How Can We Help You?

The Costly Challenge of Discovering Consumers' Unmet Needs--and Meeting Them

By Deborah Ball, Sarah Ellison and Janet Adamy
Staff Reporters of The Wall Street Journal

Three years ago, Procter & Gamble set out to build a better air freshener.

P&G researchers learned some useful things when they asked people in focus groups to describe their "desired scent experience." Many people, after about half an hour, seem to adjust to a scent and can't smell it anymore. Most air-freshener scents don't spread evenly across a room. People complained that many scents smell artificial.

THIS MONTH'S COVER STORY: ALL ABOUT THE CUSTOMER

How Can We Help You? Ingenuity has taken an extreme turn in the high-stakes world of product development. Desperate to increase sales and market share, companies are digging deeper into shoppers' homes and habits to discover "unmet needs" and then design new products to meet them. THE SUPERMARKET BATTLE FOR YOUR ATTENTION

Check This Out Some e-commerce Web sites are rolling out new software that streamlines and speeds up the checkout process as they try to persuade more people to finish their online purchases.

Get the Party Started Direct sales, an old-school marketing strategy long associated with Avon ladies and Tupperware parties, is making a comeback among small-business people. Instead of waiting for customers to come to them, these entrepreneurs take their products to the customer.

The Customer Isn't Always Right Each day, about 1.5 million customers come into a Best Buy store. Best Buy wishes some of them wouldn't. CEO Brad Anderson says he wants to separate "angel" customers from the "devils" The angels are customers who boost profits by snapping up HDTVs, portable electronics and newly released DVDs without waiting for markdowns or rebates. The devils are its worst customers. They buy products, apply for rebates, return the purchases, then buy them back at returned-goods discounts.

P&G took it all in and came back with a solution: a scent "player," that looks like a CD player and plays one of five alternating scents every 30 minutes. The gadget, named Febreze Scentstories and priced at $34.99, has a tiny fan inside that circulates the scent throughout the room. With it, P&G sells five different discs, each $5.99 and holding a variety of scents with trademarked names such as "Relaxing in the Hammock" and "Wandering Barefoot on the Shore."

"Nobody could have articulated Scentstories," says Steve McGowan, a product-development manager for Febreze, "but if you really watch the consumer, they'll tell you what they wish."

Expensive Strategy

Ingenuity has taken an extreme turn in the high-stakes world of product development. Desperate to increase sales and market share, companies are digging deeper into shoppers' homes and habits to discover "unmet needs" and then design new products to meet them. Last year, marketers launched a dizzying 34,000 new foods, drinks and beauty products-representing more unmet needs than most people ever guessed they had.

The strategy is turning out to be expensive, with the costs of marketing and promoting a new product often topping $50 million. In September, a sharp rise in marketing spending led Colgate-Palmolive and Unilever to slash their 2004 earnings forecasts-but also to resolve to continue spending heavily on marketing to help spur sales.

Even Procter & Gamble, which has led the charge into new products, is feeling the weight of additional costs. P&G recently reported that its operating margins were being squeezed by increased spending on marketing.

Marketers of everything from pet food to soft drinks feel pressure to innovate, for a variety of reasons. Powerful retailers such as Wal-Mart Stores are quicker than ever to pull a lagging product off their shelves, sometimes substituting their own private-label version.

Stores also are apt to cut prices of branded items unless shoppers find something new or exciting in them. Marketers must work harder than ever to stand out in superstores that in many cases stock as many as 100,000 different items.

General Mills rolled out 92 new products this past summer-including Betty Crocker pourable cake-frosting and square-bottomed Old El Paso taco shells-for an increase of more than 30% from the 70 new products launched the previous summer. "Limited edition" products match shoppers' short attention spans: PepsiCo launched a grape-flavored Mountain Dew, called Mountain Dew Pitch Black, last month just for Halloween and plans to follow with a spicy version of Pepsi for Christmas.

When P&G last month launched a version of Tide laundry detergent with Downy fabric softener, the company said it had "identified an unmet need among a subset of women who want clean and soft laundry, but for various reasons are either unwilling to add liquid fabric softener or are inconsistently adding it because they simply forget."

Tough Odds

New products face tough odds. The average American family turns to the same 150 items for as much as 85% of its household needs, says Jack Trout, president of marketing firm Trout & Partners. Only about 2% of new brands and brand extensions hit $100 million in first-year sales, considered the threshold for success, according to Information Resources Inc.

Sales of C2, Coca-Cola's reduced-calorie, reduced-carbohydrate cola and the company's biggest product introduction since Diet Coke, already have started to fall, just months after the product's introduction. About 25% of so-called line extensions produce no incremental sales, says Valerie Skala Walker, an analyst at Information Resources.

"Consumers are more elusive and harder to reach," says Jim Stengel, head of marketing for P&G. "We are trying to bring true category-building innovations ... not just another flavor of ice cream." Such an effort requires what salespeople call a "missionary sale," in which the seller first must teach customers what their unmet need is before offering to fill it.

There is no need too small for new products to address. Among the new products P&G has successfully sent out to market are Swiffer Sweep+Vac, the latest iteration in its successful Swiffer line of dust mops and disposable cloths. P&G introduced the Sweep+Vac, a small, battery-operated vacuum-cleaner with a Swiffer mop head attached, during the summer, after focus-group participants said they get on their hands and knees to wipe up the small pile of dirt left on the floor after mopping with a dry Swiffer cloth.

"We knew that was a compensating behavior that consumers wouldn't want to do," says Joe Miramonte, a product-development manager for the Swiffer line.

P&G appears to have hit the jackpot with an unmet need it discovered among those consumers who wash their own cars. They told P&G that half of the time they devoted to washing the car was actually spent drying the car, so that water spots won't form. For these consumers, P&G designed Mr. Clean AutoDry Carwash, a sponge along with a nozzle and a liquid-soap cartridge that attaches to a garden hose. A filter in the nozzle removes the minerals in water that cause the spots.

Retailers liked the kit's $24.99 price tag. And the price of refills-$6.99-beats the pennies that consumers might spend on soap to give their car an old-fashioned wash. The AutoDry product is on track to generate more than $100 million in first-year sales, P&G says.

All Kinds of Strips

Imitators nip at the heels of successful new products. Pfizer blazed a new trail in packaged products in 2001 with Listerine PocketPaks. The thin, edible, plastic-like mouthwash strips quickly caught on with teens and raked in $175 million in first-year sales. Today, supermarket checkout aisles are brimming with all kinds of strips, from Novartis's Theraflu Thin Strips, to Momentus Solutions' Healthy Moments Arthur watermelon-flavored vitamin strips for kids-and even Hartz mint-flavored breath strips for dogs. In the first nine months of this year, 128 different strip products were launched, up fivefold from 2002, according to Productscan Online.

Such innovations rarely stay hot for long, though, Last fall, Wm. Wrigley Jr. said it would close the Phoenix plant where its strips are made because of waning U.S. demand.

"You might be able to hold on to an innovation for six months now, maybe 12 if you're really strong," says Bart Becht, chief executive of Reckitt Benckiser, the maker of Woolite and Lysol. Among its recent innovations is Finish Glass Protector, a dishwasher detergent that protects glassware from mineral corrosion. "We aren't big believers in coming out with just the lemon variant," Mr. Becht says. "We tend to work more towards breakthrough innovations."