Ep 557: Why People Buy:  CPG & DTC Brand Growth with Seth Waite

0:00Why do people buy? Why do they make the decisions that they do? Is there a science behind this process? What is it and how can you figure it out? Demographics are interesting, but they're not always insightful. Most founders show up and they're like, my mom likes this. My friends like it. This is probably really good. Unless this stuff is flying off the shelves, chances are you don't understand yet who your customer really is. product market fit is when the only reason why you're not selling more is money. I'm not just looking for people that will buy my product and looking for people that are obsessed.

0:35The rest of your business all works when you can go and scale your VIPs and reverse engineer like what is it about them.

0:50Seth Waite:welcome to the d2c podcast seth i saw your profile on linkedin um your background looked really interesting why don't you start us off with a little background uh as to your hero's journey in the cpg space yeah my very first experience in cpg was working just out of college at a large agency. And I was responsible for digital marketing and content for Sam's Club. So wholesale, CBG items. The only reason why they gave it to a kid like me at the time was this was like at the very beginning of digital marketing. And I was a digital native, essentially. And so that seemed like it made sense. That's really where it kind of kicked off.

1:37Had a bunch of experiences there, launching programs. I was part of the team that launched Sam's Club's first mobile app, which doesn't sound that impressive. But at the time, there were only two other retailers in the top 10 that had mobile apps. So we launched a BlackBerry app as part of the mix. So that kind of dates me. But that's when we started and I started getting experience. And over the years, I've lived in Bentonville, Arkansas twice. So I've been very familiar with the Walmart world. And I don't know if there is a bigger mecca for CPG than Bentonville, Arkansas. Definitely not a large city by any means, but everybody in the world is there.

2:25And so I got lots of exposure over the years and was just always fascinated by that core question of why do people buy? Why do they make the decisions that they do? And is there a science behind this process? Answers yes. But what is it and how can you figure it out?

2:44Seth Waite:Did you have an aha moment that made you realize that brands actually don't understand why people buy in a lot of cases? For sure. Yeah. Well, what it always comes back to is there's always this moment where people show up and they're like, we understand our customer. And I feel threatened that you'd ever say that, that we don't, right? Like what normally happens is I get reached out to by an executive or somebody in leadership and they'll say, Hey, I don't think we're close enough to our customer. I don't think we understand them well enough. And then I go have a conversation with the team and the team's like, we've got this buddy, like, you know, get out of here.

3:21For me, it was this realization of everybody's operating off of like three-year-old decks, you know, like old presentations. And then when I would actually go get these presentations and like blow the dust off and actually look at it, I'd realize that those were built on assumptions also. So like there was no data, like the further I dug, it was just like a lot of statements by senior leadership in CPG talking about perspectives. And there's definitely something to having experience for sure. But having data is really powerful too. And when you can combine experience with data and perspective there, you get something really powerful.

4:01So when I was doing this work with Sam's Club, I worked with a lot of large CPGs who were selling wholesale items. I was like 24, 25 years old. I was not the ideal Sam's Club customer. Like didn't naturally have a membership, didn't need to buy like 20 pounds of chicken at a time or like fill my cart up with bags of rolls and all this kind of stuff. And so to figure it out, my kind of aha moment was like, holy cow, there's a science to this process. Even though I'm not the ideal customer, I can really figure out who is and how we sell seven pounds of pick an item. Like I can kind of I put myself in the perspective of why am I loading up a sled of items as I go shopping at this warehouse?

4:55And that was this kind of moment of like, oh, there's a science here and I'm going to go

4:58Seth Waite:figure it out. So what tools or frameworks do you use to uncover the hidden reasons that people actually make consumer decisions? Yeah. So most of the time, we've got really kind of two core perspectives that I think are different than anyone we've run into. And the first big one is that demographics are interesting. And that's kind of the word we always use. But they're not always insightful. Like, they don't tell you why people do what they do. They just give you some perspective. And so all the time, we'll hear people walk in and be like, our customer is a millennial mom. Our customer is a, pick a, you know, Gen Z.

5:36That's the popular one right now. We have a Gen Z customer. And the question always comes after that is like, so what does that mean? Because if I put it a hundred Gen Zers into a room, they're definitely not the same. They don't care about the same things, buy the same things. Like we're just throwing people into buckets and acting like all these people are motivated by the same things. That idea of like demographics are interesting, but not always insightful is important. And then what we go to is what is insightful, what does answer the question of why is motivations. And so most of the time when you're doing like segmentation work, you're trying to understand who your customer is and figure out if the world is 100 people, where are my people?

6:25Then in that process, historically, most people start with this kind of demographic model. Like let's start grouping people based on how much money they make or ethnicity or all these kinds of circumstances, our approach is the opposite then, which is let's go figure out some of their basic behaviors and then let's connect the dots between those behaviors and the reason why they're doing it. And there's two elements there that are really important because there's the reason we say we're doing things and then there's the reason we do them. And they overlap more than we think. They do overlap. But there also are these edge cases where, you know, there's a reason why shopping carts are see-through.

7:09That's what I always kind of say. Like, the reason why we buy a lot of products is because we're influenced about how we're seen by others. Like we, we, when we're shopping, when we're putting things in our car or thinking about what we're doing, we have a perception of ourselves and we have that desire to have other people that see us understand that about us. I'm a value shopper and I only buy vegetables. I can tell.

7:34Seth Waite:Yeah, right. Yeah, exactly. I only buy private label or I only buy this premium product or everything in my car is neon colors and super bright because I'm buying emerging brands, like whatever that is, or I'm an early adopter. So in the process of trying to figure out these motivations, we have to ask those questions. What do you say you do? And then what are you doing behaviorally? And we use something called the why people buy pyramid. And so it's a framework we built to kind of make sense of what can get really confusing and convoluted really quickly. So the why people buy pyramid is built off of like Maslow's hierarchy of needs.

8:14So if you think about that, like pyramid structure at the very bottom, right, you have this kind of idea of like safety and, you know, taking care of your physical body. Like those are real basic instincts that you start building off of. So similarly, in our why people buy pyramid, we're building at the foundational level, very similar things. There are basic needs. And we primarily work with food and beverage, by the way. So that's kind of our sweet spot within the CPG world. And we work with people who are both in retailers and e-com direct to consumer, all the channels. And these principles really work across all of the channels that you could be in, in the CBG world.

9:00But what we've done is basically said, okay, in the food and beverage world, in your basic needs category, you can't overlook the fact that a core basic part of food and beverage is taste. Like everybody wants to be like, oh yeah, yeah, taste is kind of an afterthought. And it's like, no, actually it's the whole story. Texture matters, right? Like how does this feel in your mouth? Is it gritty? Is there an aftertaste? Is there something unpleasant? Like smell. There's all these basic needs that have to be met. And as part of it, there are things that we don't often think about like satiation. So this idea of like, is it satisfying?

9:37Is it filling? Do I feel like I'm just eating cotton candy? And sometimes cotton candy is what you're looking for, but like not when you're looking to eat a protein bar and you walk away and you're like, I'm kind of starving still. And so as you go through these basic needs, this pyramid has like 30 different motivators that we evaluate and look at. And so you have all the basic needs, components, price, all of those things. Then you work up to emotional values. And these emotional values are really driven around things like nostalgia. So does this take me back? Like, am I eating Oreos? Because I remember as a kid, like splitting them apart and dipping them in milk and having this experience?

10:19Is that why they're in my pantry? That could be part of it. And so you're looking at nostalgia. You're looking at the way it makes you look. Does this make me look more attractive and better by having this? All of these kind of emotional values that are important. Indulgence, is this a treat for me? And then you work your way up to personal goals. So it's like, cool, we've got this baseline of needs. We've got emotional values that are deeply subconscious oftentimes, and we don't recognize those. That's usually where what we say and what we do have some disconnect is in the emotional value section.

10:57We're not all as honest with ourselves or as aware as we'd like, but then you move up to personal growth. And so these are where in food and beverage, especially right now, you're seeing a lot of functional foods and beverages. So like, this is going to give you energy. This is helping you lose weight. This is helping you grow muscles, like hitting your macros, right? So this is like, I've got goals and I expect my food to do work for me here in these goals. So that's really this third phase is like, let's hit these personal growth areas. But again, it still has to already be very functional down at the like basic needs level.

11:34It has to meet these emotional values. Oh, and by the way it's got all the macros that I need to hit my goals today. And then the very top one is just beyond self-concept of like, and it's connecting me to a community that's bigger than myself, or a cause or a mission. That's kind of that snapshot of like, that's the world that we look at as we're evaluating and thinking about motivators.

11:56Seth Waite:Can you give me an example, either a client that you've worked with or someone in the wild like Oreo, who sort of really mastered this ladder, being able to attain resonance, I guess, at every stage of that pyramid? Yeah. I mean, Oreo is a great example. They do a killer job. They dominate the shelves. They're all over the place. Put that in context a little bit. I've heard this recently because I was working with someone who was trying to build like a diabetic version of the Oreo. It's like the cookie is a big category, but Oreo is as big as like the entire cookie category itself, which people don't really realize.

12:32Seth Waite:It's like, it's just massive. Most people think of cookies as a pretty diverse set of products. Like you walk down the shelf, like the shelves and in your mind, the aisle's got like chocolate chip cookies and it's got this huge row of all this stuff. But when you walk into most grocery stores, 80 % of the aisle is Oreo. So you've got the OG Oreo, like original flavor cream. And then what Oreo has done is made variations of all these. They took this original product that triggers enormous nostalgia. So if we go back to the pyramid, they nail it with taste. So they've got a variety of products to hit whatever your individual proclivities are too.

13:17So if you're like, hey, I'm all about the cream, well, you've got double stuff, mega stuff. You've got whatever flavor variations you're interested in, but like they nail the taste. They've got a really strong texture conversation. The entire nostalgia we have around like twisting that Oreo open is that we're getting the crunch of the cookie. And for people that really like the cream component, you've got the lick or the bite or whatever that experience is. So it's very texture oriented and it's creating memories. As you're eating the Oreo, very few foods have the kind of memory generation that Oreos do.

13:56And all their ads for a really long time were reinforcing that when you're sitting down at the table or pick a place, usually at home, and you've got your little mug of milk or your little whatever, your little ritual that goes with the Oreo consumption, all of a sudden you're just like you're logging that in your brain. and now you're moving into that emotional value section. So they're like checking the box off. It's a pretty inexpensive product. You get a lot of cookies.

14:26Seth Waite:Very satisfying. You've got the chocolate element as well as the creams. You've got this combination of flavors and textures. You can eat a whole sleeve of those things in a single sitting. And they're very shareable. When it comes to kind of the occasions that you're thinking about as well, it's like it's easy to put a couple cookies in a Ziploc bag and send it off with your kid to school or put it in your own lunch. It's a late night snack. Like after dinner, I'm going to have a couple Oreos. It's easy to have at any time. So it's very consumable. But now you start adding these emotional values of like, it feels a little indulgent, but it's small enough that I can have just one, which is not the case.

15:08But you feel like, oh, I can indulge in a cookie or two. I can take that part of that thing. And then it really just plays on the nostalgia. What we've seen from a data standpoint is nostalgia works best when it's connected to a place. So it's not enough just to see a brand. But when the brand can connect you with a location, nostalgia's ability to increase your marketing capabilities or, you know, like the desirability of something goes through the roof. And that's because that place will have a special meaning that brings all these values and attaches it to the brand now. So when you're thinking about an Oreo and you're thinking about opening your lunchbox and a parent or a loved one has prepared this lunch for you and they've got this little treat in there that surprises you and you're sitting with your friends at school, right?

15:58There's a moment in time where you feel really happy and Oreos are part of it. Or that indulgent moment at the end of a long day and you're sitting at home and you're like sitting down to a favorite show and you're having this, you know, cookies and milk experience. So nostalgia is super powerful. Oreo owns a lot of moments. And then on top of that, right, personal growth, not as much. They're not dominating in the like, hey, we're helping you lose weight and do all of those things. But where they win is they have a crazy amount of limited editions. They're constantly also not just playing on the emotional value of nostalgia, but they're saying, look, as much as you like the original, we're going to bring excitement and energy, weirdness.

16:42there's a wasabi flavor of Oreos. Not good. But they have 231 limited edition flavors, and they'll bring them in every six to eight weeks. So Oreos taking this very old school thing that we all know about, and they're making it a regular TikTok and Instagram conversation every six to eight weeks.

17:04Seth Waite:And then they walk that line between being the most abundant cookie in the cookie aisle, but then also having scarcity within each of their like limited edition. So they get to play in both those worlds. Yeah. Cause you're, you're literally pursuing, like if you, if you want to know like how those, you look at eBay, there are people selling limited edition cookies and then there's a huge debate around flavors. So Reddit, great place to look at for like consumer research and just perspective. Like there's entire conversations around it. There are rankings. So people have built all of these lists.

17:39I've tried 72 of the 231 flavors, and here are the best ones. And let's compare regular peanut butter Oreos with Reese's peanut butter Oreos and which one's better. And so they're checking lots of boxes. And that's really what it comes down to is you don't have to check them all. You don't have to always check off the personal growth or have this tied to some mission that's like going to elevate your experience. They're just nailing the two bottom categories and it creates a pervasiveness that's dominating the grocery store.

18:14Seth Waite:This is kind of crazy. I read an article a while ago, because they also have another category. If you're talking about a pyramid, they also appear to have some sort of like free Masonic symbology on their cookie. They actually have this like Western cross and these things. So maybe they're also activating some like occult, like eye on top of the pyramid that we don't realize or whatever. And it makes me think of one of my favorite all-time movies. If anyone in the audience hasn't seen this, go track down Century of the Self. Have you seen the movie Century of the Self? It's a BBC documentary. It's a four-part BBC documentary about how Freud's nephew came to the United States, Edward Bernays.

18:51Seth Waite:He wrote a book called Propaganda, actually. But he started the world's first PR firm. And the documentary gives these examples of basically unlocking people's subconscious desires. Like we've taught Maslow's hierarchy of needs is quite often very overt, you know, about what people want. But there is this other aspect of these subconscious drives that Freud says that we all live with. And he gave examples of the one was Duncan Hines. Duncan Hines had this instant food cake that they could not sell to, at the time, housewives who were making those buying decisions. because, and they did through consumer research, they found the women felt like it was cheating to just create a cake and not create it from some scratch.

19:32Seth Waite:So that Freud's nephew came in, he's like, okay, well, have them add an egg to the mix. Take out whatever the egg does in the mix and have them add an egg to the mix. And that was this Freudian sort of like symbol that made it feel like it was more homemade and it totally changed the scope. I baked the cake. Yeah, exactly. I baked the cake. I added my Freudian egg to it or whatever, right? Another one about women and smoking, which is a terrible example, but about how he tied cigarettes to the suffragette movement and they became this phallic symbol of liberation. And so I'm always interested in the sub-psychological reasons that products do well as well, right?

20:10And you look at that from a lot of perspectives. Like every time someone talks about the repackaging, the rebranding, like how all these things work, the conversation is are you going to mess up something that's working? That's always a big risk. You see that all the time. Like Tropicana had a really tough rebrand conversation, not like outside of just like the Cracker Barrel controversy and all these kind of things. But like you look at that and part of it is the subconscious elements. Like the Cracker Barrel conversation, a huge part of that is they're removing some very subtle things in the logo that generate most of the value systems associated with their brand.

20:48Good, bad, indifferent. Like I'm not judging those elements as much as they're triggering for people an association that has nothing to do with the actual Cracker Barrel experience. But it brings those values in and for certain segments of the population dramatically enhances them. you know, whatever that is. And so you're looking for those areas. And that's why I always go back to, you have to know your customer. You can't like make guesses. The average person isn't Steve Jobs, right? So like Steve Jobs is, I think who all these like founders and people, not just in tech, but throughout CPG and all these businesses will go back to and be like, he just had this intuition and he just understood the customer and what they wanted.

21:30And it's like, look, there's a really good chance, like a one in eight billion chance you're not him, you know, or whatever like that is. Like you're not probably going to have that kind of intuition. And intuition in my mind anyways, is just the ability for the mind to make sense of really good data and usually lots of data. So you have to be consuming all this information, but most founders show up and they're like, my mom likes this and my friends like it. And this is probably really good. And unless this stuff is flying off the shelves, Chances are you don't understand yet who your customer really is.

22:05And so we're always just pushing for people, talk to more customers, even if you're not going to go do a more scientific research approach. Like you should be constantly demoing products. You should be constantly having interviews and conversations. And that's going to inform you about the occasions people are using your products for. I mean, if you're in beauty, pick a scenario. You always want to know when are you using this? And what are you replacing? And that replacement component will tell you a lot about the psychology behind what people are thinking. So in food and beverage, the question I always have is, when I open the fridge and put this new product in there, after just going shopping, what am I not putting in there that I had in there before the shopping trip?

22:52Like, what's this replacing? What am I sliding over when I have this new product and I put it in the pantry or the cupboard? Like you're wanting to think about those elements because the IRL version, that in real life version of how the product gets used once you leave the grocery store tells you so much. And most people are constantly talking about the person that makes the purchase. So it's like it's the mom who buys this in the grocery store. And it's like, cool. But is the mom the one eating this at home? because that's going to make all the difference when you find out that this product you designed for dinner that is focused on, you know, mom character, and you end up finding that this thing gets eaten for breakfast by kids.

23:37You know, it totally changes, okay, my positioning, the offer, the way that I'm pricing and structuring this and building my promotions around it. And then also the messaging that show up on a website that show up in all your marketing and brand materials, all of that shifts when you better understand the occasion that they're using this for and the psychology behind why it fits in that situation.

23:59Seth Waite:The psychological job to be done, the product. We talked on this a lot about you don't want a two-inch drill bit, you want a two-inch hole, right? And people focus so much on the how and the what, but so much of it comes down to the actual job that things do. I have a quote from you here. It's not the people view product competition as like an adjacent brand, but it's not always that it's actually what solves the consumer's problem faster, emotionally, socially, or practically. A hundred percent. And we get caught, I think, outside of that, right? Like we're always looking at competition. We're always thinking about these other elements.