The Consumer’s Voice—Can Your Company Hear It?

This study was undertaken by The Boston Consulting Group to analyze best practices and gaps in companies’ capabilities for market research—or, as many companies now call it, consumer insight. The report findings reflect the results of a comprehensive benchmarking study conducted in the spring of 2009. In all, 40 global companies participated—all industry leaders, each with at least $1.5 billion in sales, and many with sales exceeding $10 billion. The study included a detailed data-collection effort, a quantitative survey of more than 800 executives in both line management and the consumer insight function, and nearly 200 qualitative interviews. About 60 percent of the survey respondents were from North America, and the rest were from other regions. The findings outlined here are relevant for a wide variety of consumer-facing industries, including consumer goods, retail, apparel, technology, travel, banking, and insurance.

Executives talk about the importance of deep consumer insight…but struggle to achieve it.

• In their corporate mission statements and annual reports, almost all of the companies in our benchmarking study talk about understanding and meeting customer needs—and in our survey, a large majority of executives said that market research contributes materially to their financial performance and growth.
• Still, only 35 percent of executives describe their consumer-insight capabilities as best in class.

Most companies have not yet unlocked the value of consumer insight.  

• We identified four stages of consumer insight capabilities in a continuum that runs from the consumer insight function as an order taker (stage 1) to consumer insight as a source of competitive advantage (stages 3 and 4). Almost 90 percent of the companies in our study follow a more traditional approach to market research and are still at stages 1 or 2.
• A few leading-edge companies, however, have reached more advanced levels and are working to capture the full potential of consumer insight to create value.

Frustrations exist both among line managers and within consumer insight teams.

• Line managers often expressed disappointment with the results on consumer insight and were not aligned with insight teams on what constitutes high-quality output. For example, when asked whether consumer insight teams “consistently answer the question ‘so what?’ about the data they provide,” 73 percent of consumer insight staff said yes, but only 34 percent of line managers agreed.
• Meanwhile, insight teams expressed a different concern about line management: a lack of engagement in the research process. Fewer than half (41 percent) of insight staff thought that the business leaders in their organization would pass a “pop quiz” on important facts about consumers.

Two critical drivers of success are the engagement model between line management and the insight function and the performance of the insight function.

• Addressing these two issues in tandem is the only way to close the gap between the potential and the reality of consumer insight.
• Improving the engagement model involves changes in senior management involvement, the scope of the insight function, and the processes and ways of working around consumer insight.
• Improving insight performance involves such efforts as upgrading capabilities and talent, enhancing the role of the function, and focusing the team on the right activities and deliverables.

Organization structure alone does not drive a better engagement model.

• There is a wide variety of organization structures for consumer insight among the companies in our study. Many different structures can be viable.
• One characteristic of most companies in stages 3 and 4 is that the leader of the insight function holds an executive-level position. In addition, the function is integrated into the business units, and reporting lines both to and from the insight function are strong and effective.

A better engagement model requires a strong connection between line management and the insight function.

• On average, only 20 to 35 percent of a company’s market-research budget is devoted to strategic studies. In addition, many companies do not adequately leverage their consumer insight. More than 70 percent of survey participants said that market research was used to inform new-product development and marketing messages, but less than 40 percent said that it was used for decisions on pricing, promotional activities, or distribution channels.
• To address this gap, companies in stages 3 and 4 ensure that the insight team has access to senior management and is encouraged to contribute to cross-brand strategic decisions. Insight staff can thus gain a better perspective on critical business issues. At the same time, direct engagement raises the bar for insight team members, requiring their work to yield high impact to the business.

Improving consumer insight is a question not merely of spending more money on research but also of spending on different types of research and making the most of each study.

• Only 28 percent of executives currently believe that they spend enough on market research.
• In looking at research budgets, however, we found no correlation between spending as a percentage of sales and the quality of consumer insight. Rather than spending more, the critical drivers are a better balance of tactical and strategic work and maximizing the value of any spending.
• Perhaps paradoxically, companies in stages 3 and 4 spend less on consumer insight per full-time insight employee. As a result, however, the insight team is not forced to hop from study to study and instead has time to move past process management and more effectively draw out strategic implications through structure and analysis.
• In addition, these companies tend to make important investments in talent, training, and career development within the insight function.

Some companies have embarked on a transformation journey to modify or enhance consumer insight capabilities.

• Companies in stages 3 and 4 demonstrate that there is a way to unlock the full potential of this critical function.
• Success requires changes in behavior and expectations—and not just within the insight function but also on the part of line managers, including CEOs and senior executives.