Customer Insights: Beyond Market Research

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Customer Insights Beyond Market Research

• Patrick Barwise
• London Business School
• Differentiation that matters (Simply Better)
• Customer insights that matter (work in progress)

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1. Differentiation That Matters
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FT Review

• This is a book about marketing for people who
  have read too many books about marketing.
• Gary Silverman, FT

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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 todays competitive markets, you can no
  longer differentiate the basics (table stakes)

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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
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A Textbook Well Differentiated Brand

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An Even More Valuable Brand

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Brand Valuation ( bn)Source MillwardBrown
(WPP) April 2006
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The Key Concept

• Differentiation that matters (to customers)

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The Table Stakes Myth The Reality

• The evidence from companies like Toyota, Tesco
  and PG is that, through customer focus and
  continuous improvement, you CAN differentiate the
  basics
• But its hard work
• The good news for the simply better companies
  is that most companies still keep letting down
  their customers

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The Worlds Most Famous Car Brand

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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
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Another Consumer Strikes BackSourceThe
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 NTLs recorded message while pressing
  the star key.

He left the following message Hello, you are
through to NTL customer services. We dont 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
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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)

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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

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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)
  thats brand equity

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Easy to Say, Hard to Do
Peter Drucker
Most Influential

Leadership Visionary

AMA, 2003

Marketing is
not a specialised
business
activityit is the
whole enterprise
seen from the
customers point
of view.

Peter Drucker
The Practice of Management, 1954
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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

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2. Customer Insights That Matter

• The next book (ie work in progress)
• Build on Simply Better
• To be published by HBS Press, summer 2008

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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

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Customer Perceptions and Behaviour
Consumer Perceptions
Consumer Behaviour
Point of Purchase

Perceived Need
Sought Benefits
Distribution
Availability
Category Knowledge and Brand Equity
Category and Brand Purchase
Marketing Communications
Expected Benefits
Point of Purchase Impressions/ Information
Design/ Packaging and POP
Comms.
Price and Sales Promotion
Price
Satisfaction
Experienced Benefits
Brand Usage
Product/Service
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Would You Definitely Recommend This Airline to
a Friend? ()Source Holiday Which?, Spring 2005

• Rank (out of 58)
• 1 Singapore Airlines 82
• 6 Virgin Atlantic 60
• 9 easyjet 51
• 16 Ryanair 40
• 32 BA 31
• 34 American Airlines 29
• 46 Air France 18
• 51 Thomas Cook airlines 15
• 57 Iberia 10

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Stages of Innovation/Improvement
Generating new ideas
Selecting promising ideas
Customer insights
Developing selected ideas
Launching proposed improvements
Improving existing operations
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Qualitative/High-Touch vs Quantitative/High-Tech
Methods
Explore radical innovations
Improve existing offer/activities
High-Tech
High-Touch
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Bridging the Empathy Gap

• Personal experience and direct customer contact
• Ethnography, metaphor elicitation (MR vs DIY?)
• Talking and listening to customer contact staff

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Understanding the Drivers (Existing/Lapsed/Potenti
al Customers)

• 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
• 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

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The Organizational Context
Market Sensing
Source Simply Better, p 157
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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 dont lead to improvement achieve
  nothing