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APRIL 10, 2001

COMPANY CLOSEUP
By Faith Keenan

Dear Diary, I Had Jell-O Today
NPD Group is bringing buying-habit data from consumers into the Internet Age by dropping the old handwritten journals

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Remember the diary you used to keep until you were 12 and had better things to do? You'd fill it out religiously for a few weeks, then the entries would peter out as the thrill of self-confession wore off. The same thing happens to consumers who keep daily tallies on eating habits, personal hygiene, and the like for market researchers: They leap from the starting blocks with a bang, only to fizzle before the finish line, leaving less reliable results for number-crunchers.

Now, paper is out and the Web is in. Consider NPD Group, a market research firm based in Port Washington, N.Y., that takes its name from "national purchase diaries." For nearly half a century, the company has relied on these handwritten report cards to gather data on what folks might be eating at fast-food outlets or whether they prefer briefs to boxers and why.

Then the Net gained credibility as a research tool, and NPD decided it's the only way to go in a wired world where data can be gathered and disseminated within hours. The company has spent more than $60 million over the last two years and has taken a hit on its bottom line to turn itself into a Web company. Now it's beginning to collect purchase and preference data from 925,000 online consumers worldwide (710,000 in the U.S.).

It provides tools that crunch the results in 184,000 ways and delivers them to customers like Burger King, General Mills (GIS ), and scores of others that are hungry to track how their stores and products stack up to competitors'. "It's like heroin -- it's must-have information," says NPD President Bill Lucas. NPD is the ready-to-please dealer. "We're trying to make it simple for users to get what they need," says Lucas.

BURGER BYTES. How can 184,000 graphs be simple? The Net and the software behind it lets clients punch in parameters and get results in fewer than five seconds. Take Burger King, a 30-year NPD client that also helped advise the company as it developed its new system. It may want to know what age group in Houston is buying the most burgers, broken down by Whoppers, double cheeseburgers, hamburgers, and so on. The Burger King researcher would go to NPD's online food portal, called Foodworld, and insert the age group, burger, geographic, and time criteria in pull-down menus. Presto -- a chart would appear, perhaps showing that kids are eating more Whoppers these days.

The information might cause Burger King to alter product sourcing or promotions to capitalize on the change in demand. "It captures all their eating habits specific to Burger King," says Debbie Miller, former director of performance analysis in the chain's marketing department. Paper diaries didn't do that. "If someone had a burger, they would record that," says Miller. "But we wouldn't know if it was a Whopper or [something else]. Just a large or small burger. That was the extent of differentiation between burgers."

That's not the only advantage to gathering and delivering data online. Another is faster reporting. NPD customers used to receive data collected in binders, then on CDs, on a quarterly basis -- sometimes too late to be useful. With the Web, they have it within weeks. And it's more reliable, says Lucas. Teenagers, for instance, were notoriously lax about filling out paper diaries. For clients that target the younger crowd, like Gap (GPS ), the percentage of buyers surveyed would be skewed to an older audience, because they were the ones reporting. The Net, though, is more teen-friendly. "The online data aligns perfectly for clothing," says Lucas.

The change in data-collection methods has been nothing short of revolutionary for the research house. The company began its all-out conversion two years ago when it pulled 14 key executives together into a unit and told them to turn the company into an online entity. Their development efforts were topped off in January, when NPD sold its custom consumer-panel unit used for mail and telephone research, which represented 40% of its business, to Ipsos, a French research conglomerate. NPD's revenue will take a hit: Lucas says the company expects sales of $100 million this year, down from $160 million in 2000. But it hopes to jump to $200 million in 2003. NPD would not comment on whether it expects to remain profitable this year.

MORE FOR MORE. Plenty of other research firms have jumped on the Net bandwagon in the last two years. "Before that, the population online was not like the rest of the population. They were different folks -- the nerds, Webheads, students, almost exclusively male," says Jim Spaeth, president of the Advertising Research Foundation, a trade association in New York. "You couldn't find out about Campbell's soup users from them because they weren't."

But by 1999, leading research firms like Market Facts and NFO were showing that online studies were delivering the same results as offline ones -- faster and for less money. Still, total revenue for online research amounted to just $219.5 million of a total market of $5.4 billion (about half being consumer research), according to the newsletter Inside Research.

That amount is projected to double in 2001, and NPD intends have a chunk of it. The company is banking on being able to charge customers more for better data delivered faster and more often to their desktops. Its 40-odd clients using Foodworld pay between $85,000 and $150,000 for an annual subscription, depending on the amount of information they want. That's 25% more than they used to pay, says Lucas.

In this case, companies are hoping that more for more will mean even more on their own top lines.