New insights for new growth: What it takes to understand your customers today
Companies
that know how and when to use the wide array of research tools available today
have a big competitive advantage in generating insights that lead to new
organic growth.
What do Unilever, Philips, Amazon, and
Netflix have in common? At first sight,
nothing much. They compete in very different industries, and while Unilever and
Philips are firmly rooted in the 19th century, Amazon and Netflix are unthinkable
without the Internet.
What they have in common, though, is that
they drive growth by meeting consumer needs better than their competitors do.
Core to this consumer focus is a strong belief in insights, and in the active
use of a diverse mix of insight tools—new and old, qualitative and
quantitative, digital and analog—to get better answers.
Unilever, for example, has successfully
engaged in consumer cocreation to launch TRESemmé, a fast-growing dry-shampoo
brand that is now one of the best-selling mass hair-care products in the US.
Philips has achieved major market-share gains in highly contested
home-appliance categories through city-level growth analysis. Thanks to its
data-driven recommendation engine, Amazon attributes more than one third of its
revenue to cross-selling,1and
Netflix saw its subscribers triple between 2011 and 2015, largely because of
its ability to develop hit shows such as House of Cards, based on
advanced analysis of subscribers’ past viewing behavior.
Developing a better understanding of
customers is increasingly a strategic necessity, because fast-moving markets,
new technologies, and new business models are changing what customers want and
how they shop. Yet many companies still spend the bulk of their research budget
on traditional techniques (e.g., focus groups, interviews, and surveys), or
treat insights as an afterthought, which leaves them with a limited and often
incorrect view of what customers want. That is a recipe for obsolescence in
today’s economy.
While there is a vast array of marketing
analytics and insights capabilities, this article focuses on those tools,
techniques, and approaches that specifically lead to new commercial growth,
i.e., new products, services, or markets. (An insight is defined as the
discovery of a fundamental consumer need that companies can use to create value
for the customer and the business.)
A new
approach to insights
Getting to a level of understanding about
what customers really want requires the ability to understand what motivates
consumers, as well as how they shop and make decisions. Based on our work with
leading companies and innovative insights vendors, as well as proprietary
research, we have identified five research approaches that are best suited for
generating the kinds of insights that lead to new growth opportunities.
1.
Observe consumers ‘in the field’
Observing consumers as they shop or use a
product is often deeply revealing about their behaviors and motivations. This
kind of research is closely tied to behavioral economics, a school of thought
that seeks to understand the way consumers actually make decisions. It’s also a
pillar of design thinking, which puts the customer at the center of a system of
interactions with the brand.
John Kearon, the founder of UK-based
agency BrainJuicer, a two-time winner of Esomar’s Best Methodology award and a
leading provider of observational and ethnographic research, believes that
“anything based on observation of what people really do is massively more
accurate than what people say they do—or the reasons they give for saying it.”
One international food company, for
example, was seeking to introduce European markets to a new product: a dip that
could also be spread on bread. The CEO believed that countries like France or
Italy would be ideal pilot markets, given the countries’ obsession with good
food. To test this hypothesis, a team of ethnographic researchers conducted
“dine-alongs,” where they joined subjects in five countries both in restaurants
and in private homes.
Through observation and casual
conversation, the team found that consumers in two other countries were
actually more open than those in France and Italy to international cuisines and
new flavors, and would be more receptive to the company’s product. Based on
this research, the company changed their market-entry priorities and increased
their launch targets to more than a 10 percent share in the category, which
unlocked additional sales of more than $10 million annually.
2.
Digitize the daily diary
While consumer diaries—literally a written
record someone creates to track their daily decisions and purchases—have been
around for some time, digital advances and mobile devices have made this kind
of research much more versatile, accurate, and accessible. Typical applications
include video recording, photographs, and blog posting of food or beverage
consumption, media usage, patient journeys, or compliance with medical
prescriptions and therapies. What’s more, the results are available within
days, if not in real time, rather than after weeks or months.
In a pioneering case, a maker of pharmaceuticals
and medical devices used digital diaries to better understand how arthritis
patients self-administered injections several times a day. Participating
patients used mobile devices to film themselves performing these tasks.
Additionally, researchers observed patients at home. The research revealed that
some patients skip injections because of the discomfort and pain they cause or
the anxiety patients feel. Not all patients, however, admit such qualms to
their physicians, who then will frequently prescribe higher dosages of pain
medication. A member of the observation team said, “Until now, we have never
seen how patients live in their day-to-day lives.”
To address this issue and increase
patients’ compliance with the prescription regimen, the company is working on a
needle-free drug delivery system as well as other ideas for new products and
services that would make the life of arthritis patients a lot easier. The total
opportunity has been valued at almost $100 million in incremental revenue.
3. Use
advanced analytics to get much more granular insights
Today, the mass of data about consumer
behavior allows marketers to get past broad and often deceptive averages to
dive into much more granular levels of insight that can unlock new
opportunities. Those who invest in big data and advanced analytics often
achieve up to 10 percent sales growth, up to 5 percent higher return on sales,
and a margin uplift of 1 to 2 percent.
A next-generation car-rental company with
ambitious growth plans, for example, used advanced data-mining techniques to
target new customers more effectively. It started by analyzing its database of
driver profiles and trips to identify distinct groups of customer archetypes.
The team then pulled in external data from a variety of sources to build a
scoring model to identify drivers in a given city or neighborhood who fit one
of the ten archetypes the business had developed. They then tailored offers and
communications to each of those segments. Within one year, the company grew its
customer base by more than 10 percent and increased its revenues by almost 20
percent.
Philips US applied advanced analytics to
simulate the market potential for various combinations of price tiers,
channels, and product portfolios—not at a country or even regional level, but
city by city in dynamic markets.
With that information in hand, the
marketing team created offers that targeted the most promising segments in each
city. The market share in relevant product categories increased from 15 percent
to 19 percent, and the EBIT for the company’s consumer lifestyle division
jumped from 8 percent to 14 percent. Says Pieter Nota, CEO for Philips Consumer
Lifestyle: “Based on the global growth analysis, we devised a plan to double
revenues over the course of less than a decade without compromising profit
margins, partly driven by product innovation in two highly dynamic categories.”
4.
Better listening and learning with social media
Social media allows companies to listen in
on unfiltered conversations consumers are having about their preferences,
experiences, and habits. Many services exist, such as Hyve, Winkle, BrandWatch,
Synthesio, or Google Analytics, to unlock insights from analysis of online
discussions, consumer reviews, topical blogs, and keyword-driven trend
analysis. Active listening enables companies to detect relevant buzz early on
(be it positive, neutral, or negative), react swiftly, and unearth clues that
can lead to innovations.
Beiersdorf, the personal-care company and
owner of the Nivea brand, tapped into an ongoing social-media conversation to
develop a completely new product line. Using Hyve’s Netnography Insights
software, the company found that consumers were complaining in multiple online
forums such as beauty junkies.de that deodorant leaves stains on textiles.
Further analysis revealed that the issue was widely discussed and that users
shared advice on how to remove various types of stains.
In response, the company developed a new
type of deodorant that prevented yellow stains on white clothes. To test the
concept, Beiersdorf turned to almost 2,000 dedicated followers of the Nivea
brand. It turned out that consumers were not only concerned about yellow stains
on white clothes but also about white stains on dark-colored clothes.
Beiersdorf refined the concept and marketed it as “Nivea invisible for black
& white,” stressing that “white stays white and black stays black.”
Ansgar Hölscher, in charge of consumer
insights for the Nivea brand, says, “Thanks to social listening and online
consumer cocreation, Nivea Black & White became the most successful product
launch for Beiersdorf in ten years.”
5.
Cocreate with consumers on digital platforms
Manufacturers of consumer products are
inviting their customers to generate new ideas to advance their product
development and gather feedback on new products, even before launch. This goes
beyond just listening to customer preferences and bringing them into the
creative and development process. When done well, cocreation can reduce
market-research costs, increase customer loyalty, and develop the products and
services that customers want. Leading vendors in this field include CrowdWorx,
Innocentive, Synthetron, noo F/X, and Lunar, the award-winning design firm
recently acquired by McKinsey.
Procter & Gamble became a high-profile
proponent of this approach when it launched its Connect+Develop program, which
aimed to leverage external idea generation for future product development. One
of the innovations that originated from this program was the Swiffer range of
cleaning products that collectively contribute about a billion dollars in
annual sales.
More recently, Unilever made headlines
when it created a new hair-care range, TRESemmé Fresh Start Dry Shampoo, with
the help of consumers. It learned that half of US women do not wash their hair
every day, even though many of them feel insecure on the days when they don’t.
To learn more, Unilever engaged with women
in My Beauty Café, an online community dedicated to hair care and beauty
regimens. Community members contributed to every step of product development,
from initial ideation and concept refinement to sample testing, packaging, and
advertising. Launched in 2010, the new range generated first-year sales of
almost $8 million. Subsequently, Unilever’s share of the US mass hair-care
market jumped from 9 to almost 16 percent. Today, Fresh Start Dry Shampoo is
one of the ten best-selling products in the overall styling category in the US
mass market.
Generating insights is a vital, iterative process.
Testing and learning, adding innovative methodologies to your tool kit, and
discarding techniques that no longer add value have become core insights
disciplines. While reengineering how companies generate insights is crucial to
finding new growth, how effective it is relies on an approach that is as
dynamic as the market itself.
By Jonathan Gordon, Volker Grüntges, Vicki Smith, and Yvonne
Staack
http://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/new-insights-for-new-growth-what-it-takes-to-understand-your-customers-today?cid=other-eml-ttn-mip-mck-oth-1612
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