3 Costly Customer Understanding Mistakes

3 Costly Customer Understanding Mistakes:from Wide Angle by Jing Zhang
“Marketing is a consumer of data.”
We’ve heard these words on member calls, discussing how the marketing function is vying to consume and understand the information coming from today’s world of “Big Data”.  In a way, within an organization, Marketing is the customer of both market research and data-analytics functions.  (For more on data analytics, see our resource center.)  And in this supplier-consumer relationship, one of the most coveted products is customer understanding.
However, when approaching their research/analytics functions for answers, Marketing often makes three costly errors:
Mistake #1: Taking a 360⁰ approach when you don’t know what you’re looking for.
We’ve heard that today’s marketers want to understand everything about their customers so that they know “where”, “when”, and “how” to hit “who” most efficiently.  But that is every bit as complicated as it sounds.
Intuitively, a comprehensive approach is great when you don’t know which piece of information is going to be most relevant to your decision-making… spread that net as wide as possible, right?  However, the more you invest in breadth, the less you have left to invest in depth.   Understanding every habit and interest of your customer won’t help drive sales if those variables aren’t directly linkable to the purchase path.
Remedy: A relatively low risk process is to start by measuring your existing highest value customers, mapping their purchase paths, and isolating leverage points (i.e. areas of highest marginal impact).  Your prospects should mirror your highest value customers (establishing the “who”), and the leverage points will provide insight as to “where”, “when”, and “how”.  Read more about how Foxtrot used this process to decrease customer attrition rates by 30% and boost customer value by 15%.
Mistake #2: Panning for gold & seeking silver bullets.
With so many decision-making stakeholders involved, marketers are constantly looking for that one piece of information – a silver bullet – that everyone and anyone can understand and get excited about.  They then use that nugget to drive alignment for everything from content creation to customer service.
There are three problems with this mindset.  First, in today’s world of too much information, finding that “sound bite” often requires oversimplification, which unfortunately runs opposite to targeting and nurturing efforts where details really matter.   Second, silver bullets tend to be surprising and unexpected, which means that marketers likely don’t know where (or if) they’ll find it.  This means marketers will be running down too many random rabbit holes and losing focus on higher order goals really matter.  And third, once you’ve found one, it’s hard to refrain from trying to squeeze it into every conversation or context.
Remedy: Clarify – to yourself as well as to your researchers/analysts – the specific business goal(s) you’re trying to address in your search.  Then frame inquiries with concrete questions answerable with data, preferably ones that can validate or disprove hypotheses (e.g., ask them “Do our repurchase rates correlate with behaviors x, y, or z?” rather than “How do our customers behave?”).
Mistake #3: Understanding everyone and everything when few matter.
Based on research from our sister program, when it comes collective decision making, 10% of stakeholders wield five times more influence than the average stakeholder.  We also heard that for one daily deal company, zip code and gender predicted 90% of purchase interest.  That means that if you’re spending most of your research investments on more than a selective set of variables or customer profiles, you’re probably wasting your time.
Remedy: Unfortunately, fixing this requires upfront investments that may not pay off in the short run, as it’s no easy task to isolate the few variables/stakeholders who matter.  We don’t have all the answers here, but if you’ve had success on this front, we’d love to hear from you!
What do you think?  Are these challenges that you’re facing?  Have you had success overcoming or avoiding these potholes?  Here at the CEB-Marketing Leadership Council, we’re just kicking off our 2012-2013 research projects, so we’d love to hear your thoughts!