host of new factors—such as breaking through clutter, generating buzz and offering true innovation—that also need to be considered.

The consumer adoption process can be broken down into five key factors on which winning products excel:

• Being salient—the ability to stand out. Winning new products catch consumers’ attention and/or offer a distinct consumer benefit.
• Successfully communicating—get the message out. The message needs to be understandable, focused and translatable into memorable ad copy.
• Generating consumer attraction—generate interest. Provide a unique solution to a substantial need/desire, be credible and be free of barriers.
• Converting attraction at the point of purchase—find it in the right store, on the right shelf and at an acceptable cost.
• Delivering an enduring product—achieve lasting consumer adoption with strong repurchase strength.

For each factor, traditional and new performance measures are evaluated to pinpoint and isolate areas of strength and weakness.

3. What it takes to be ready for a successful launch varies at each step in the adoption process.
How does your product perform relative to the competition? Because each step of the adoption process—salience, communication, attraction, point of purchase and endurance—may have different ranges of in-market readiness, each evaluative measure should be benchmarked separately using a four-tier scale: Strength, Ready, Not Ready and Weakness. In doing so, performance is linked to success for every key measure.

Put another way, not all measures are created equal. For some measures, being “average” may be good enough for in-market readiness and improvements may have limited returns on the potential for success. For other measures, it may be more important to perform better than competition, as this could represent an area of real competitive advantage. Moving beyond a simple competitive comparison and adapting launch criteria with this understanding makes for a more robust decision-making platform.

4. Success is about doing most everything well enough, not about really excelling at one facet.
In-market success is not about doing one thing really well. Rather, it is about doing everything you need to do—covering every touch-point in the consumer adoption process—sufficiently. The initiative that does everything enough, but isn’t a star at any one thing is likely to be a success. A single fatal flaw can derail even the otherwise strongest of initiatives—think “weakest link”. Many marketers fall into a trap of focusing only on the one or two areas that a new product does really well, but ignoring areas that represent barriers to success.

Each consumer adoption touch-point has a limited ability to compensate for the failure of another. Take a holistic approach to vetting innovations, making sure that every consumer adoption step is satisfied and optimized. This doesn’t mean that a winning initiative has to excel on everything. A winning proposition will have mostly green “ready” bars, perhaps with a few blue “strength” bars, and no yellow “not ready” or red “weakness” bars.

5. Measure what matters, when it matters.
Set action standards for every new product development stage based on the relevant consumer touch-points. And the earlier you start in the new product development process, the better. Even at the earliest stages, you can understand an idea’s ability to stand out, catch attention, and meet a relevant need. As the idea progresses into a more developed concept and branding, features, and pricing are built in, more elements of the communication and point of purchase dynamics can be folded in. The key is to build on a consistent framework that puts the relevant touch-points into the context of in-market readiness along the way.

Putting the plan into practice
For every stage in the new product development process, set action standards based on readiness for in-market success. For the final test of the concept and product prior to launch, look for “green (ready) or higher” for every touch-point. Seek competitive advantage in the touch-points that are specific to the initiative’s strategy. Only allow initiatives with “yellow” (not-ready) touch-points to move ahead to the next phase if improvement seems likely and monitor these issues closely as the launch proceeds.

For two days, global stakeholders from government, academia and media met to discuss trends in youth media and their implications on the media diet and educational processes of today’s youth. As part of the dialogue, Covey presented Nielsen’s latest understanding of media usage among teens.

The video below features a Q&A session that followed Covey’s presentation.

With the country in the grips of a recession, however, consumers are focusing on price more than where they purchase goods.  Recent surveys have reported a decline in corporate allegiance.  But all is not lost for companies who are willing to take a hard look at classic marketing tool – consumer segmentation – and applying its concepts in new and innovative ways. 

Best Buy, for example, launched a customer-centric program based on segmentation that now is at the heart of its corporate growth strategy.  By classifying its best customers into five consumer segments, targeting them with marketing and changing the way stores look and training associates in new ways, the company has posted same-store sales growth in excess of 9 percent – more than double that of outlets that haven’t converted to the model and no small feat given the current economic challenges.

Nielsen has been at the forefront of consumer segmentation since the 1970s; its PRIZM system draws on a range of U.S. Census data and market research to classify all 114 million U.S. households into one of 66 consumer types.  Systems like PRIZM can help companies build stronger relationships with customers through tailored marketing and help them retain consumer loyalty, even when conditions are less than ideal.

Read more about how consumer segmentation works and can help innovative companies develop a competitive edge in the new edition of Consumer Insight.

Nielsen looked at more than 100 client engagements over a five year period to develop the four following guiding principles:

• Reducing the package size: a risky move that must be balanced with a conveyance of additional auxiliary benefits such as convenience
• Increasing the package size: A preferable option, but must communicate to consumers something more than value for money
• Changing the packaging materials: a margin-enhancing move that can also leverage consumer goodwill
• Changing the ingredient formulation: a high-risk move that must not compromise consumer experience or perceived quality

At the end of the day, consumers are seeking more value for their limited money.  But value is more than price: it is about a quality product that satisfies a need.  Cost-saving innovations, when done in isolation, tend to lead to declines in perceived value and appeal.  Manufacturers need to know their consumers and communicate the auxiliary benefits gained from these innovations to ensure sales growth.

Read a full analysis of the pitfalls and rewards of the four principals described above and learn how manufacturers can innovate cost-savings in the current edition of Consumer Insight.

The recession gripping the U.S. has prompted many families to eat in and to entertain at home, and in many ways, return to basics in an effort to save money.  Many analysts are predicting that the changes being witnessed in consumer behavior will be permanent.  While these changes have had a negative impact on some sectors, others have benefited by adapting to the changing times and leveraging fundamental brand strengths.  Two such sectors — canning and freezing supplies, and gardening supplies – have posted solid growth over the past year, with canning and freezing supplies posting unit sale growth of 14 percent over the last 52-weeks, making it the lead category in unit sales growth across all mega-categories tracked by Nielsen within food, drug and mass merchandising (including Walmart).

Given the number of articles about how more households (including the White House) are planting gardens and raising their own produce, this growth is not all that surprising.  That said, it offers an excellent example of how manufacturers can continue to grow in a challenging environment by adapting to it.  Ball and Kerr, the leading brands in the canning and freezing supplies category, have been in this industry for over a century.  Yet because it has taken an innovative approach to marketing, it continues to be a relevant and successful company.  Its messaging has been simple and hits on some of the most important consumer themes: value, family and environment.  Their marketing has been effective not only because they offer value, but because it is integrated: they link to web sites that offer advice on canning and preserving, as well as highlighting new products.

Burpee Seeds, the nation’s largest mail-order seed company, is another example of a company making the most of the current environment.  It has reported record sales and has even sold out of some of its seed stock this year.  One element of its success: promoting the value gardening can offer by citing a study that claims $50 spent on gardening supplies can become $1,250 worth of produce a year, clearly a message with resonance in these uncertain times.

These are just a few examples of companies running complete and integrated marketing campaigns that have adapted to and capitalized on the changing mood and behavior of American consumers.  More CPG companies and retailers would be well-advised to follow the lead of these “old-fashioned” companies that have adroitly adjusted to the times.

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A primary theme of the high-energy general session on Day Two of the Nielsen Consumer360 conference was encouraging attendees to use the current recession as a learning opportunity, in order to build better relationships with consumers and/or reinvent business models.

From Nielsen’s James Russo, there was talk of the fact that great companies such as GE, Disney, Microsoft, and HP were started during economic downturns. And, he felt that consumers may soon be spending more, albeit with some restraint. Signs of the recession were everywhere, from a global reduction in out of home entertainment expenditures, to canning and freezing supplies being a top growth category, to a slowing of growth in health and wellness and organics. Home has become the new “center.”

Kraft’s Nick Sorvillo said his company has multiple online consumer panels that tell them that consumers are looking for control and security in their lives. They have discovered new priorities and advantages from living simpler lives – Sorvillo called this “brightsiding.” As 72% of shoppers surveyed said they will continue using new shopping strategies when the economy improves, Kraft has gone about reconnecting with consumers and becoming a dependable, valuable source of help — providing recipes by e-mail, recipe widgets, and an iPhone assistant app that, having launched ten months ago, is in the top 50 iPhone apps.

Malcolm Gladwell, author of “The Tipping Point,” “Blink,” and his new book, “Outliers,” said that the recession offers us a chance to rethink assumptions and bad habits accumulated over many years. To him, successful people are aware of their limitations and work harder to overcome them. He noted that some things that we see as advantages, such as small school class sizes, are not necessarily so. For example, many Asian countries that have great educational systems have large class sizes. In essence, one of this theories is that making it too easy for people spoils them and actually inhibits success. In that light, he sees the current poor economy as perhaps providing a highway to creativity – nothing like a crisis to focus the mind.

Ken Romanzi discussed the revitalization of Ocean Spray, as over the past few years the company has jump started sales by educating consumers that their products taste good, and are good for them. Ocean Spray embarked on a heavy P.R. and marketing campaign to reintroduce the cranberry to U.S. consumers, showcasing their products’ heritage, and linking their products to various holidays and celebrations.

Nielsen’s Chairman and CEO, Dave Calhoun, said he has been amazed at the resilience of consumers, as their spending on food and fuel held up until the liquidity crunch of last September. He sees another 12 months’ or so of turmoil and said an important signal will be what consumers are going to do about saving, as so far most of the growth in savings has been involuntary, due to the reduced availability of credit.

All in all, it was an enlightening and entertaining morning – with every bad economic statistic seemingly offset by the notion that the current downturn was eventually going to go away, and until then we have an opportunity to rethink how and what we’re doing. It was also great to see many speakers at the conference using video and audio clips of consumers – giving us much more than just charts and statistics.

Many of the videos of the sessions at Consumer 360 are available on demand at Consumer360.com.

When the economy is buzzing, most companies can afford to overlook inefficiencies or take a broader view of what their customers want.  But when times are tough, as they are now, companies have little choice but to re-evaluate how they do business if they hope to continue to grow and prosper.  Managers are faced with essentially two choices: cut costs or understand precisely where the most profitable market demand is and align more effectively with it.  Both options are difficult, but only one can achieve both short- and long-term objectives.

Throughout the recession, we have been inundated on an almost daily basis of news of companies closing plants, laying off employees and reducing product offerings.  It is the rare business that has not taken action to reduce costs in some form.  However, the supply-focused cost cutting approach can have several significant limitations, including:

• It is unlikely to be rewarded – Wall Street consistently rewards demonstrated profitable growth much more than it does cost cutting.
• It may not be realistic – Most businesses have aggressively attacked costs in recent years, so very few significant cost-saving opportunities remain.
• It’s not sustainable – You can only reduce costs so much without affecting a business’ core operations.

Companies that develop new insights into demand can drive dramatic improvements in a company’s cost and revenue positions:

• Reduce production costs – Lacking insights into demand can cause businesses to develop offers that under-deliver on the key benefits that profitable customers value most, while adding costly bells and whistles that don’t add value.
• Improve sales and marketing ROI – Without a precise understanding of demand, businesses tend to chase any and all customers with communications and marketing strategies that rarely hit the mark.
• Volume expansion – An improved understanding of demand brings new customers to the brand while simultaneously cementing relationships with existing customers
• Increased pricing power – New insights ensure development of products which deliver against the key needs of target consumers and for which they are willing to pay a premium.

Our work with a major food manufacturer can better illustrate how a precise understanding of profitable demand yields tangible results.  This company was experiencing flat to negative growth on a historically key strategic brand, and was communicating in-market in a reactive way.  Management had come to the conclusion that this core business had exhausted opportunities for growth and was seeking to expand the brand into new adjacencies.  Using our hallmark demand strategy approach, The Cambridge Group undertook the following steps:

• Identified the most profitable consumer segments and need states, and determined what was most compelling to them
• Developed brand positioning and overall brand strategy. Which were specifically designed to motivate the most valuable consumer segments and need states
• Executed Customer Demand Analysis^TM to identify tangible product features which are both most valuable to target consumers and most profitable for the brand to offer
• Optimized brand portfolio strategy to maximize profitable growth while minimizing required capital investment

One year after completing the strategy, the results were clear: brand sales went from -1% to +15% and returned the brand to profitable growth – the only one at the manufacturer to simultaneously grow share, sales and margin that year.  Furthermore, brand costs were reduced by eliminating packaging, supply chain and formulation components not motivating to target consumers.  Trade spend was rebalanced to the most profitable, more premium SKUs.  The target consumer and need state was redefined from single males to households with teens and from BBQ to after-school/afternoon snack, respectively.  Even now, when most brands are experiencing pressures, this brand continues to enjoy unprecedented volume, revenue and profit growth and has surpassed profit targets by nearly 30% this year while achieving the #1 share position in its category.

The precision of demand analysis can be the solution to turning around brands that have seemingly plateaued.  And the application of this analysis goes beyond consumer packaged goods – it has been successfully implemented at credit card companies, insurance companies, retailers and a range of others.   In these difficult and uncertain economic times, understanding precise target segments, need states and brand strategy are critical tools to driving growth and profitability.

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Gloria Cox will be presenting May 13 at Nielsen’s Consumer 360 conference.

Gloria Cox is the Managing Director with The Cambridge Group. She specializes in consumer products and services clients, working with them to develop market-driven growth strategies through consumer targeting, brand strategy and positioning, and new product development.

Prior to joining The Cambridge Group, Gloria was an Engagement Manager and core member of the Consumer Goods Practice at McKinsey & Company where she addressed strategic and organizational challenges for a number of consumer goods and services clients. Gloria also worked in market research in the Paper Division of Procter & Gamble, where she was responsible for designing, executing, and analyzing custom market research for several key Procter & Gamble brands including Pampers, Luvs, Charmin, Bounty and Puffs.

Gloria graduated Phi Beta Kappa from Indiana University with a dual degree in telecommunications and business. She received her Masters of Management from the J.L. Kellogg School of Management at Northwestern University.

Sales of store brands, or private label products, began to spike in 2007 just as we were seeing the first signs of an economic downturn. At first, these private label sales were driven by higher commodity prices, but volume growth began to catch up with dollar growth in mid-2008. As the economy continues to struggle, more and more consumers are replacing their branded products with private label equivalents. Store brands are up 10% to $84.4 billion in annual sales across categories reported by The Nielsen Company. Talking to Consumer Packaged Goods marketing professionals across the country, there is a consensus that these private label switchers won’t be coming back when the economy improves – at least not without some incentive.

Winning back these shoppers will not be easy for branded manufacturers.  Although many will be tempted to cut back on new product development, now is the time to innovate.

What To Expect From Name Brands

• More products with new health and wellness claims like “now with more calcium,” or “no trans fats.”
• New package designs with claims like “re-sealable” or “renewable.”
• New package sizes and shapes that will make it more difficult for store brands to copy.
• Innovative new flavor profiles with more line extensions.
• New advertising in new places to get the message across to consumers.

Retailers aren’t just sitting back waiting for new brands to copy; over the past several years, we’ve seen store brands evolve from inexpensive national brand alternatives to exclusive destinations that allow retailers to differentiate themselves. Many store brands achieve premium pricing while strengthening retail banner equity with more upscale offerings. Retailers are investing in their own brands more than ever as their efforts are paying off. The battle between national brands and store brands is about to get interesting.