New product development by Knorr in Japan using mobile phones

In this post I want to discuss about a slightly old but relevant case of Knorr's mobile-based new product development project in Japan. Knorr Foods, a subsidiary of Ajinomoto Inc. Japan, involved younger female consumers in development of a new Soup Pasta by creating a mobile campaign site where discussion threads served as input for the idea generation and screening.

In 2006, the Japanese soup market was valued at $1.43 million. Ajinomoto had led the Japanese soup market since 1964, when it began to sell the Knorr brand through an alliance with U.S.-based Best Foods (acquired by Unilever in 2000). Its brand mix included three main variants: Knorr Cup Soup (for breakfast); Knorr Soup Pasta and Knorr Soup Harusame (popular among young women for lunch); and Knorr Tamago Soup (a mainstay soup, packed with ingredients that go well with rice). With the Knorr brand, Ajinomoto held 26.5% and 42% of the instant soup and total soup markets, respectively.

In 2007, Knorr was in the midst of developing a new Soup Pasta to target the primary gourmets of noodle cuisine: younger, female consumers. Bringing a new product to market is not an easy task, but in this case, the hardest question was how to develop a Soup Pasta that fit the target segment's taste preferences. To generate and commercialize the product successfully, the company needed frank and honest opinions from young, female consumers during the idea generation, idea screening, concept development, product design, and detail engineering phases. To this end, Knorr decided to tie its new product development project to the Tokyo Girls Collection (TGC).

The TGC is a twice-annual celebration of all things cute, organized by Girlswalker.com magazine to showcase the season's fashionable streetwear produced by domestic brands. Unlike typical "invitation-only" fashion events, this show is open to anyone who pays the entry fee. The clothes are sold at in-venue stores and the fashion show uses only amateur models chosen from trendsetting girls' magazines. The fashion event includes entertaining attractions such as live performances by renowned artists, a charity auction, the final stage selection and presentation of the TGC Contest.

In September 2007, Knorr's new product development project was announced at the TGC venue, with star TGC models assigned as official new Soup Pasta development project members. Knorr set up a campaign booth, where the TGC project members explained the product development launch. At the same time, surveys asked the TGC participants what tastes they wanted in Knorr's next Soup Pasta. Knorr launched a mobile site on the mobile Girlwalker.com site, where TGC project members described the product development process in their blogs. On this blog, other mobile users freely entered comments and opinions, creating successful discussion threads that revealed the vast majority of customers' need for the new Soup Pasta. The bloggers' comments thus effectively replaced traditional idea generation through qualitative research, which often relies on one-on-one interviews and focus group discussions. Also, this blogging provided young consumers with real-time information, as well as entertaining reasons to talk. Knorr therefore expected project information to be spread among the blog participants' friends, peers, and family.

The TGC model project members participated fully in the product development process, from a visit to Knorr's factory to package design, from idea generation to taste testing. In March 2008, Knorr finally developed a new Soup Pasta called "Tarako Cream" (creamy cod roe), which embodies the key attributes identified in the new product development project. As with the initial project announcement, Knorr used the TGC to present samples of Tarako Cream and offered the new Soup Pasta to young girls from catering trailers located at the venue. In April 2008, Knorr started nationwide sales of Tarako Cream, mainly at major convenience stores. The product was received enthusiastically by young female consumers in their teens and 20s, and as a result, sales of Knorr Soup Pasta increased by 50% compared with the previous year.

Knorr's mobile blogging enabled the company to minimize the risk associated with new product development in two ways. It immediately reduced the cost of idea generation. Often, a search for important ideas resembles the quest for a needle in a haystack. Firms must make substantial investments to generate many ideas, just to find one worthy of development. The ubiquitous communication device also enabled more timely and speedy comment entries in blogs, which compressed the development time.

One has to ask that why did the company use mobile internet to reach the consumers when it could have opted for normal internet websites. Japan represents a country with one of the highest levels of 3G penetration. A staggering 90 million 3G handsets are currently in circulation, and more than 70% of the 127 million Japanese population has subscribed to the mobile Internet. Since NTT DoCoMo's i-mode launched in early 1999, the mobile Internet in Japan has become increasingly fast, sophisticated, technically stable, and easy to use. By pressing one dedicated button on their phones, users can instantaneously go online and therefore since 2006, more people have been accessing the Web by mobile device rather than by PC.

India has also started 3G services though BSNL and MTNL and the country is likely to see national rollout of 3G services by other service providers by end of 2010. While internet is making rapid proliferation in India, 3G on mobile phones presents an opportunity for marketers to exploit this new mode for different marketing related objectives. In doing so, the marketers need to look beyond using mobile for sending text-based mobile ads and shift to mobile-based promotional campaigns, in which mobile communication is part of a more holistic marketing strategy.

Giving music free and making money

In this post I want to discuss about the music distribution model pursued by some artists which, inspite of free music distribution, makes them money, besides providing a direct connect with their audience.

Lucky Ali decided to break his hiatus of five years by releasing long awaited album Xsuie. While some of the songs were available since September 2009, the album was officially launched in March 2010. Xsuie meaning “at your own pace”, is a fusion of music ranging from balladic to anthemic, to lyrical. The mega album is in 3 parts and contains 24 tracks of Ali's works including Dil Gaye Jaa, O Rahi, With You, Sea of Life, Yeh Zindagi and others.

Xsuie is not only an unconventional name for an album but also has a unique way to distribute it. Lucky Ali chose to break the conventional medium of physical album distribution so that fans can listen to the music without depending on labels for promotion and physical distribution of CDs. These songs and the album are available as downloads online from aggregators such as nimbitmusic.com and bluefrogsounds.com. Anyone can listen to the songs for free. However, if the listener chooses to own the music, there is a download fee. The album has plans to go online at itunes, amazon, rhapsody, cdfreedom etc in the coming months as the songs become popular.

Explaining the online distribution of his album, Lucky Ali said, "I have deliberately avoided distribution in physical format in the form of CD or tapes for the present moment as well as the mobile market. The online medium empowers the artist to interact with his fan base directly and connect with music lovers the world over and hence there being no compulsions to be adhered to (apart from the obvious ones) there's scope towards greater creative freedom and awareness". He further added, "Trends are changing faster and people are more digital savvy. The present time demands change and the digital media platform is the present future. Moreover, the digital media is very accessible. One does not need to rush to stores if they don't want to, in fact it's the other way round, the store comes rushing to you on your mobile phone or through your computer." Lucky Ali also added environmental angle and said that he hoped to save the plastic and paper that will be wasted for making CDs.

While Lucky Ali promotes songs from his album to be listened for free, Indian Ocean has gone a step further. Their latest release “16/330 Khajoor Road” will be entirely available for free download, a first among Indian bands. The album named after their jam-pad in Delhi’s Karol Bagh, 16/330 Khajoor Road – a picturesque 100-year old bungalow - where the band has rehearsed and composed since 1997, comes a full five years after the band's previous album - Black Friday. Their business model is a prompt acknowledgement of the fact that in the age of unpreventable piracy and post-glory days of original music CDs, free content is the only solution.

The decision to name the new album was taken almost three years ago, and the decision to give away the songs for free evolved over the last year and a half. The Indian Ocean website mentions that starting 25th July 2010, one song will be given away free every month as free download in mp3 format on the band's website. Listeners will have to just log on to the website, register, and will get an e-mailed code that shall let them download the song. Thus, one can download “Chand” – the first song of album, from 25th July till 24th August, and starting 25th August, one can download the next song for a month and so on. The last song on the album will be available on 25th January till 25th February 2011. The idea behind the one-song-a-month is to “prolong the process, get more people involved,” said Sushmit Sen, member of band.

After February 2011, when each of the seven songs on 16/330 Khajoor Road has had its turn, the physical CD release will follow. This will be a double CD with the second CD containing versions of songs and some practice session recordings. The business model does not rely on making money from selling CDs as Indian artists hardly make money on album sales or royalties. The CD launch is because there are people who would like to own a hard copy and still treasure the physical possession of a CD. In India, the real source of revenue for bands is live shows and that is where the band would like to make money while giving the songs free to the listeners. A lot of people (specially younger people) do not buy music any more but rip or download from the web, so this will make their lives a little guilt-free. Also, this helps in reducing the distance between the band and its listeners. In addition, this means no more negotiating contracts with record companies and fighting over copyright issues, no worries about bad distribution, albums not being available at different places and so on. Corporate sponsorship and sale of merchandise are other revenue generating options.

Both the examples remind me of Mike Belmont who produced movie We Are the Strange without a cast, crew, or budget in 2006. Mike Belmont (pseudonym M dot Strange) used his self-invented “Str8nime” process (strange + 8 bit + anime) to create the fully animated feature, We Are the Strange. Belmont wrote, directed, co-edited, and produced the movie over three years, mixing and matching multiple animation techniques, including 2D, rotoscoping, stop-motion, and 3D, among others. The movie is a mixture of old-school video-game graphics, 8 Bit music and Japanese anime-inspired animation that tells a somewhat confusing story of a sad girl and an odd, big-headed doll that become friends — and face demons — in their quest for ice cream.

After making rounds of various film outfits looking to distribute the film, Bilmont decided to reject a studio deal. He said that it would have forced him to give up all his rights and, given the limited niche audience, not get any money in return. Instead, it went straight to DVD, and from there it was just a small step to torrent sites. When he heard that his recently released animated movie had been leaked onto torrent sites, he immediately fired up his email client. But he didn’t send out DMCA takedown notices to stop the unlicensed distribution of the movie he had worked on for three years. Instead, he thanked the pirates for the free publicity, “I’m glad to see it being released and possibly finding more strange people who appreciate it. In the future, filmmakers like myself will work together with torrent sites when releasing films.” He realized that money had to be made on sales of merchandise and, if possible, in case of DVD sales.

Times are changing. Sometimes, giving away for free can be profitable.

Parle Agro Hippo: Using Twitter to track inventory and replenish stocks

I recently came across the initiative by Parle Agro for its baked snack brand Hippo where they have utilized the social media to track inventory and replenish stocks. This post examines the initiative.

Parle Agro launched snack food brand Hippo in 400,000 stores across India. Since its launch in June 2009, the brand has operated by the philosophy of establishing itself in the US$ 1.5 billion Indian snack market with its unusual tagline, ‘Hunger is the root of all evil. Don’t be hungry.’ The package of Hippo baked munchies sported its mascot, an unusual black-coloured character named Hippo. In February 2010, Nadia Chauhan, Joint Managing Director & CMO, Parle Agro Pvt Ltd. stated that “It’s been nearly seven months since the brand was launched and by now we have a national footprint. The response has been very good following the launch and we have exceeded our expectations in these seven months. We also opened four factories since the production began”. However, the unexpected sales pressure along with a new, unsettled sales and distribution network created problems in inventory management as stocks were drying up in stores and they found it challenging to track and re-stock the empty stores quickly. The coverage of retail stores was further complicated because more than 90 % of Indian snack market was still catered through unorganised retail.

In order to reinforce its sales and distribution network, Parle Agro partnered with Creativeland Asia and turned to social media to experiment with alternative retail inventory tracking methods. The snack brand explored the possibility of using social media to crowdsource the sales and distribution network in a huge country like India and get consumers to voluntarily work on augmenting its supply chain efforts. Both the partners came up with something very special on Twitter, pushing the boundaries of what 140 characters can do for a snack food. What they have achieved, in short, can be called crowdsourced inventory tracking.

Hippo asked his Twitter followers to send a tweet whenever they couldn’t find Hippo in stores and promised to replenish stocks within hours. On February 2010, the @HelloMeHippo twitter account sent out this message: “Hippo ask you tell to Hippo when you not find Hippo in shop. Hippo come there at once and fight hunger.” The company called it ‘Hippo English,’ ostensibly straight from the mouth of the mascot itself. Parle Agro acted on the tweets by sending word to local distribution partners to get snacks into the newly empty shelve who restocked the store within hours. Hippo also reciprocated with incentives and real-time stock replenishment updates on Twitter.

As people followed the Hippo’s call, Parle Agro became beneficiaries of the first Twitter-based real-time nationwide stock checker. At negligible cost Parle Agro managed to leverage Tweeters, ‘mostly… in cities where Hippo was present but maybe temporarily unavailable,’ as an essential part of their supply lines. The company had Tweets pouring in from 45 cities across India. Thus, Parle Agro had 400 additional people helping it in its sales and distribution efforts over Twitter – equivalent to almost 45 % of the strength of its sales and distribution network itself. The company claimed that sales rose by 76 % in the first few months of its launch of the campaign.

The resulting response prompted Parle Agro to set up a core cell which instantly passes the information received as tweets to the respective area sales and distribution teams. Hippo continues to respond to the tweets with regular and meticulous updates on stock replenishment and also sends out personalised anti-hunger hampers to the most active tweeters, complete with a handwritten note. The initiative became one of the six entries from Indian agencies which were shortlisted in the Media Lions at Cannes 2010 in the Best Use of Social Media Marketing sub-category.

While the initiative focused on places where Hippo was already sold, it has potential to be much more. Parle Agro believes that they haven’t just created infrastructure to track stock, they’ve created one that can identify, gauge demand in, and prioritise new markets. Nadia Chauhan stated, “if a retailer doesn’t stock Hippo but there is a consumer demand for it, we can convince him to stock it. The initiative has also helped us to identify markets where Hippo sells out fast” While the company says that the initiative aimed to sharpen Hippo’s distribution, it can be said that it also helped in spreading up awareness, top of mind recall and demand from consumers.

Thanks to their popularity, Hippo munchies flew off the shelves; thanks to social media, they flew back on them.