Mindset
Consumer insight for shaping business directions must be broader in its canvas and bolder in its investigation of “why not” than consumer insight for functional marketing decisions. As explained earlier, the focus of functional marketing is very different from that of business-market strategy. Functional marketing is about implementing a chosen business direction in the market. Functional marketing managers need to translate that business direction into a concrete product–price–distribution–communication consumer experience in the marketplace. Therefore, their approach to consumer insight is through the prism of the brand and/or the category, or even the product.
How do we sell more of shampoo Brand X in State Y? How do we differentiate our telecom service advertising from all the others? How do we design introductory pricing offers that will induce trial? How do we convert a proposition into a consumer promise (cheaper–better into a mother-in-law will approve!)? And so on.
In contrast, the business strategist’s job is to design the business-market strategy (or the front end of business strategy) and address questions such as “how do we grow this business”, and explore answers, which would include any of the following:
“Choose directions of growth which are step outs from the current product category/customer segments that the business operates in today”, or “What is the battlefront on which we should be engaging competition: Price? Product features? Service? Ease of distribution?” Or “Which value
spaces should we be playing in, and which should we stay out of, given our business mission?” Or “How do we build sustained advantage over competition?” Or “How should we de-risk the business from changes that will occur in the world of customers as a result on environmental or competitor strategy changes?” Or “Are there any big opportunities that could arise as a result of environmental changes, which we can grab?”
To answer these questions, strategic consumer insight is needed, and should be obtained by viewing markets through a lens of strategic possibilities, hence, be far more “naïve” and open in its investigation and study an entire need arena, not merely a product-market, as functional marketing is wont to do (for example, study need for entertainment, not stay restricted to the digital music category).
Approach
Stay away from analytical tools to begin with, until you have robust consumer insight hypotheses. We caution against outsourcing acquiring consumer insight to analytical tools like conjoint analysis (which provides a measurement of how consumers trade-off between different elements of a product offer), or cluster analysis (which asks consumers to rate different need dimensions on how much they want each and then group consumers into different clusters or segments based on their need patterns), or Kano analysis, borrowed from Quality Function Deployment (QFD), which identifies product features that, when improved on, can provide better value to customers than competition.
The reason is that using all these tools requires some going-in hypothesis or pre-judgement about the dimensions along which customers make choices; therefore, many analytical tools end up providing better ways to play the game within the sandbox in which the game is currently already being played by competitors. The mission and purpose of strategy, however, is to find new and fresh ways to redefine the game itself, and not to play it a little bit better than the way others are playing it.
In our experience, consumer insight capable of driving strategic breakthroughs come from naïve listening to customers; not through the lens of the current business but through the lens of their needs, by broad and holistic understanding of a need arena (like transportation) rather than a narrow category (like motorcycles or cars).
Methodology
How should we map markets in a way that helps to “see what no one else has seen (or bothered to notice) and think what no one else has about that which everybody sees?”
The romantic mode of strategy formulation is usually about newness and uncharted territory, and abounds with phrases and ideas like “creating industry revolution”, “discovering new markets’, “being a shaper rather than an adaptor”, “blue ocean strategy”, and so on. However, the operating or classic mode is where the problem lies, even in market-research-rich companies. This is not because the data is not available, but because the way in which it is analysed and synthesised does not tell the story of strategic market opportunity. The data is too often generated by looking at the market through the prism of the category of product or service the firm is engaged in.
We suggest abandoning the product lens altogether and looking at the market as a collection of people who have a need. Again, a need segment is not to be confused with a group of people buying Product X. We prefer using the phrase need arena because it frames a certain where to compete playground, and because the word “segment” has been overused to the extent of losing its clarity and sharpness.
Within the need arena, the most basic and most helpful analyses, often unavailable with strategists, are around market structure and consumer behaviour. The former provides inputs into where to compete, the latter into both where and how to compete.
Strategic market structure maps
A strategic market structure map for a business of health food drinks used as milk additives should start with all people in the universe who could possibly consume this, and not start with all buyers or potential buyers of health food drinks. A strategic market structure map would then tell you how many people in this market (and who they are) have a felt need for additional nutrition or better still for the benefits or values that such nutrition can provide. How many – and who are they – want brain boosting (not brain boosters, which is a product; but brain boosting which is a benefit), how many worry about keeping bones intact in old age, how many want children to grow tall, how many do not worry about any such thing at all, how many are truly not bothered or concerned about anything, etc.
For each such group, what are all the ways in which people do or do not fulfil that need, could be hanging from trees to grow tall, could be doing Sudoku to boost the brain, could be eating badams (almonds), could be taking multivitamin pills or even consuming health food/drinks. It has to answer the question of “What are middle-aged, low-income folk doing to improve their health and fitness levels?”, rather than answer the question of “What is the profile of consumers of health food drink used as milk additives?”
The latter starts with the product, the former with people. This often does not require a whole new approach. It may just require the way the percentages are calculated to be flipped around (that is, how many middle-aged low-income people drink health drinks may yield an answer of 3 per cent, but how many health drink consumers are middle aged and low income, may yield an answer of 33 per cent!). The fresh insight gained from looking at what else the middle-aged low-income consumers consume/do to stay healthy may be invaluable in shaping the business direction of the health food business.
Excerpted with permission from Customer in the Boardroom: Crafting Customer-Based Business Strategy, Rama Bijapurkar, Penguin.
