Customer Insights: Beyond Market Research

Patrick Barwise

London Business School

1. Differentiation that matters (“Simply Better”)

2. 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” MythIn 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

3.4

12.5

13.8

14.4

17.3

30.2

23.8

13. Volvo

6. Chevrolet

5. Ford

4. Honda

3. Mercedes

2. BMW

1. Toyota

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

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.

: Another Consumer Strikes BackSource:The Times, June 9, 2005

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

«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

Peter Drucker: «Most Influential»Leadership Visionary –AMA, 2003

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

PerceptionsConsumer Behaviour Point of

Purchase

Distribution

Price and Sales Promotion

Brand Usage

Category and Brand

Purchase

Product/Service

Satisfaction

Category Knowledge and Brand

Equity

Perceived Need

Marketing Communications

Sought Benefits

Expected

Benefits

Experienced

Benefits

Availability

Price

Point of Purchase Impressions/ Information

Design/ Packaging and POP Comms.

“Would You Definitely Recommend This Airline to a Friend?” (%)

Source: Holiday Which?, Spring 2005

Rank (out of 58) 1 Singapore Airlines 826 Virgin Atlantic 609 easyjet 5116 Ryanair 4032 BA 3134 American Airlines 2946 Air France 1851 Thomas Cook airlines 1557 Iberia 10

Stages of Innovation/Improvement

Customer

insights

Generating new ideas

Selecting promising ideasDeveloping selected ideas

Launching proposed improvementsImproving existing operations

Explore radical innovations

Improveexisting offer/activities

High-Tech High-Touch

Qualitative/High-Touch vs Quantitative/High-Tech Methods

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. Dissatisfaction with the brand (vs competition) – usually the basics; customers’ top priority

2. Satisfaction with the brand (vs competition) – also usually the basics but also add-ons

3. 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

Source: Simply Better, p 157

MarketSensing

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