Moving to a Service Business Model - Pricing Considerations
Innovations impact on affordable healthcare, part 3.

How to Waste Money on Customer Intimacy

This is Chris Halliwell, Executive Director of the Technology Marketing Center, (finally) back with the second of 3 posts discussing implications for strategic marketing at the intersection of market research and advanced technology. 

Let me start with an apology.  The cranky titles of these blog posts are meant to get your attention.  If you are ready this, it may have worked.  On the other hand, I fess up to years of frustration over management and marketing team disconnection with genuine insight about customer value, therefore:  weak value propositions, no value pricing, anemic competitive value advantage in the definition of new products and services.

In the first post I lamented high tech's lack of motivation to invest in market research as a core activity of the strategic marketing function.  We debunked technologists' views that market research related to innovation is of limited value. Furthermore, many tech sectors especially B2B, are now mature, relying on incremental innovation and slim points of differentiation to protect price. The incremental improvement world that most of us live in lends itself very well to both traditional and novel web-based market research tools -- if applied correctly. 

Real World Customer Insight

All too frequently important decisions on segment targets, products, price, and positioning made by marketing departments, and the cross-functional teams they influence, based on serious navel-gazing augmented by a review of emails from the sales department.  If we put that point on one end of a market research quality continuum, the next point in the line is some fairly informal effort to gather qualitative or quantitative customer input without respect for the minimum research skillset required to assure novel, measurable, and unbiased insight. 

It is common for untrained teams to embark on a mission to prove a particular point of view rather than to learn.  As part of the TMC launch about 4 years ago we did a survey of Caltech Industrial Relations Center executive education participants, asking these high tech managers how many of them had ever invested in voice of the customer research training.  Although the majority of respondents felt they did this type of research in their company, less than 10% had invested in any formal training.  And sure enough, the biggest arguments against customer research visits are that a) we already know that stuff, and b) we always get biased results.  To review the logic:  we don’t train ourselves on rigor (listening to different customer buying influencers, asking about different topics, in different ways) and then we stop doing structured customer research because it is not effective.  Hmmmm.

Leave it to the Professionals

Moving along the customer research quality continuum may involve throwing up our hands and tossing the whole issue over the wall to a newly formed internal market research department or to a third party consultant.  Outside firms doing custom market research can be quite helpful.  Internal teams can learn a lot about research tools, and a lot about customers, but these engagements need scrutiny, oversight, and quality assurance that your team can only provide if they have at least some bare bones understanding of market research.  For instance, is the right tool being used for the right job, E.g. surveys, visits, experiments, or conjoint?  If it’s a survey, has the market research firm overcome the dirty little sample size bias secret that drives confidence in numerical results?  And if qualitative research is the right tool, why in the world would we ask a non-technical stranger to engage our customers on our behalf if we were adequately trained to do so directly?

Internal market research departments have recently fallen out of favor because they can further distance product strategists from customer insight, as development teams delegate and devalue the task.  Research departments do offer the potential for more informed purchase of outside research services, but they are a very expensive way to solve the problem.

Where Should We Go From Here?

The point is that technically trained professionals should at minimum have a basic understanding of research fundamentals so that can assure quality and properly integrate research results into team discussions and decisions about product/market strategy.  Many of our best technologists and product strategists don’t have an MBA.  Those that have some business education are unlikely to have taken a “specialist” course in market research, and if they did, they very probably learned about consumer market research tools – how to explore a purchase event rather than a B2B purchase process.

In the interests of full disclosure, the Technology Marketing Center advocates Professor Ed McQuarrie’s seminal guidebook to high tech customer research, Customer Visits, and we offer a course for product/market strategy teams based on his new book, The Market Research Toolbox:  A Guide for Beginners.  You are urged to check out Ed’s books and dive in – with a little effort you can potentially make a huge contribution to your team’s understanding of value, and realize the prize of profitable growth.

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