Foresight 20/20

Not only should Congress encourage/facilitate the organized bankruptcy of the Big Three, but it should also make it easy for them to be replaced by 500 new car companies.

He goes on to describe that this is what it was like 90 years ago, and suggests what it could be like in the future.  Great idea.

I would build on Seth's idea to suggest an increase in the incentives for companies that are built around consumer needs, rather than new technologies.  Never before have consumers been so available, ready and willing to be part of the process.  As I've said many times before, valuable innovation is not random.  The tools are available for a company to identify a real need (not just a preference), define the market for it, and connect the dots for how their solution will satisfy that need.  Companies who do this should be rewarded with the most incentives, as their value propositions will be able to support multiple types of products and services to satisfy those needs.  They will have a clear roadmap, and will be less likely to get bogged down in the development of a solution in search of a market.

This could also provide a new perspective for the way VC's evaluate potential investments.  But that is a story for another time...

There is a good article in Strategy + Business about Consumer Choice Modeling.  Consumer Choice Modeling is a tool to project how well different product options and their attributes will do in the market.  Rather than being a simple preference test, it projects the consumer's likely behavior at the store shelf, given a specific set of choices.  As an example, they said that this tool accurately predicted that Apple's first iPhone was priced too high, which the market subsequently validated.

I think tools like this are great.  However, problems arise when they are used at the wrong point in the process.  These tools are best used after a new product is defined; the benefits, the details of how they will work, and what they will cost are all worked out.  These tools do not help you to develop a breakthrough innovation from scratch.  For that you need to figure out what would motivate a consumer to try a new solution in the first place; what problem really needs to be solved. 

The reason these tools are often misused is that they deliver an answer with a high degree of certainty.  This makes people comfortable.  But it does not take the place of the deep understanding required to figure out what a new offering should be.  What they do is confirm or disprove the decisions that have been made so far, but they will not give you information to come up with the idea in the first place - unless the idea is an improvement on what already exists. 

Once again, it all comes down to clearly understanding the scope of your innovation effort.  If you are already working with an existing offering, and want to improve it, then you can start with tools like Consumer Choice Modeling.  If, however, you want to develop something new, then save the Consumer Choice Modeling tool until you reach a point at which you have developed a set of choices for the consumer to make.

I talk with a fair number of start-up companies and I'm always able to tell who chose the company name.  Not the specific person who chose the name, but whether or not the name originated from within a marketing function or a technical function. I can also usually tell if it's a second or third generation name.

The technology function tends to love names that are cleverly descriptive of what their underlying technology is or how it functions.  Sometimes the names are difficult to say or remember, but that doesn't matter.  The more descriptive the better, and if it's disguised in some type of word play that's even better.

The marketing function tends to love names that connect the company's product to current popular trends.  They also seem to love names that are enigmatic enough to allow meaning to be built into them through use.

And then there are the names that are descriptive of a company's benefits.  Usually simple, and often indirectly referenced, these names reinforce what I will be buying into when I choose their products.  In my very small sample size, I've noticed that these names are often second or third generation names of these companies.  There are often stories about how someone realizes that what a technology does for people is more interesting than the technology itself.  Or they realize that it's more important to differentiate from the sea of My- or i- products and companies, than to show a connection to them.  The key is that the name becomes relevant to the consumer, rather than relevant to a technology, internal preference, or discipline the consumer may not know exists.

This is the way to enable the consumer to influence your business right down to the name.  It's not about asking them to choose their preference from a set of choices.  It's about understanding what you provide that is relevent to them, and reinforcing that value in the name.

I've been thinking about trends lately.  Not in how I might identify them, but in observing how other people think about them.  Some want to be trend setters.  Others are fearful that they will miss an opportunity if they fail to recognize a trend.  What's common in these points of view is that trends are often seen as isolated occurrances that spring out of nowhere.  They see trendwatchers as people with a crystal ball who predict the future.  I don't agree that this is true, and for that reason I don't base my decisions on predictions by trend forecasting companies.  If I read them at all, it's to understand why they made the prediction. 

Then yesterday I was pleasantly surprised.  I was looking at trendwatching.com's top 15 trends for 2009.  In it they defined a trend as:  "A manifestation of something that has unlocked or newly serviced an existing (and hardly ever changing) consumer need,* desire, want, or value."

Bingo!  They went on to say that basic human values don't really change.  What does change are the social and economic contexts in which we live, which may surface issues that haven't concerned our society in a long time.  Technology is always evolving, giving us new ways to express or satisfy our current concerns.  On the surface, it may look like new trends are emerging that we have never encountered before.  And while it's true that we haven't encountered the specific expressions before, if we dig a little deeper we will find that the underlying drivers have not changed much at all.  Digging deeper is where we will find our answers.

And while we're speaking of trends, one trend I am seeing lately is the fact that more organizations are recognizing the importance of understanding consumer values and motivations as a way to succeed in the long term.  Their bigger issues are in translating these values into products and services that will satisfy consumer needs within today's social, economic and technological contexts.  When they get that translation right, they won't have to worry about trends, because they'll be transcending them. 

Now that's an underlying recipe for success that doesn't change.

The internet doesn't encourage people to do anything they wouldn't already do.  It does, however, make it easier for them to do what they would want to do anyway, such as finding others with whom they share interests.  Today, groups of people can rally around a cause, idea, hobby or other passion like never before.  Even people with very niche interests can gain strength in numbers, giving them a stronger voice and greater power to make things happen.

On the surface, it would seem like this is a marketer's dream.  Just find these groups, and you have a ready audience to whom you can market your products and services.  But it's not working out that easily.  These groups have become much more than billboards for the eyeballs they attract each day.  They have become thriving, vibrant communities of people who care about each other and do not want to be assaulted by blatant marketing and sales tactics.

This has highlighted the importance of truly understanding your consumers.  The insights you derive should guide your company to new ways to provide authentic experiences that your consumers will value.  You need to become one of them before they will pay attention to you.  The internet has made this point blatently obvious as we see so many companies fail to gain traction with their "online media strategies."  But the fact that it's obvious now doesn't mean that it wasn't always true.  

Many companies make the mistake of thinking that this is how the online world is different from the traditional channels they know well.  In reality, this is how the expectations of newly empowered consumers will change the way the traditional world works.  Are you ready to meet these challenges? 

Who at your company is responsible for understanding the consumer inside and out?  How is this understanding changing the way you think about the way you do marketing and develop new products and services?  Hopefully you've discovered that the lines are blurring, which may be a bit confusing.  If so, then see it as a sign that you're on the right track.

While we're on the topic of publishing, Chuck Frey of Innovation Tools published an article I wrote about guiding innovation with consumer research. 

It's a brief how-to, illustrating how consumer research is applied differently for incremental improvement or developing breakthrough innovation.  The example is from the past, and shows how consumer research on a desktop computer could lead to the improvements we enjoy today, or to the development of the laptop.  I'd love to know if it clarifies the common "one size fits all" perception of consumer research techniques.

Innovation Tools is a weekly newsletter where Chuck shares tools, methods, and ideas he collects through the week.  It's a great place to find all the latest tools and thought leadership to aid in mind-mapping exercises, brainstorming, bringing out creativity, etc.  As with any resource, use it wisely.  Tools can help you to be better and more efficient at what you need to do.  No single tool, however, can give you the answer, or transform your organization on its own.  You still have to do that work. 

You can also download it here, and if it's helpful, feel free to share it - but don't sell it. consumer guided innovation.pdf (66.32 kb)

I was advising a client on how to collect some qualitative and quantitative research. He wanted to combine all the questions into one survey.  I cautioned him about collecting too many qualitative responses, and suggested that we may want to do two separate studies.

"Won't that take forever?" he asked? I responded that it wouldn't take that long, because we wouldn't need many responses in the qualitative part.  "But that's not statistically significant!" was his reply.  He had the understanding that no matter what type of research you're doing, statistical significance meant that you needed at least 500 respondents.  We then had a good conversation about what statistical significance means.

Statistical significance is a term used to describe the confidence level with which you can use the results of your study to project how the broader population will respond.  For example, if you are doing a quantitative study to find out how many people identify positively with your brand, you may collect 1000 responses recruited to represent proportions of the population.  If 800 of those people identify positively with your brand, you may say with a high degree of confidence that approximately 80% of the population identifies positively with your brand.  There are charts that can tell you exactly what that degree of confidence is, and that is your measure of statistical significance.

But let's say that you want to understand the associations with your brand more deeply.  You want to know how it makes people feel.  You can't ask this type of information in a quantitative survey without making some assumptions, so you decide to do some in-depth interviewing to find out how your brand makes consumers feel.  In each interview, you need to have time for a longer conversation about the consumer's values.  Even if you talk to a large group of people, if you don't go deeply enough to get an understanding of their values, your confidence level for understanding what those values are is pretty low.

In following this example through, suppose that in interviews with 10 people who love your brand, we find out that it gives them a greater sense of control than your competitors' brands.  These consumers may not have said this directly, but in 10 interviews, we were able to actively think about what we learned, and draw this conclusion with a high level of confidence. 

Would we project this conclusion onto the population at large?  No.  While we have a high level of confidence that we know the issue, we don't have a high level of confidence that this issue is true for the broader population.  For that we need a quantitative study with a large sample size.

What does the term "statistical significance" mean at your company?  Remember that it is a measure of your level of confidence that you have the right answer.  This will vary based on what you are trying to learn, the size of your total population, and how deep you need to dig for answers.  If you are doing very in-depth qualitative research, remember this:  A large sample size may be less statistically significant, because you won't be confident that you could find the right answer in the first place.

My current client owns some of the world's largest online consumer communities in niche enthusiast segments.  Here are a few things I've learned about doing consumer research within established online communities.  I hope you find them useful.

1)    Get introduced to the community by the founder.  Have a profile, and let everyone know who you are and what you'll be doing.  Be transparent about this.

2)    Remember that you're not really "one of them".  You may be welcome, but you are their guest.

3)    If you're working with a passionate community, you can actually disrupt some of the traditional in-depth research techniques, and learn some very deep information very quickly.

4)    Still, there are some things you need to be with people, in person, to learn.  This will vary with each community.

5)    Make surveys as much like an informal interview as possible.  Make the questions informal, and communicate as similarly to the way they communicate on the site as possible.

6)    When executing a survey, remember that consumers hate pop-ups.  Don't you?

7)    Long questionnaires feel smarmy.  You know, the ones with multiple matrix tables that expect consumers to know the name of every feature on the site?  Yeah, those.

8)    I'm sure no one reading this would ever do the previous two points, but let's say there's a prior agreement with a third party, and you have one on your site.  Make sure the community knows that it didn't come from you, and that you wouldn't do that to them.  Graciously collect all complaints about them.

9)    In global communities, be careful with how you use incentives.  Rules vary by country, and international members could feel left out.

10)  Remember that passionate communities LOVE their site.  If they honestly believe you are working to make it better, they will bend over backward to help you.  Authenticity and genuine interest will be your most valuable tools.

Think about the last focus group you ran or attended.  Be honest with yourself.  Why did you have the focus group?  And what, exactly did you learn from it?

I always tell my clients that focus groups serve a real, and valuable purpose, and that they must be used judiciously to make sure we're using the right tool for the task at hand.  But then I noticed that I'm using them less and less frequently.  They don't seem to be very helpful in learning deeply about consumers' lives.  One-on-one interviews are much more helpful to do that.  They also don't seem to be very helpful in evaluating new product concepts, as group-think often obscures real opinions.  Add to that, the numbers are too small to use them to quantitatively infer the behavior of the larger population with a high degree of confidence.

So why are we using them?  I had one client tell me that she used focus groups because it was an easy way to get others in the company to participate.  They could drop in and out from behind the glass, and at least have some exposure to their consumers.  Another client told me that they are used in her company because they were an "accepted" method of gathering market research, and they could easily obtain the funding to run them.

I can see using focus groups when I have an idea of what I want to learn, and I want to collect some basic information to help me to know which areas I'd like to probe more deeply.  It's a safe, middle of the road tool.  What I'm finding, however, is that as we become more focused on who our consumers are and we become more adept at using online tools to collect this basic learning, the focus group is becoming less relevant for me.

I'm curious to know if others are having similar experiences.  Is there greater value we should be getting from focus groups?  Or are they a tool that will become less relevant in the future?

I'm on vacation next week, and will return the week of September 8th.  In the meantime I'll leave you with this thought: