Research that Produces Customer Insights

Mohan Sawhney Kellogg School of Management October 22, 2003

From market research to insight

What exactly is an insight? What are some examples of insights? What is the process of developing insights? How do we transform market research from providing information to delivering insights? What tools and frameworks will help us to improve the quality of customer insights?

Agenda
The nature of insights Why traditional research rarely produces insights How to do research that produces insights Rethinking the mission of the research organization A process framework for evaluating research projects

Insight Conceptual definitions

Grasping the inner nature of things intuitively Clear or deep perception of a situation Clear (and often sudden) understanding of a complex situation A feeling of understanding

Defining a customer insight

A customer insight is a fresh and not-yet obvious understanding of customer beliefs, values, habits, desires, motives, emotions or needs that can become the basis for a competitive advantage.
A not-yet obvious discovery A unique and fresh perspective A penetrating view of the obvious A competitively-advantaged idea Grounded in customer understanding Not a number, a fact, or a quote from a customer

Seven characteristics of insights

1. Not immediately apparent 2. Can be based on one data point 3. Often come from unusual sources 4. Often discovered accidentally 5. Often rooted in observed anomalies 6. Rarely emerge from quantitative analysis 7. Need to be useful

Examples of customer insights

The Sony Walkman as redefining the relationship between personal space and private space The i-Pod as being able to take all your music with you but yet being unobtrusive Maison Haire studies on Instant Coffee as reflective of lazy mothering P&Gs learning about Japanese mothers as being fastidious about personal hygiene, spending a lot of time outside their homes and traveling on public transportation Research on HDTV showing that videophiles are people with a lot of time to watch TV and not people with a lot of money to spend on video equipment Steve Jobs insight that people see color of their PCs as ways to express their personalities and make a personal connection with their PCs Sam Waltons insight that suburban and semi-rural markets are more profitable and underserved by competition

Virgin Mobiles Insights About Young Adult Market

Young adults dont like to be marketed to

Young adults dont have credit cards

Prepaid cellular Rebel brand image Anonymity No contracts Word-of-mouth advertising Non-traditional outlets

Young adults dont want their fathers carrier

Young adults buy lots of music

It only takes a few Companies built on a single insight

Home Depot Target Do-it-Yourselfers Federal Express Segment by speed Dell Be direct Starbucks Sell the experience Southwest Forget hub-and-spoke Enterprise Rent cars in the neighborhood Body Shop Pursue environmental & social change Microsoft Empowering people through software

Customer insights as a subset of business insights: The Innovation Radar

Offering (WHAT)
Brand Platform

Networking

Solution

Presence (WHERE)

Customers (WHO)

Supply Chain

Customer Experience

Organization

Process (HOW)

Value Capture

Brand

Offering (WHAT)

Platform Solution

Networking

Presence (WHERE)

Customers (WHO)

Supply Chain

Customer Experience

Organization

Process (HOW)

Value Capture

Brand

Offering (WHAT)

Platform Solution

Networking

Presence (WHERE)

Customers (WHO)

Supply Chain

Customer Experience

Organization

Process (HOW)

Value Capture

Brand

Offering (WHAT)

Platform Solution

Networking

Presence (WHERE)

Customers (WHO)

Supply Chain

Customer Experience

Organization

Process (HOW)

Value Capture

Agenda
The nature of insights Why traditional research rarely produces insights How to do research that produces insights Rethinking the mission of the research organization A process framework for evaluating research projects

Two ways of knowing Inductive versus Deductive Reasoning

Inductive Reasoning: Using observation to formulate an idea or theory. Qualitative or Interpretative research draws on inductive reasoning. Deductive Reasoning: Taking a known idea or theory and applying it to a situation (often with the intention of testing whether it is true). Quantitative or positivist research draws on deductive reasoning.
Traditional research tends to have a positivist bias

Two research paradigms

Qualitative Paradigm: Focuses on investigating subjective data, in particular, the perceptions of the people involved. The intention is to illuminate these perceptions and, thus, gain greater insight and knowledge. Quantitative Paradigm: Focuses on what can be measured. It involves collecting and analyzing objective (often numerical) data that can be organized into statistics and interpreted.

Contrasting the two paradigms

Qualitative Research Also Known As Type of Reasoning Objective Outcomes Quantitative Research interpretative / responsive positivist / hypothetico-deductive (usually) inductive Generate insights that lead to hypotheses Illuminate a situation to create deeper understanding and insights Qualitative, eclectic truth seen as subjective and socially constructed (usually) deductive Validate insights by testing hypotheses Accept or reject a proposed theory, or get specific answers to welldefined questions Quantitative, rigorous truth seen as objective and universal

Methods Approach to Validity

The Pyramid of Understanding

Traditionally, marketing researchers and research agencies stop here New understanding that is actionable and competitively unique Interpretation of the research findings.

Insights

Recommendations Findings Information Data

Consider carefully the research objectives. Data Analysis and Data Reduction

The Pyramid of Business Value

Insights Recommendations Findings Information
Of most value because offers new ways of looking at markets that lead to competitive advantage Summarizes the implications of the research for the business

Selected information that is of interest, but lacking in implications Informs the business about a market, but no indication of relative mportance of different pieces of information Of little value because it is usually difficult to understand and interpret on its own.

Data

It takes two to tango

Inductive, Qualitative, Exploratory Research that Produces Insights

Deductive, Quantitative, Confirmatory Research that Validates Insights

To blend the two paradigms into a synergistic whole, we need to eliminate the positivist bias in research, balance the research portfolio, and tightly link the qualitative research with the quantitative research.

Agenda
The nature of insights Why traditional research rarely produces insights How to do research that produces insights Rethinking the mission of the research organization A process framework for evaluating research projects

Research as photography
What to see How to frame What lenses to use How to focus How to develop How to share How to remember

Seven steps to insightful research

1. 2. 3. 4. 5. 6. 7. Right mindset Right projects Right tools Right customers Right suppliers Right metrics Right dissemination

1. The right mindset 10 tips

1. Experience the task 2. Open your mind 3. Enter the mind 4. Peel the onion 5. Respect the choice 6. Learn to listen 7. Be there yourself 8. Observe natural behavior 9. Watch little cues 10.Keep moving on

2. The right projects Balancing the research project portfolio

Proactive, Episodic

Reactive, Routine Validation Research Exploratory Research

3. The right toolsBroadening your repertoire

Ideas from Innovative Customers and Partners Introspection, Intuition and Brainstorming

Metaphors and Analogies

Customer Insights

Patterns in Customer Transaction Data

Anomalies and Discrepancies

Observation of Customer Behavior in Native Surroundings

IDEOs eclectic research toolkit

Cultural probes Scenarios Affinity diagrams Try it yourself Bodystorming Guided Tours Draw the experience Five Whys Activity Analysis Flow Analysis Immersion Fly on the wall Word-concept association Error Analysis Narration Predict the Headlines Customer Experience Still Photo Summary Social Network Analysis Cross-cultural observation Foreign correspondents Empathy tools

Extreme user interviews Shadowing

4. The right customers Thinking broadly about customers

Top Management Product Development
Fin an ce
Corporate Marketing

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L L ice ice n n sin sin g g

Market Research
Product Marketing

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Legal & Corporate Affairs Partners

5. The right suppliers From vendors to research partners

Trusted advisor versus research vendor Strategic relationships with bilateral commitment Strategic scope Integrated approach versus project-to-project Solutions and service-minded Complementary skills Eclectic methods Diverse points of reference Engaging, inspiring recommendations Consistent methodology and tools across projects

6. The right metrics Measuring the Value of Research

Decision value: What decisions did the research cause to be:
Different Not taken Improved

Learning value: What new understanding did the research provide us about our customers and markets that:
We did not know before Customers could not have told us We would have guessed differently

Business value: What implications does the research have for:

Identifying new opportunities Developing new products Differentiating us from competitors Seeing the market differently

Option value: How can the insights from this research be leveraged:
Across business groups Across functional areas Across research projects

7. The Right dissemination approach Presenting Research Findings

Worst practices
35 key findings from the research 10 pages of methodology Every possible analysis conducted Analyses just from that project Death by PowerPoint and bullets galore

Best practices
Key recommendations and implications for decisions Methodology in appendix Only analyses needed to support recommendations Integrates insights and analyses from prior projects Compelling narrative, written as a text story

Agenda
The nature of insights Why traditional research rarely produces insights How to do research that produces insights Rethinking the mission of the research organization A process framework for evaluating research projects

Market Research doesnt deliver: What CEOs say about Research

Not very
1

How useful is the information ?

2 3 4

Very
5

Finance & Accounting Marketing Information Services Human Resources Market Research Source : McKinsey

Criticisms of Market Research

Dont know our business Too data bound Confirm what we should already know Not integrative people, focus on one job at a time Not good at delivering or generating insight Presentation valium Insular Reactive Order takers Too rigid and slow

Some soul-searching questions

What value does market research add to our business? What are the major strategic decisions taken by our company over the past year? What role did market research play in these decisions? What would decision makers do if the research group did not exist? How could market research have had more impact?

Creating a vision statement for research

Vision Statement An energizing picture, based on a view of the future, of what leadership wants the function to become. Elements
Fundamental goal View of the future Scope of offering Distinctive competencies

Vision statement for Unilevers Consumer and Market Insights Group

To be the fundamental resource for business intelligence, knowledge, and tools that are used systematically for achieving higher levels of market performance and stakeholder value.

McKinsey Customer Insights Vision

To be the preeminent consultants generating deep customer and consumer insights to create innovative marketing and business solutions for our clients.

Eli Lilly Customer Insights Vision

Delivering insights that drive decision making.
NOT Risk Avoidance NOT Confirmation of what we (ought to) know

Repositioning the research function: Some titles that firms are using
Customer and Market Insights Group Consumer Insights Group Business Analytics and Assessments Group Customer Insights and Strategy Group Customer and Market Intelligence Group Customer Understanding Group

Market research at Unilever

A case study

Unilevers Corporate Statement of Purpose

Our purpose at Unilever is to meet the everyday needs of people everywhere, to anticipate the aspirations of our consumers and to respond creatively and competitively with branded products and services which raise the quality of life.

Consumer insight as an enabler of the corporate mission

Consumer insight and Unilever growth

Our growth depends on one thing above all others. Consumers. If we do not get better at understanding our consumers and meeting their needs, want and aspirations, we will not grow. Its as simple as that.
Keki Dadiseth HPC Division Director Patrick Cescau Foods Division Director

Four roles of Unilever CMI Group

Consumer Guru Consumer Voice Consumer Process Expert Guardian of Consumer Knowledge

Transformation of Research at Unilever: From MR Group to CMI Group

Less time managing projects, more time adding value and mining for strategic understanding New Competencies Needed
Strategic Influencing Breakthrough Thinking Personal Experience Seizing the future

The New Market Research Mindset

Think BIG PICTURE Think CLIENT/BUSINESS Think INSIGHTS & SOLUTIONS Think LONG TERM RELATIONSHIPS

Agenda
The nature of insights Why traditional research rarely produces insights How to do research that produces insights Rethinking the mission of the research organization A process framework for evaluating research projects

Seeing Research as a Learning Cycle

Eclectic tools Diverse listening posts Tracking Evaluation Post-mortem

Sense

Interpretation skills Empathy

Monitor
Relevance Partnership

Interpret
Learn and Adapt Presentation skills Dissemination channels

Decide

Communicate

Checklist for research projects

How does this project fit into the global business priorities of our business? How does this project relate to other research projects? Is there something new or creative about the problem, the methods, or the anticipated learning? What do we already know about the problem? What stakeholders will benefit from this research? What is the business case for this research? Are we using the right research methods for the problem? Should we outsource this research? How important is it for us to be personally involved in the field work? How will we involve the customers of this research in the process? What is our plan for disseminating the findings and insights? How will we capture the learning and insights so that they are easily accessible in the future?

Scorecard for evaluating research

What were the key findings of the research ? What were the key implications of the findings? What new insights did the research produce? How were the research results disseminated? Who actually ended up using the research? What decisions did the research impact? What was the estimated business value of the research? What did you learn from this research about doing future research projects differently or better?

A Macro Issue: Knowledge Management system for research

This is a macro question what is the process for disseminating, archiving, retrieving and synthesizing cumulative learning across all research projects done in the past? How will decision makers use this system? How do we make sure this system is user-friendly and contextually relevant?

Bottom line
The research team should measure itself on the business value of the insights that it produces through research, not on the quantity of research or the number of projects that it conducts. The research portfolio needs to be balanced with an appropriate blend of insight generating research and hypothesis validating research. The research team should strive to be seen as an expert and trusted advisor by its internal customers. This will require a different mindset, different methods, and different metrics. The research organization needs to redefine its mission and rethink its organization design and processes to achieve this goal.