Revenue Catalyst


by Allan DeYoung

Customer research too often serves as a disaster check, a cost without clear ROI.

Before Alan Lafley took over as CEO of Proctor & Gamble in 1992, design was viewed as “the last decoration station on the way to market.” Lafley’s success at P&G has largely been credited to the way he has embraced design as a key element of the company’s strategy and a real driver of financial value.

Much has been written about the importance of design at leading companies like P&G, Apple, OXO and Samsung. But what’s often overlooked in these stories is the critical role that customer research plays in the innovation process. Because great products, services and experiences can only happen when you truly understand your customers and their behaviors, beliefs and needs (both expressed and latent).

Unfortunately, in many organizations customer research is still used as a last-minute disaster check, and is seen as a cost rather than an investment with quantifiable ROI. In this white paper we outline ways in which smart companies can incorporate research into all stages of the brand development process and, in doing so, can lower product-development costs, drive revenue, and improve customer satisfaction and retention.

To many marketers, research is all about listening to the voice of the customer. But sometimes listening isn’t enough, particularly in the earliest stages of the ideation process. Breakthrough ideas are more likely to emerge when you use ethnographic research techniques to immerse yourself in the customer’s life and watch how they behave in real life settings. By observing customers in the act of making a purchase decision, you begin to see the role of your category, company, and product/service in a completely different light. We believe that ethnographic research is a powerful tool to help companies identify those elusive “white spaces” – market niches where the consumer feels no currently available product or service meets their needs.

Procter & Gamble spent 22 months visiting consumers’ homes to understand what they found difficult or inconvenient about floor cleaning. They observed that three out of every four times a vacuum cleaner was used, it was to clean up a little mess on a small area of the carpet rather than a thorough, full-room clean. Researchers also observed that putting the vacuum cleaner away and getting it out again was seen as a major inconvenience for consumers, particularly if they had to carry it up and down stairs. Based on these observations, P&G went away and developed the Swiffer, a device that looks and feels like a Swiffer but that can pull debris off carpets without a motor.

Customer research during the prototyping phase can play a critical role in shaping your final product/service and identifying potential barriers and opportunities for success.

In our experience, focus groups are the best option for eliciting customer and prospect feedback at this stage, as an experienced moderator will be able to probe on key issues and facilitate an in-depth discussion that would not be possible in interviews or online surveys.

BMG Music used focus groups to help them redefine their customer Web experience as the company shifted from a pure direct-mail business model to a multi-channel relationship. As they evaluated prototype Web sites they learned that customers and prospects had different expectations and demands of the site. For new prospects, the most important feature of the site was the ability to sign up and make initial selections as quickly and easily as possible, whereas returning members wanted to take more time to review and purchase music. This insight allowed BMG to create different online shopping experiences for prospects and members, which in turn lead to increased conversions and sales.

At this point in the process, the role of customer research is to provide quantitative data that allows you to validate and tweak final concepts, as well as establish a benchmark for future quantitative studies. A quantitative study will help you gain a greater understanding of such factors as product appeal, clarity of messaging, fit to positioning, preference and purchase intent. Typically, one hundred completed surveys per target audience is considered “industry standard” if you want to identify both major and minor differences and provide projectable results.

Online research tools such as Zoomerang and SurveyMonkey, have made quantitative research much more affordable, but these tools can easily yield misleading or incomplete results if not handled by those used to designing and interpreting the results.

Most companies will not be comfortable making a “go/no-go” decision until they have completed the ultimate form of customer research – the in-market test. Typically, a company will offer the new product or service on a limited basis to establish a relative comparison with current market offerings. For example, when Suzuki wanted to introduce 4-wheel drive vehicles into North America, for example, the company provided a limited number of dealerships with several vehicles. Only after customers had the opportunity to see, touch, feel and test drive them, did Suzuki believe they had sufficient proof of concept to roll out their new models.

Smart companies understand that research does not come to an end after their product or service is introduced to the market. Engaging in an ongoing dialog with your customers – whether in-person, online, or by phone – is critical for any company that wishes to retain its competitive edge and grow customer lifetime value.

Secret Shopper analysis has long been used as an “undercover” way of gathering data on the customer experience. But new tools and technologies are allowing marketers to take the game to a whole new level. For example, we can now use data-mining software to find out what your customers are saying about your brand across the Web—in public chat rooms, blogs, social networking sites, competitor sites, and newsrooms. It’s like being a fly-on-the wall when your customers are talking about you behind your back, and without the inhibitions that an interview or focus group setting might impose.

It’s easy to become overwhelmed by the amount of data available to you once your product or service is in market, especially with today’s sophisticated CRM applications. In our experience, one of the main challenges faced by marketers is how to make sense of all the data available to them so they can act on it without delay. A recent study by the White House Consumer Affairs reported that 96% of unhappy customers won’t bother to complain to you but will tell 9 friends about their negative experience. If this is, indeed, the case then you cannot afford to let product/service problems persist simply because the right data has not found its way into the right hands in a timely manner.

Research has always been about asking the right question, in the right way at the right time. And with today’s tools and technologies, marketers have never had more powerful tools at their disposal when it comes to understanding how their customers think, feel and act.

We believe that an in-depth understanding of your customers is a prerequisite for growing customer lifetime value and driving revenue growth. As such, research should be involved in all stages of the product/service development process and not just as a last-minute disaster check.

Finally, many companies may be tempted to cut their research budgets in an economic downturn. We believe that this is a big mistake. Making the investment to listen to your customers and respond to their concerns at a time when they are most likely feeling insecure or uneasy, will help you strengthen customer loyalty and advocacy. By engaging in an ongoing dialogue with your customers when times are tough, you will be best placed to leapfrog the competition when times change for the better.

To learn more about, contact:

Allan DeYoung