Insights Into Customer Insights

Insights often emerge from looking at a problem differently, and by being

eclectic in research methods.

Mohanbir Sawhney, Northwestern University Kellogg School of Management

xcellence in customer relationship management begins with deep were an underserved segment, as most hardware stores focused on

E customer understanding. But customer understanding goes well

beyond the traditional CRM notion of analyzing customer
responses and creating targeted offers for specific customer segments.
contractors and professionals. Sonys Walkman was successful because
it redefined the relationship between personal space and private
space. And Virgins mobile business is founded on the insight that
While target marketing can lead to incremental improvements in teenagers and young adults dont want to deal with their parents
marketing effectiveness, it seldom results in marketing breakthroughs. wireless company and they dont like to be tied down to monthly
True breakthroughs often come from customers who arent in your bills or long-term contracts.
database with offerings that customers cannot even visualize. They While customer insights are valuable, they are hard to come by.
are often based on powerful customer insights. In fact, they are hard to even define. So what exactly is a customer
Consider Apple and its phenomenally successful personal digital insight? Where do insights come from? Why does conventional market
music player the iPod. When Apple launched the iPod in October research rarely produce customer insights? How can companies
2001, it was not the first entrant into the digital music player business. improve their customer insight capability? Where should they look,
In fact, digital music players had been around since 1998. But Apple and what tools should they use in their search for customer insights?
was the first to get it right by understanding the crucial design In the answers to these questions may lie the keys to the growth and
equation for a portable digital music player the largest number of success of your company.
songs divided by the smallest physical size. Apples research uncovered
a key insight people want to take all their music with them, but they The Nature Of Customer Insights
want personal music players to be unobtrusive. This insight led to two The dictionary defines insight as the act of intuitively seeing the inner
key design goals make it as small as a deck of playing cards and build nature of things. More precisely, I define a customer insight as a fresh
it to hold 1,000 songs. Add a dash of Apples design and usability magic and not-yet-obvious understanding of customers that can become the
to this insight, and you have a recipe for a blockbuster. By April 2004, basis for competitive advantage. This definition suggests several
Apple had sold more than 3 million iPods, creating a billion-dollar characteristics of a customer insight:
business for Apple. Apple commands a 40 percent market share in It is a not-yet-obvious discovery. Wisdom is sometimes defined as
digital music players and a whopping 70 percent share in the legal a penetrating view of the obvious. Insights seem eminently logical
digital music download market. in hindsight. But they are not obvious before they are discovered.
Apples success was grounded in the insight about how consumers In fact, they are often not obvious to most people even after they are
wanted to consume digital music. Indeed, entire companies have discovered. Apples iPod was criticized as being overpriced in the highly
been built on a single customer insight. Starbucks was founded on competitive MP3 player market. Southwest Airlines and Wal-Mart
[Link]

the insight that coffee is not a product sold in a coffee shop, but defied conventional logic by refusing to locate their operations in the
rather an experience marketed in a third place between home and most highly trafficked neighborhoods and airports. So when you are
work where people can gather
and relax. Home Depots early
success was based on the Mohanbir Sawhney is the McCormick Tribune Professor of Technology and the Director of the Center for Research
insight that do-it-yourselfers in Technology & Innovation at Northwestern Universitys Kellogg School of Management.

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 Survival

looking for insights, you should not assume that the obvious is true. ing. The first approach is deductive reasoning, where we test a known
And you should also not assume that the truth is obvious. idea or hypothesis in order to see if it is true. Deductive reasoning is the
It is a unique and fresh perspective. If you want to have different dominant logic behind quantitative or positivist customer research,
conversations, you must have different voices. And if you want to see where we seek to accept or reject a proposed set of hypotheses, or to get
different things, you must look through different eyes and with different specific answers to well-defined questions. The quantitative research
lenses. Insights often emerge from looking at a problem differently and paradigm uses the scientific method of experimental design and
by being eclectic in research methods. The Mexican cement company hypothesis testing, and relies on structured customer interviews and
Cemex discovered that ready-mix cement could be delivered within a sophisticated statistical analysis.
guaranteed 20-minute time window by emulating the emergency The second approach to customer understanding is inductive rea-
dispatch system used by the Houston 911 dispatch center. The design soning, where we rely on observation to formulate an idea or hypoth-
firm IDEO uses a 52-card methods deck to remind itself that it should esis. Inductive reasoning does not begin with a question or hypothesis.
look at a problem in a variety of ways to uncover an insight. To gain Rather, it begins with observations that may lead to a hypothesis.
customer insights, we must understand that we are prisoners of what Qualitative or interpretative customer research draws on inductive
we know and what we believe. And we must broaden our horizons by reasoning. In the qualitative research paradigm, we rely on thick
using diverse tools and listening to diverse voices. observation of customer behavior in a quest for deeper understanding
It rarely emerges from quantitative research. A common theme in and insight.
customer insights is that they rarely result from fancy market research Qualitative research and quantitative research need to go hand in
and high-powered number-crunching. In fact, quantitative market hand for true customer understanding. Qualitative research generates
research rarely yields customer and market insights. As Steve Bennett, insights, while quantitative research validates insights. You need both

Qualitative research and quantitative research need to go hand in hand for true
customer understanding. Qualitative research generates insights, while
quantitative research validates insights. You need both research traditions, and
in the right sequence.

CEO of Intuit, observed in a recent speech at Northwestern Universitys research traditions, and in the right sequence. Quantitative research
Kellogg School of Management, I have not seen a single insight come that is not informed by insightful qualitative research may end up being
out of quantitative market research. Yet companies continue to spend precise but lacking in customer insight. On the other hand, customer
millions of dollars on market research, using rigorous surveys and insights that are not validated with quantitative research may end up
sophisticated quantitative techniques like conjoint analysis, cluster being interesting but not representative of mainstream customers. As
analysis, and factor analysis. While market research produces oceans of Albert Einstein observed, Science without religion is blind, and
data and information, it rarely produces much customer insight. religion without science is lame. Qualitative research provides the eyes,
It is often rooted in an observed anomaly. In uncovering insights, but quantitative research provides the legs of validation. You need both
it is important to heed the saying: Always ask why. Often, an anomaly if you want to walk out of the forest of ignorance.
is a valuable starting point for uncovering insights, because it forces you
to question and potentially overturn the orthodoxies in a market. When From Market Research To Customer Insights
Apple launched the iMac, it asked, Why should all personal computers In most companies, the market research organization is charged with
be beige? Enterprise Rent-A-Car questioned why all cars are rented at the responsibility for developing customer understanding. However,
airports, when most people dont live near airports and people dont most market research departments arent fulfilling this mission because
rent cars only when they fly. As companies race to benchmark and copy they fail to appreciate that they exist not to do market research, but
each others strategies, they often end up looking just like each other. to generate customer and market insights. The value of the market
This strategy convergence tends to reinforce industry traditions that research department is not determined by the number of studies that it
Defying The Limits

make perfect sense to insiders, but create interesting opportunities for does, but on the business value of the insights that it produces and the
outsiders who find that the status quo in the industry is at odds with decisions that it influences. In fact, I believe that market research
what should be, or what could be. departments should be called the customer insights function, to
emphasize the true mission of market research. This is what the
The Two Ways Of Knowing consumer products giant Unilever has done. Its customer and market
To improve our ability to understand customers, we need to appreciate insights organization defines its mission as getting better at under-
that there are two very different approaches for customer understand- standing our consumers and meeting their needs. At Eli Lilly, the vision

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for the customer insights team is to deliver insights that drive users who dont do business with anybody in the category. As Clayton
decisions, and not confirmation of what Eli Lilly knows or Christensen observes in his book, The Innovators Solution, disruptive
hypothesizes. These examples reinforce a basic fact market research is innovations often compete against category non-consumption.
a means to an end generating customer and market insight. Research Southwest Airlines did not compete with other airlines. It competed
as an end in itself has no meaning and no value. against railroads and cars, taking people out of cars and putting
them into planes.
Making Lightning Strike Twice Create new observation posts. Customer insights often emerge
Customer insights are like a lightning bolt illuminating, but rare. from strange places, so you must cast your net wide in fishing for
While you cannot make lightning strike, you can make it more likely insights. Leading customer insight companies such as Intuit, Procter &
that you are at the right place and the right time where lightning is Gamble and eBay have created a diverse array of channels for
likely to strike. To increase the probability of generating customer generating customer insights. Some examples:
insights, you must talk to the right people in the right places using the Intuit designed a follow me home program where researchers
right set of tools. Here are some specific tips for improving the spend time watching consumers manage personal finances in
customer insight capabilities of your organization: their homes;
Involve the whole firm. Customer insight is too important to Hallmark has the Hallmark Idea Exchange, a 1,000-member virtual
be left to the market research department or the marketing organization. community that the company mines for ideas and feedback on
Customer insights can come from any functional area of the organization, personal expression;
including marketing, engineering, sales, customer support, purchasing, or Mazda used a Web-based market intelligence tool called BrandPulse,
operations. They can originate from the top management or from a front- which monitors all conversations and discussions related to the
line employee. And they can be sourced from inside the firm or from Mazda RX-7 to understand what customers wanted in its new RX-8
external partners. The marketing organization needs to connect customers sports car; and
with all functional areas in the company, to capture customer insights Herman-Miller relies on a design concept team consisting of
wherever they may emerge, and to disseminate insights to where they can external domain experts and industry visionaries to generate
be used. Marketing must evolve beyond its traditional role as a breakthrough design concepts.
middleman conveying the voice of the customer to the organization.
Instead, it must become the orchestrator of all customer-facing Become proactive. Market research organizations should not wait for
interactions between the firm and its customers. product managers to come to them for research projects. Projects that

Winning the customer insight race demands that you understand the true
nature of customer insights, embrace both the ways of knowing, reinvent the
market research function as a customer and market insights function, and
improve your peripheral vision.

Expand your repertoire. Eclecticism in tools is essential for a are originated by product managers tend to focus on seeking answers
deeper understanding of customers. Traditional research techniques like to known questions, because they relate to a specific product or
focus groups, surveys, and in-depth interviews are better at marketing problem. Market research organizations should
understanding needs that customers can articulate. To gain a better complement these projects with proactive, open-ended projects that
understanding of unarticulated needs, the research tool kit needs to be seek to develop a deeper understanding of customer problems and
augmented with observational techniques like contextual inquiry, customer needs.
customer experience mapping, human factors research, and In todays hyper-competitive world, the race for competitive
ethnography. These techniques rely on direct observation and advantage is really a race for customer and market insights. Winning
interpretation to generate insights. the customer insight race demands that you understand the true nature
Understand non-customers. Most efforts at customer under- of customer insights, embrace both the ways of knowing, reinvent the
standing are focused on current customers and currently served market research function as a customer and market insights function,
markets. To increase the chances of creating breakthrough insights, and improve your peripheral vision. While there is no guarantee that an
[Link]

you need to escape the tyranny of the served market by looking apple falling on your head will lead to the same level of insight as it did
beyond the customers in your customer base and the products in for Isaac Newton, you can at least make sure you are sitting under a tree
your portfolio. To expand the peripheral vision, you should try to that is full of ripe apples, where it is more likely that an apple will fall
understand the customers who dont do business with you, and non- on your head.

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