Innovation: why do many companies underuse customer insights?
According to new research from academics at IÉSEG, Erasmus University Rotterdam, EMLyon and Ghent University, many companies are struggling to effectively apply the insights they gain from customers to improve innovation. The team interviewed 12 market research executives and surveyed over 300 managers (working in marketing, innovation or customer experience roles) to shed light on the customer insights process, why firms find the use of customer insights challenging, and how they can become more customer centric.
12/12/2024
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Companies have long recognized the importance of understanding customers’ needs, for example when it comes to improving or launching new products or services. However, a study by Kantar Worldpanel (2022) reported that 61% of new product launches fail within their first two years, mainly due to insufficient customer understanding.
So what exactly do we mean by customer insights?
The authors define customer insights as “a reasoned understanding of customers’ attitudes and behavior that firms can innovate upon”. Companies use a variety of activities and methods to collect, share and apply customer insights (see graph below). These can include different ways of collecting data, observing clients’ behavior, or crowd-sourcing or co-creating activities with clients. They also cover the way that data/insights are shared within an organization and the way decisions are then taken and tested.
Graph1: The 10 domains relating to customer insights (source Authors)
Professor Elke CABOOTER, notes: “ Right now, companies aren’t fully using customer insights to drive successful innovations. But by focusing on and involving customers in each of the ten domains we’ve identified, companies can greatly improve their chances of success with new ideas and products.”
Results show untapped potential for using customer insights
The new study suggests that many managers believe their firms are underusing many customer insights activities for innovation purposes.
As the graph below highlights, this is particularly the case for activities involving crowdsourcing and co-creation but also those used to gather the ‘voice of the customer’, for example, through interviews, focus groups, surveys, etc. (referred to as intruding), and observing customers.
“The underuse (of insights) in these areas where firms actively need to involve customers can primarily be explained by budget constraints, a lack of an easy and clear process to generate customer insights, and a gap between R&D and marketing teams.”, explains Professor CABOOTER.
Graph 2: Customer insights domains sorted by degree of “underuse” (Source – authors)
What can companies do to improve the way they use these customer insights?
The article suggests that companies can consider ways to support and/or upskill their employees to help improve or develop crowdsourcing and co-creation performances. For some companies, they may need to look to external providers to get support with implementing these types of collaborative insights.
Companies struggling to use the insights they have gained can also look at ways to enhance internal collaboration between teams dealing with marketing and those dealing with innovation. “The managers we surveyed indicated that firms need to embrace testing and tracking of innovations and should do so earlier and faster. Therefore, early and frequent involvement of the marketing team in innovation initiatives may help firms emphasize early and proactive testing and tracking across innovation stages,” explains Professor CABOOTER.
Six-step framework to manage the process
The authors propose a six-step framework to help companies streamline the way they gain, extract and implement insights for different types of innovation. This involves: (1) generating customer data, (2) confronting new and old information, (3) sensemaking, (4) visualizing, (5) applying, and then (6) tracking. The process also incorporates feedback loops, formulated as questions, that firms can follow to improve how they leverage customer insights for innovation decisions iteratively.
“The aim is to find the right balance between analytics and intuition by highlighting key activities such as customer data generation, meaning, visualization, and applying insights to decision-making. This structured approach aims to help companies move beyond intuition-based decisions to more evidence-based innovation strategies,” she adds.
The process is illustrated in the study via the example of a Swiss insurance company:
Aiming to create innovative insurance policies for new target customers, this insurer initially organized an ideation workshop inviting employees to generate new product concepts. One of the ideas targeted pet owners. Next, they interviewed pet owners to understand how well their lifestyle and insurance needs matched the company’s new product concepts (“confronting”).
They then organized a second workshop with relevant internal stakeholders to extract conclusions from the resulting insights (sensemaking), leading to refined new product ideas. The best ideas were visualized in a ‘mock-up’ and tested with target customers using a survey-based conjoint analysis to identify different segments and willingness-to-pay per segment. The company then launched the most appealing concepts (applying) and monitored their market performance and customer satisfaction (tracking).
Methodology:
After a review of more than 280 research articles from different leading scientific journals, the team first carried out interviews with 12 executives at 11 of the world’s largest market research agencies. They then surveyed more than 300 managers involved in innovation decisions to assess the perceived underuse or overuse of customer insights for innovation, and the perceived alignment or misalignment between the use and impact of different domains of customer insights for innovation.
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The full study is accessible here: Stremersch, S., Cabooter, E., Guitart, I.A. et al. Customer insights for innovation: A framework and research agenda for marketing. Journal of the Academy of Marketing Science.(2024).
