Customer Insights Beyond Market Research

Customer Insights: Beyond Market Research Patrick Barwise London Business School 1. 2. Differentiation that matters (“Simply Better”) Customer insights that matter (work in progress) 1. Differentiation That Matters FT Review “This is a book about marketing for people who have read too many books about marketing”. Gary Silverman, FT Two Marketing Myths • The Uniqueness Myth Customers will buy your product/service only if it offers them something unique (or cheaper). The “Table Stakes” Myth In today’s competitive markets, you can no longer differentiate the basics (“table stakes”) • The Uniqueness Myth: The Reality “Customers rarely buy a product or service because it offers something unique. Usually, they buy the brand that they expect to meet their basic needs from the category – gasoline or strategy consulting or mortgages – a bit better or more conveniently than the competition. What customers want is simply better – not more differentiated – products and services.” - Simply Better, Preface, page X A Textbook Well Differentiated Brand An Even More Valuable Brand Brand Valuation ($ bn) Source: MillwardBrown (WPP) April 2006 1. Toyota 2. BMW 3. Mercedes 4. Honda 5. Ford 6. Chevrolet 12.5 14.4 23.8 17.3 30.2 13.8 13. Volvo 3.4 The Key Concept Differentiation that matters (to customers) The “Table Stakes” Myth: The Reality • The evidence from companies like Toyota, Tesco and P&G is that, through customer focus and continuous improvement, you CAN differentiate the basics • But it’s hard work • The good news for the “simply better” companies is that most companies still keep letting down their customers The World’s Most Famous Car Brand PR Triumph: An Exasperated Customer Writes Dear Sir or Madam My congratulations to you on getting a yacht to leave the UK on 28th November 2004, sail 27,354 miles around the world and arrive back 72 days later. Could you please let me know when the kitchen I ordered 96 days ago will be arriving from your warehouse 13 miles away? Yours sincerely John Roberts : Another Consumer Strikes Back Source:The Times, June 9, 2005 Ashley Gibbins (26), having been put on hold for an hour while trying to order a broadband internet connection, stumbled across the facility to change NTL’s recorded message while pressing the “star” key. He left the following message: “Hello, you are through to NTL customer services. We don’t give a **** about you, basically, and we are not going to handle any of your complaints. Just **** off and leave us alone. Get a life”. NTL admitted that it reflected a serious security flaw in their system Service Quality Is Not A Commodity “The worst-performing [US mobile] carrier received 5.7 times as many complaints per million subscribers as the best” Source: McKinsey/Better Business Bureau (2004) The Strength of the Toyota Brand • Toyota Corolla vs Chevrolet Prizm (same car, same plant) • GM spends $750 / car more in incentives • Corolla outsells Prizm four to one • And keeps its price premium in the secondhand market • The brand is the only difference between the two products Why is Toyota a Stronger Brand than Chevrolet? • Over many years, US customers have found Toyota makes reliable cars that get you from A to B in good comfort, at reasonable cost, and with generally good after-sales service • Customers’ experience with Chevrolet have been more mixed • Toyota has been simply better at providing what most car buyers want - the basics • Customers remember this (and tell each other): that’s brand equity Easy to Say, Hard to Do Peter Drucker: « Most Influential » Leadership Visionary – AMA, 2003 « Marketing is not a specialised business activity…it is the whole enterprise seen from the customer’s point of view. » Peter Drucker The Practice of Management, 1954 The Key Take-Aways • Your first priority should be to understand customers and give them what they really value (better than the competition) • What customers really value is product and service quality, simplicity, convenience, reliability, and reasonable value for money • Genuinely useful extra features and benefits, attractive design, and outstanding brand communications are great, but are not a substitute for being “simply better” at the basics 2. Customer Insights That Matter • The next book (ie work in progress) • Build on “Simply Better” • To be published by HBS Press, summer 2008 How Do Companies Learn About Customers? 1. Personal experience and direct customer contact 2. Qualitative market research 3. Quantitative market research 4. Customer database analysis 5. Learning from operations 6. Collaboration with business partners 7. Market intelligence Customer Perceptions and Behaviour Consumer Perceptions Consumer Behaviour Point of Purchase Perceived Need Availability Category Knowledge and Brand Equity Distribution Marketing Communications Expected Benefits Category and Brand Purchase Point of Purchase Impressions/ Information Design/ Packaging and POP Comms. Price Satisfaction Experienced Benefits Brand Usage Price and Sales Promotion Product/Service “Would You Definitely Recommend This Airline to a Friend?” (%) Source: Holiday Which?, Spring 2005 Rank (out of 58) 1 6 9 16 32 34 46 51 57 Singapore Airlines Virgin Atlantic easyjet Ryanair BA American Airlines Air France Thomas Cook airlines Iberia 82 60 51 40 31 29 18 15 10 Stages of Innovation/Improvement Generating new ideas Selecting promising ideas Customer insights Developing selected ideas Launching proposed improvements Improving existing operations Qualitative/High-Touch vs Quantitative/High-Tech Methods Explore radical innovations Improve existing offer/activities High-Tech High-Touch Bridging the Empathy Gap • Personal experience and direct customer contact • Ethnography, metaphor elicitation (MR vs DIY?) • Talking and listening to customer contact staff Understanding the Drivers (Existing/Lapsed/Potential Customers) 1. 2. 3. Dissatisfaction with the brand (vs competition) – usually the basics; customers’ top priority Satisfaction with the brand (vs competition) – also usually the basics but also add-ons Dissatisfaction with the whole category – usually the basics; potential source of significant comp. advantage – can also explore potential add-ons, but usually more marginal – drive the market The Organizational Context Values Responsiveness Performance Market Sensing Source: Simply Better, p 157 The Key Take-Aways • Use all the ways of learning about customers (high-touch/high-tech) • Drivers of dissatisfaction (and satisfaction) with the brand and the category • Insights that don’t lead to improvement achieve nothing