Industry Insights

“Actionable Insights”: Watchword or Buzzword?

We’re only one year into the 2010s, but we’re already concerned that the term “actionable insights” is fast on its way to topping this decade’s list of meaningless marketing buzzwords. Don’t get us wrong, we love the sentiment behind the term—we’re as frustrated and depressed as the marketers who paid for the study when research results end up gathering dust on a shelf because no one could figure out what to do with all the “insights” into customers and prospects. When recent discussion on the topic turned to the measurement of the return on marketing research investments, however, we started to worry a bit.

“Return on Investment (ROI) on research projects,” predicts Bob Lederer, editor and publisher of Research Business Report, “is going to become a factor in the everyday functioning of client research/insight departments. It is already happening in a handful of companies. Many others see its inevitability [and] are beginning to think about it. Some expect it to materialize in the short term.”

It’s true, getting hard and fast ROI numbers for research certainly would help on many fronts. When Copernicus sat down with a group of marketing research directors at some of the leading companies in America a few weeks ago, most agreed that middle management submits “too many requests for small annoying projects” focused on nearer-term, tactical issues. Having some side-by-side comparisons of the ROI of frequently requested smaller tactical projects vs. more comprehensive, strategic assignments could help managers understand how to get more value out of the research they ask for and do.

Many of the back-of-the-envelope kind of ROI calculations we ourselves have used either reflect the risks inherent in not doing the research or the relatively minor cost associated with doing research that could produce a sizable improvement in marketing performance. Admittedly, this kind of ROI discussion does not necessarily make for the strongest business case for doing it in the first place. We agree that providing a number based on actual investment dollars and sales/profit results would be more in line with what a CEO or CFO would expect, and could certainly help when it comes to securing and protecting the annual budget.

Of course, we can forsee any number of difficulties in getting to that number. For instance, what happens when marketers implement a marketing plan different than the one the research supported? How can you reliably calculate ROI in that situation? Or in a larger organization, how do you isolate the actual financial contribution of a market segmentation exercise from that of, say, the advertising campaign to the performance of a new product?

Whatever the measurement system that does get into place, we can also forsee any number of difficulties resulting from that number. There’s already plenty of evidence to suggest that the perception among marketers is a good deal of research produces insights of marginal value. For example, only 14% of senior executives who’ve done a market segmentation exercise in the past two years say they derived any value from it. Put another way, nearly 90% think they got little out of one of the most frequently done major strategic research exercises.

According to a recent Boston Consulting Group (BCG) study, just 41% of executives said marketing research was a source of competitive advantage and only a third said their company was above average when it came to turning consumer insights into innovative products or services. Only 34% of line managers agreed that their insights team consistently answered the question “so what,” about the data they provide. Reported BCG, “money is spent on research reports that languish on dusty shelves because the data rarely yield actionable plans….The result is a low return on marketing research investment that can total hundreds of millions of dollars.”

We hope for all the energies spent getting the metrics and measurement capabilities into place to evaluate ROI, equal or greater attention gets paid to what’s driving the perception that many insights aren’t actionable in the first place. While measuring the ROI of marketing research is certainly an intriguing idea and could help direct marketers to the kinds of strategic research that can have the biggest impact on performance, why wait to get a measurement system in place to ensure that marketing research is demonstratively useable and relevant to marketers?

No matter what, the outputs from the measurement system will only be as good as the inputs. If the ultimate goal is to deliver “actionable insights” and highly positive perceptions of value, improving the ability to assess ROI won’t get us there on its own. Employing research tools and approaches that make it easier to connect insights to actions needs to play an equal part in the ROI effort.

Recommended Reading:

Get Marketers to Eat Their Spinach and Love It Too! 5 Tips for Marketing Researchers, Copernicus Marketing Consulting & Research

The Consumer’s Voice: Can Your Company Hear It?, Boston Consulting Group

Copernican Exploration

Lessons from Oscar: What NOT To Do With An Established Brand

How to differentiate an established brand, stay relevant as competitors encroach, broaden your audience without losing existing core customers, and continue to grow are all issues marketers deal with on a regular basis. No one is immune.

Up until recently, for example, retail heavy-weight Wal-Mart had a bumpy road as it tried to figure out how to update its brand strategy from “always low prices.” Starbucks has made many recent moves, including a new nameless logo, as it searches for ways to keep its aging brand relevant and competitive. More recently and in true Hollywood fashion, the Oscars, the venerable annual award show honoring “the best of the best” in motion pictures, has demonstrated some very important “don’t’s” when trying to reinvigorate interest in an aging brand.

All signs seemed to point to the potential for the show to expand its audience base. Though the TV audience for the show’s yearly broadcast had increased 30% over the past two years from an all time low of 32 million in 2008 to 41.7 million in 2010, there still seemed to be opportunities to grow in every age group. Yet when the median age of the broadcast topped out at over 50 last year, the Oscars’ brand managers must have become so preoccupied with attracting younger viewers that all their energies went into coming up with ways to appeal to the younger demographic.

The Oscars secured twenty-something actress Anne Hathaway and thirty-something actor James Franco as hosts and launched a full-throttle marketing campaign, “You’re Invited,” with a slew of digital and social media elements.

As Nicole LaPorte described on The Daily Beast: “The decision by this year’s Oscars producers…to hire Franco and Hathaway—the youngest hosts in the history of Oscar—was itself a drastic act in the progressive slouch towards a cooler, more populist Academy Awards.” She went on to describe Franco’s “offbeat reputation” as playing “perfectly into the Academy [of Motion Picture Arts and Sciences, the owners of the Oscars] to rebrand the Oscars as, well, playful,” and to detail other digital efforts to make the show more “au courant than ever before.”

Certainly hiring hosts who appeal to current and prospective viewers makes sense. Same for extending the event into social media during the broadcast. Hitting viewers on the multiple screens they supposedly look at simultaneously seems like the direction entertainment is going. Yet these are far from bold strategic moves to resuscitate a flailing brand. In fact, they strike us as superficial fixes backed by little more than an intuition that going after a younger demographic is the best way to increase overall audience size.

Not surprisingly, they didn’t work. The broadcast—younger hosts and all—received less-than-rave reviews across the board from critics and viewers alike. As reported in the Wall Street Journal, about 37.6 million people watched, down almost 10% from 2010, and “ranked as the fifth lowest since at least 1974.” True, the 2011 broadcast didn’t LOSE as many 18-to-34-year-olds as it did last year, but that’s not exactly a selling point that ABC—or whichever television network may broadcast the Oscars next year—can use to woo potential advertisers or justify higher ad prices.

Taking a closer look at who to target was by no means a bad place for the Oscars—or any other established brand that’s seen stalled or shrinking share, for that matter—to start when it comes to formulating a plan of attack. Sometimes even just asking the question “who is our target?” can instantly reveal a whole host of opportunities, particularly when the targeting decision wasn’t all that well-fleshed out to begin with.

What was the rationale for selecting this group? What do we know about them, not just demographically, but about their movie-going habits, attitudes towards award shows, favorite stars, etc.? What percentage of this group tunes into our program? Why don’t they tune in? Are they familiar with the Oscars? Are we not appealing to them in a way that’s all that compelling or motivating? Is there something about the broadcast that they don’t like?

Interestingly, we’ve found through our own experiences working with companies to set marketing objectives that sales problems are often NOT the fault of the product or service. Still, we wouldn’t be surprised to find out the Oscars bucked this trend. The inexplicably long broadcasts and many, many dry and self-congratulatory moments have made for some fairly unentertaining television over the years. Another good question for the Oscars to ask is what would reliably and feasibly increase the entertainment value of the broadcast to the target audience?

While it’s probably not the kind of news that brand managers like to hear, as the Oscars demonstrate, reinvigorating a brand more often than not requires much more than superficial fixes.

Discovery of the Month

Customer Satisfaction in a Slump: Even the Net Promoters Agree

A few weeks ago, we saw the latest statistics from the American Customer Satisfaction Index (ASCI), which put the average customer satisfaction rating for more than 225 companies in 45 different industries and government agencies at 75.3 out of a hundred. As it turns out, that number has not improved appreciably for more than a decade.

By way of background, the ASCI is based on customer interviews and an econometric model developed at the University of Michigan’s Ross School of Business. The model maps the relationship between customer expectations, perceived quality, and perceived value (a.k.a., the drivers of satisfaction), satisfaction, and customer complaints and customer loyalty (a.k.a., the results of satisfaction).

Given all the recent emphasis on really “engaging” with customers by responding to their unique needs, wants, and interests throughout the pre- and post-purchase process, we found the news that it hadn’t improved at all for years pretty astonishing.

Keep in mind that for more than a decade, companies have obsessed over corporate and brand equity and management consulting firms have preached the joys of 100% customer satisfaction. For all that, according the ASCI many firms still earn “C” grades.

Coincidentally, about the same time we saw the ASCI report, we also read the 2011 Net Promoter Industry Benchmarks put out each year by the software firm Satmetrix. A completely different measure of customer satisfaction from the ASCI, the Net Promoter Score first saw the light of day in 2003 when The Harvard Business Review published “The One Number You Need To Grow,” by Fred Reichheld, a senior management consultant at Bain and Company.

Reichheld’s objective was (and is) to elevate customer satisfaction metrics to the same level of rigor and importance as financial metrics like revenue growth or return on equity. He proposed an 11-point “recommend” scale from zero—definitely would not—to 10—definitely would “recommend this company to a friend or colleague.” People who score 9 or 10 for a particular company or brand are labeled “Promoters”; people who score 0-6 are, in turn, labeled “detractors”; the 7’s and 8’s are ignored. Subtract the % of detractors from the % promoters and you have the “net promoter score” (NPS).

Generally speaking, a score over 50% is considered a good score. In some industries where the average NPS is negative, just hitting positive single digit numbers is a relative achievement. True, NPS is one of the most controversial and often criticized customer satisfaction metrics in marketing research, but true or not, correct or incorrect, it’s a score that many CEOs and CFOs look at to gauge how their company and its brands are performing at keeping customers happy.

According to Satmetrix, there were some standouts in their 2011 report. Financial services firm USAA earned the highest NPS across all brands and industries examined at 87%. Grocer Trader Joe’s was also up there at 82%, as was Costco at 77%, Apple at 72%, and Amazon at 70%. Still, we were startled by the negative NPS industry averages and scores for big brands. Insurance had an industry average of –5%, for instance. In credit cards, Citigroup earned a -20%. In insurance, Cigna had a -24%.

Other industry averages and scores for big brands were only just fair. Airlines had an industry average of 15%, for example. We know getting over 50 is considered in the range of good, but we would have expected a brand like search engine giant Google–the #2 most admired brand in the world no less—to do more than just barely make it over that threshold. It got a 53%.

Interestingly, Reichheld himself has said the NPS score of the average American company is 15%. You could get that by having 45% promoters and 30% detractors or 58% promoters and 43% detractors or—and this would be really crazy—you could have only 20% promoters and 5% detractors with 75% of customers and prospects giving you a pass. Any way you look at it, a 15% isn’t exactly a good sign about the ability of American business to make customers happy.

Our own research does not support the pursuit of 100% customer satisfaction. We have repeatedly found the relationship between satisfaction and profitability to be curvilinear—profitability does rise as satisfaction rises, but only up to a point. After that point, the costs of delighting the customer with ever-increasing levels of satisfaction exceeds the retention-linked profitability.

While the point of diminishing returns differs from company to company, it does exist. Finding out where it is as part of an effort to better understanding the financial relationship between satisfaction and profitability would certainly help companies set more realistic, achievable, and bottom-line-friendly goals than 100% customer satisfaction.

Still, anyway you look at it, put the ASCI and Net Promoter results together and it’s clear that companies have some work to do when it comes to figuring out what drives customer satisfaction with their brands.

What We’re Reading Now

At the Top of Our Reading List….

Everything is Obvious Once You Know the Answer: How to Minimize Risk, Avoid Surprises, and Grow Your Business in a Changing World

By Duncan Watts (Crown, March 2011)

We just got our copy of this new book which we’ve already read quite a bit about. Watts, a principal research scientist at Yahoo!, takes on conventional wisdom—which is, he writes, “not so much a worldview as a grab bag of logically inconsistent, often contradictory beliefs, each of which seems right at the time but carries no guarantee of being right any other time”—and challenges some strongly held marketing beliefs such as the marketing power of “influentials.”

We’re looking forward to reading it.

Looking for more good books to inspire your marketing strategies and programs? Consider the seven books written by the principals of Copernicus. The list includes the popular Your Gut Is STILL Not Smarter Than Your Head, chock full of ideas for balancing experience and judgment with rigorous, actionable research when making important marketing decisions.

Buy now on…..

Coming Attractions

Register for Our Upcoming Webcasts….or Check Out One On-Demand

Each month, we tackle core strategy development issues or offer points of view on hot marketing topics to marketers looking for fresh perspectives, ideas, and information to help them improve the performance of their marketing programs.

Visit our webcast channel for a complete listing.

Upcoming Speeches and Talks at Conferences Near You

Find out if we’re coming to your favorite industry event or a conference in your city.

OTC Perspectives National

Topic: Market Segmentation in the Digital Age
Speaker: Eric Paquette
Tuesday and Wednesday, May 10-11
Sheraton Atlantic City
Atlantic City, NJ

AMA Atlanta

Topic: Digital Strategies “Illustrated”: Translating Insights in Actions
Speaker: Kevin Clancy
Tuesday, June 21
Villa Christina Restaurant
Atlanta, GA