Gaps in Knowledge About Their Customers Are Hampering the Efforts of Some of the World's Top Companies to Pull Out of the Recession, Says The Boston Consulting Group
In the Wake of a Survey Showing That Fewer Than Half of Companies Know What Drives Market Share, Who Is Buying, and Why, BCG Urges a Radical Overhaul of the Way Consumer-Facing Companies Do Market Research
| Source: The Boston Consulting Group
BOSTON, MA--(Marketwire - November 23, 2009) - Nearly 90 percent of blue-chip companies are not
making the most of their market-research efforts, according to a new report
released today by The Boston Consulting Group (BCG).
The report, titled "The Consumer's Voice -- Can Your Company Hear It?"
offers stark evidence that even large blue-chip companies lack basic
knowledge about their customers. In a survey of more than 800 executives
based at 40 global companies with sales of $1.5 billion or more, only 35
percent said that they have good time-series data on how consumer needs and
behavior change over time. Just 47 percent said they know what drives
market share, who is buying, and why. And less than 45 percent said that
their market research -- or "consumer insight," as many companies now call
it -- is a source of competitive advantage or provides a high return on
investment.
At the same time, many companies are failing to leverage the data they
have. Most respondents (72 percent) said they use consumer insight to help
with the development of new products and marketing messages, yet only 30
percent use it to help decide channel and distribution strategy. Only 33
percent use it as an input to their financial forecasts, and only 38
percent use it to drive pricing.
"Consumer insight is critically important now, as companies are fighting
for their share of a shrinking consumer wallet," said Mary Egan, a partner
in BCG's New York office and leader of the benchmarking study. "Only
companies with the sharpest focus on understanding consumer value will
retain customers in this environment."
The report is based on a 2009 study comprising of a survey of more than 800
executives (about half in the consumer insight function and half in line
management), nearly 200 interviews with executives, and benchmarking data
collected on the companies' structure, staffing, and spending. The 40
participating companies were all large global corporations (with sales of
at least $1.5 billion) in consumer-facing industries such as packaged
goods, financial services, retail and apparel, travel, and technology.
Many Frustrations with Consumer Insight
According to BCG, many companies continue to run the consumer insight
function with an old-world mindset that asks market researchers simply to
take orders rather than to act as strategic partners generating
breakthrough insights. The result is a low return on a consumer insight
investment that can total hundreds of millions of dollars.
The root causes for consumer insight frustrations lie both within the
insight function and among executives in the rest of the company, as shown
in strikingly contrasting responses to the survey. For example, 73 percent
of consumer insight staff said that they always answer the question "so
what?" about the data they provide -- but only 34 percent of their
counterparts in the business units agreed with them. Meanwhile, less than
half of consumer insight staff believe that senior management would pass "a
pop quiz on basic facts about the consumer."
Better insight capabilities will require change on both sides. "Companies
must upgrade the insight team's performance, while concurrently improving
how line management engages with the insight organization," said Emmanuel
Huet, Paris-based leader of BCG's Center for Consumer Insight and a
coauthor of the report.
Closing the Gap on Insight Performance
The answer to better insight performance is not just to spend more money.
Despite the fact that only 28 percent of executives believe they spend
enough on market research today, the study found no connection between
spending as a percentage of sales and insight performance. Instead,
companies need to maximize the benefits of their current research spending
by adjusting the mix of tactical versus strategic work and by investing
time in synthesizing the results.
Paradoxically, the best companies actually spend less on consumer insight
per full-time insight employee. As a result, the insight team is not forced
to hop from study to study and instead has time to effectively draw out
strategic implications from the research through structure and analysis.
The best companies also do more to invest in people. "Giving the insight
team a seat at the table both requires and enables them to rise to the
occasion. This means upgrading the performance of the insight organization
by addressing such issues as hiring and talent, career paths, and
training," said Kate Manfred, a Chicago-based principal and a coauthor of
the report.
Improving Engagement with the Business
The top companies in the study all demonstrated a higher quality of
engagement between the insight teams and executives in the rest of the
business, driven by four key principles:
1. Ensure an appropriate interface with senior executives. The insight
teams have access to senior management and are encouraged to contribute to
cross-brand strategic decisions.
2. Move beyond a narrow marketing scope. Consumer insight is used not just
for new-product development and marketing communications but also for a
range of critical decisions from repositioning brands to exploring
international markets.
3. Prioritize strategic work and exercise the ability to say "no" to some
projects. Senior executives avoid asking the insight team to test every
small packaging color change or line of ad copy. At the same time, a strong
central insight leader helps ensure that insight teams spend time on the
highest-return activities.
4. Strongly embed the insight team in the business units. Removing the
insight staff from an isolated silo greatly increases their ability to
remain abreast of key business-unit issues, conduct research that
effectively addresses those issues, and provide actionable recommendations.
To request a copy of the report or arrange an interview with one of the
authors, please contact Eric Gregoire at +1 617 850 3783 or
gregoire.eric@bcg.com.
About The Boston Consulting Group
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