Two Ways Companies Obstruct Their Ability to Hear their Customers

I’ve recently come across a great report called “The Consumer’s Voice–Can Your Company Hear It?” It’s a benchmarking study that Boston Consulting Group (BCG) conducted in the spring of 2009 to analyze best practices and gaps in companies’ capabilities for doing consumer insights. Forty global companies–each with at least $1.5 billion in sales and many exceeding $10 billion–participated. The full 30+-page report can be downloaded here. It’s worth the read, as there’s lots of great learning to be gained from the knowledge presented, even for those companies who might consider themselves experts at obtaining and retrieving maximum value from their consumer insights programs.

There are a couple insights presented in this report that are particularly worth a call out, as I repeatedly see companies making these mistakes, and as a result, are failing to reap the most value from the consumer research they do invest in.

Obstruction #1: Companies fail to find balance in the amount of money spent on tactical, reactive research versus strategic-focused studies.
BCG looked at the market research budgets that the 40 participating companies in their benchmarking study had. They then correlated this information between spending as a percentage of sales and the quality of consumer insight. The critical drivers to improving consumer insights was less about spending more money and more about spending on different types of research, finding a better balance of tactical and strategic work.

I often see companies spend way too much of their overall consumer insights budgets focused on narrowly scoped projects. These are those studies where the outcomes have a shelf live of days, where they’re trying to learn which advertisement is better comparatively to others or which feature sets are most desirable for a new product, for instance. Too many of these closer in projects, without the balance of some more strategic, broader scoped initiatives can result in companies gaining a very myopic viewpoint of their business.

If interested in this question of how to spend your market research dollars more wisely, I’d encourage you to check out an article I wrote on the topic, published last May 2009.

Obstruction #2: Companies treat consumer insights as an “order taking“ function versus embracing it as a source of competitive advantage.
In the report, BCG presents the following taxonomy for making sense of how consumer insights functions can be integrated into organizations.

It’s those organizations that approach consumer insight as a source of competitive advantage (those in the #3 and #4 spots above) that are positioned to yield the most return from the studies that they embrace. In these organizations multiple departments and diverse functional roles are exposed to consumer insight, from R&D to the supply chain to distribution, along with the more usual suspects of marketing and sales. Market research is supported and championed in the C-suite. And knowledge gained about the organization’s customer is not generalized for all departments to use. Rather, detailed knowledge about the consumer is translated into specific targets per business unit or across the organization’s broader corporate portfolio.

It seems that there’s room for lots of improvement here. According to BCG’s findings, only 10% of the companies participating in the benchmarking study position consumer insights for competitive advantage. The majority of corporations are continuing to treat market research as “an order-taking function” and therefore significantly limit the value that the organization can yield from those studies supported.

If you’re wondering where your organization fits on the continuum of embracing market research as an order taking function versus a source of competitive advantage, check out p. 13 of BCG’s report. They have a short quiz you can take to find out.

The bottom line here is that quality consumer insights are valuable and effective at contributing to the growth and the profitability of organizations. It doesn’t have to cost a lot to be good at listening. It’s more that you need to be smart at knowing which levers to pull and how to align your resources corporate-wide to not only listen, but to hear and act on what your customers are telling you.

Categories: Customer experience, Ethnographic research, Innovation, Market research, Marketing, Strategy