Consumer research is ingrained in the cultures of many large corporations but relatively few are maximizing its use, according to a new study from The Boston Consulting Group.
Typically, such research centers on honing marketing messages or developing new products, thereby limiting its value to the entire corporation, the study suggests. More than 70 percent of the study participants apply research in those two contexts. In contrast, less than 40 percent use consumer insights to set product prices, develop promotions, forecast financial results and forge channel and distribution strategies.
Those findings illustrate a larger problem associated with the research function: most companies use it tactically rather than strategically, reducing researchers to order takers and number crunchers, according to the study, “The Consumer’s Voice — Can Your Company Hear It?”
In fact, based on a four-stage scale of research development that BCG used to evaluate the 40 global companies it surveyed, nearly 90 percent were in the first or second stage, where research is generally tactical and applied in limited contexts.
The participating companies represented a cross section of categories, including consumer goods (Procter & Gamble, Johnson & Johnson, PepsiCo, Nestle, Colgate-Palmolive, The Clorox Co., Danone), financial services (such as Ameriprise, Axa, Nationwide), retail (JC Penney, The Gap, Bath & Body Works), technology (Microsoft) and travel (Starwood, JetBlue, American Airlines).
“Some organizations spend all of their budget on very tactical bits of data that are very hindsight orientated,” said Kate Manfred (shown), a co-author of the study and a principal in BCG’s Chicago office. “So, they spent a lot of time getting syndicated tracker data and spend data for things that happened in the past. Other organizations have some of that, but they also allocate a fair amount of their spend to gathering data and insights that are much more strategic and forward-looking around where the consumer is going to go next.”
Management and research respondents disagreed on why their companies have failed to fully capitalize on their market research efforts. Business leaders suggested it was a performance issue, while research types cited a lack of engagement among business units in the function.
Bigger picture, with consumers increasingly using social media outlets to critique company products and services, researchers aren’t lacking for data. The biggest challenge they face is synthesizing disparate sources of information and explaining what it all means. “It’s about how do we capture all this social media [commentary] and all this emotional connection with the customers and do better?” said Becky Gillan, vp, global market research and satisfaction at Starwood Hotels & Resorts in White Plains, N.Y. “This is the next evolution from e-mail surveys, which was a big sea change” in itself.
BCG found no link between how much a company invests in market research and the function’s maximum utilization, but companies need to better prioritize how they spend those dollars, according to the study. They should focus on deep-dive strategic efforts instead of tactical, short-term exercises, BCG suggests. Furthermore, the deeper dives need to produce tangible results, said Paul Ballew, svp, consumer insights and analytics at Nationwide in Columbus, Ohio.
“The number one issue for any good insights and analytics group is turning insights into action,” Ballew said. “And whether you spend a small amount on research and analytics or a large amount, you have to assure yourself that you’re getting a bang for the buck.”
BCG based its findings on benchmarking data from the companies, a quantitative survey of more than 800 executives and qualitative interviews with 200 of them. Roughly half of the executive sample works in line management and the rest in the consumer insight function.