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CULTIVATING SYSTEMATIC LISTENING

Market leaders are exceptionally good at listening to their markets. It’s one of the reasons they are market leaders. In fact, it may be the most important reason. Listening to the market gives market leaders the next best thing to a crystal ball. It gives them what I call the Crystal Ball Effect: a greater level of understanding about the market that allows them to more effectively anticipate market needs, understand how to respond to them and generate better financial performance as a result.

To generate the Crystal Ball Effect, market leaders don’t just listen occasionally. They do so systematically. Every team member is taught to gather information and pass it along.

Not only do they listen, but market leaders act on what they hear. The feedback they get from their customers is one of the key drivers of decisions about the products and services they offer, the pricing structures they use, their distribution channel selections, the technology systems they use and how they promote their products.

Unfortunately, the average performers in the market, which is what most companies are considered, don’t listen. Worse yet, some companies solicit input and then ignore the feedback. There is little difference between this situation and that of a friend who asks for your advice and then ignores it. It frustrates the customer and may eventually cause them to stop giving advice or remaining your customer.

The reason companies ignore what their customers say isn’t because they don’t care. They do care. In fact, many think they are listening, and, sometimes, they are. But they aren’t listening systematically, they’re listening sporadically. Their CEO may listen, and perhaps, the executive team or sales team, but the organisation’s culture as a whole doesn’t focus on listening as a core value. Thus, the information they hear may not make it to the individuals who are in a position for driving critical business decisions.

Market leaders build a listening culture in three ways. First, the executive team models the behaviours they want to see within the organisation. Second, they build processes and systems internally to listen and incorporate feedback. Third, they use market research, when needed, to improve accuracy and gather additional feedback. This chapter explores each of these aspects of listening organisations in more detail.

MODELLING THE WAY: THE EXECUTIVE’S ROLE IN BUILDING THE CRYSTAL BALL EFFECT

Costco Wholesale Corporation focuses on providing what it calls ‘the extreme value proposition’ to members. Its customer is a value seeker who wants quality but opts for price over brand as long as the product meets quality standards.

To make this possible for customers, Costco combines no-frills, warehouse-style retail facilities, strong vendor negotiation strategies and the economics of a gym membership. Members pay an annual membership fee that gives them access to its physical and online stores and provides Costco with a direct communication channel to its customer base. Like a gym membership, this fee is paid annually, regardless of whether Costco’s services are used.

This steady stream of income helps facilitate the low prices members find inside, which reinforces member usage. The result is a cult-like following from members. According to Jim Galanti, Costco’s executive vice president and CFO, ‘We don’t tweet. We don’t buy banner ads. We rely on the fact that we’ve got 30 million member households that are loyal to us.’

The model has been extremely successful. Since it was founded in 1983, the company has grown from a single warehouse in Seattle to nearly 600 warehouses in nine countries, with 64 million members worldwide and over $100 billion in annual sales. In just 29 years, Costco has become the third largest retailer in the United States and the leader in the warehouse retail sector. Costco is a market leader.

When asked why Costco has enjoyed such exceptional success, Galanti emphasised the importance of understanding their customer and looking for ways to serve their customer’s needs. And how have they done so through their rapid growth? In part, it is because of their executive commitment to understanding who they serve.

Costco Wholesale Corporation’s co-founder and CEO Jim Sinegal began his warehouse retail career as a stock boy, working directly with customers. Many of his fellow executive team members also got their start in the 1950s or 1960s as box boys or cart pushers at Fed-Mart or Price Club, some of Costco’s predecessors in the warehouse retail business.¹ Although experience at this level isn’t a requirement to understand the customer, it certainly helps. But what is more important is that the executive team’s active interface with customers didn’t stop when they joined the corporate office.

In 2012, as Jim Sinegal was preparing to retire, he still visited each of Costco’s 600 locations at least once each year, talking with employees from store managers to forklift drivers and gathering information about the customer experience. Sinegal was not the only executive committed to listening personally to input from customers and employees. ‘Each and every one of the senior executives of Costco, including me,’ Galanti explained, ‘have a [customer] phone call or receive an e-mail or a letter on a weekly basis that we’re responsible for responding to. No matter how big we are, if you don’t know what’s going on out there in the stores, or in our case, the warehouses, you’re missing something.’

And the conversations don’t end with goodbye. Costco’s management brings that information to the table as it talks over what else can be done to help meet customer needs. Galanti goes on to say, ‘We’re constantly going back and looking at what we’re doing. We operate in a healthy state of paranoia. It sounds a little perverse, but [we recognise] that we don’t invent things that have patents or [are proprietary]. Once it’s out there, on the very next day, not only you, the customer, but every competitor can see it. So we have to remain a moving target.’

Jim Sinegal and Jim Galanti both see listening to customers as a key reason that Costco is a market leader. Their own behaviour as executives reflects that belief and they serve as models for others.

Bill Ayer, the recently retired CEO of Alaska Airlines concurs. Listening is critical, and one of the most important lessons the airline has learned is ‘to be totally and completely customer focused.’ Ayer continues, ‘I would tell you that the primary motivation for all of the changes that we’ve made, all the improvements we have made in our operations, have been driven by customers. Customers are the only reason we’re in existence. They drive every decision that we make, directly or indirectly, and at the end of the day, they decide how successful we’re going to be.’

Ayer modelled the behaviour he wanted within the company. Before his retirement, he still visited airports routinely, often stopping by on his way to work, a heavy travel time for the airlines. When he got there, he watched and listened. He listened to customer complaints about waiting lines, anxieties about missing flights, concerns about bags and desire for different amenities. Then, he took action. He returned to work with insights and input and encouraged others to do the same.

The result was innovative improvements that helped improve the customer experience. One example is the approach Alaska Airlines took to expediting the ticketing process by using ticketing kiosks rather than a ticket counter. ‘That all came from just talking to customers and watching customers,’ he said. ‘I used to stop at SeaTac [airport], in fact, I still do, at 6:00 in the morning and watch people get in line at our old ticket counter. People that are running for a meeting, maybe running a little late [because] they hit traffic, and they’re just scared to death when you look at them and talk to them, and they say “darn, I wasn’t counting on a 20-minute wait at your ticket counter line. Can’t you do this better? I may miss my flight, and my day is destroyed if that happens.”’

He took that feedback to his team with a mandate to remove customer stress from the existing system. The result was a self-service kiosk system used in some foreign airports but completely unused within the U.S. airline system, and it has dramatically improved the speed with which passengers can go through the ticketing process. Is this part of marketing? According to market leaders, it is. It may not be part of the marketing function, but it is definitely part of the discipline of marketing. It is part of aligning everything the company does with customer needs and expectations, and it is critical to success.

The CEOs and other executives of companies that are market leaders spend time in the market talking with customers, listening to the feedback they receive and taking action to improve. As Ayer said, ‘it’s all about continual improvement’ of the customer experience based on feedback from the customer, and the executive team must lead the way for improvements.

BUILDING A LISTENING CULTURE

Listening has to happen at more than the executive level. In fact, many average performers are led by executives who are very good at listening. They talk with customers, and they take action on aspects of their business that they learn need to change. The challenge is that when a company grows, if the executives are the only ones listening, they are likely to hear only a small percentage of the feedback. If the population of customers is very large, and the number of customers with whom the executive team has relationships is very small, especially if the customers have an existing relationship with the executives who speak with them, the information the leadership team receives is not likely to be representative of the population overall. This means that without a company culture that reinforces listening, these leaders may be missing extremely valuable insights that might give them the Crystal Ball Effect, the edge they need to become leaders in their industry.

Most companies need more than executives who listen, they need a culture that systematically listens to customers and passes along feedback internally. The executive team plays a critical role in building that culture, and they do it in two ways: informally, by recognising employees who help the company listen, and formally, through systems and processes designed to help companies gather information.

Employees at every level within an organisation have conversations with customers or prospective customers every day. These provide excellent opportunities to gather feedback, if the employees know that doing so is important and valued and if they have the training to do so well.

At Alaska Airlines, Bill Ayer and his management team focused on helping employees understand the importance of a listening culture informally through subtle changes, feedback and persuasive conversations. Because many of the changes the process prompted were hard on employees or existing operations, the change was challenging, and when we spoke in May 2011, Ayer said it still wasn’t complete.

He said the key to change was to frame the conversation in terms of the benefits to employees. If they wanted the company to remain independent, which most employees did, the company needed to be profitable. To be profitable, they needed loyal customers. To have loyal customers, they needed to be completely focused on what customers want and need.

Although many of those conversations happened at employee only meetings or in other venues where leadership could address multiple employees at the same time, it also happened individually. Ayer said that he often had conversations with front line team members, asking them how they were helping to improve the customer experience. If their feedback reflected an operational focus, he corrected them.

If they responded by saying, ‘that’s not what my supervisor said to do,’ Ayer said his next visit was to the supervisor. This process takes time, but the outcomes are literally paying dividends for Alaska Airlines. Since 2008, Alaska Air Group’s stock has outperformed every other stock in the Pacific Northwest, including Amazon.com. By explaining the importance of a customer focus to employees one conversation at a time, Ayer and his team changed Alaska Airline’s focus, and the airline became a market leader and improved returns for investors.

Other companies have learned the value of customer conversations through experimentation and now provide more formalised training to help improve the impact. For example, the marketing team at Ford Motor Company’s European division understood that the next generation of automobile purchasers would be teenagers, but they didn’t know as much about this age group’s lifestyle or priorities. To gain more insight, a group of Ford engineers and marketers spent time at a hair salon in London that also hosted experimental techno-pop music sessions.

They spent time talking to their target market, discussing their priorities and then went out together to experience their lives first hand. When they started connecting at a more personal level, they were able to get a better understanding of what mattered to the teens, and they incorporated the feedback into designs. The teens continued to provide input to the Ford team until they produced a design for a car that was both simple to drive and inexpensive to purchase.

The programme was so successful that Ford employees in North America are now being trained on how to communicate with consumers wherever they meet them, whether they happen to be in a dance club, a hair salon or a department store.²

Many companies, especially consumer-focused companies, are leveraging social media to communicate with customers. By some estimates, 61% of U.S. companies use social media to ‘listen’ to their markets at least occasionally.³ Unfortunately, most of what happens using social media is more aptly labelled ‘hearing’ than ‘listening.’ In these cases, internal teams are more focused on the number of likes or followers or communicating to the customer than on actively listening to what they say. Yet, social media provides an unprecedented opportunity for employees within a company to gather real-time feedback.

The computer maker Dell, Inc., has been listening—and training its employees to listen—to conversations on social media. In 2010, Dell opened a social media university where employees could learn to participate on behalf of the company in social media initiatives. Within ten months, 9,000 employees had taken a course through the programme, and more than 1,000 had finished the four courses required to become a certified participant in Dell’s social media programme. Dell also created a social media centre that scans the online conversations between their market and their employees, looking for patterns and developing additional ways to promote conversation. According to Manish Mehta, vice president of social media and community at Dell, the company uses the conversations as ‘a systematic early warning system’ for product flaws and other issues.⁴

In each of these cases, the executive team led the way by modelling the behaviour they wanted. They followed up that behaviour with formal and informal programmes that encourage employees to listen to, and take action on, what they are hearing from customers.

VALIDATING INTERNAL INFORMATION WITH THIRD-PARTY RESEARCH

The third tool that market leaders use to listen to their market is third-party research. Market research, conducted by an impartial third party, can bring valuable insights to an organisation. It can also be quite costly. The key to effectively using research is to remember that the primary purpose of market research is to reduce risk. It acts as an insurance policy, reducing risk by turning some assumptions into facts. Market research allows a company to shift from making decisions on assumptions to making decisions based on facts, or at least a reduced level of uncertainty, by testing the assumptions made by inherently biased internal decision-makers before using them to make strategic decisions.

Many companies resist market research just as they resist planning processes because they both cost time and money and don’t deliver an immediate return. However, the outcome is like building a home without plans that have been reviewed for compliance with building codes. By neglecting the facts of the environment, in this case, the required building codes in the building process, the builder is highly likely to have to tear down part of what has been built in order to fix it. Although the building process may begin more quickly, the house will cost more money and time to complete. Market research provides insight into the market’s code, so that whatever is built by the company will be readily accepted by the market for which it was designed. It reduces risk by reducing mistakes and shortening the time between execution and realisation of financial returns.

Why Market Research Reduces Risk

Market research works to reduce risk in several ways. First, using a third party to listen to customer input can eliminate a company’s natural tendency to filter feedback based on what the company’s executive team wants to hear. Even the most adept listeners can fall into the habit of hearing what they want to hear and neglecting other information. Those who perform third-party research listen with a fresh perspective and may catch feedback that internal sources have inadvertently ignored. This reduces risk by improving the chances that the executive team will appropriately prioritise initiatives according to what the market truly wants.

Second, third-party research can improve the quality of the research results. Some audiences will resist providing direct feedback, particularly negative feedback, to a person or company with whom they have a significant relationship. As a result, the answers to questions about service quality may reflect satisfaction when, in fact, they are searching for a new vendor. However, when a third party asks and assures the respondent of anonymity, the respondent may be more forthright with his or her feedback. When a company is using satisfaction metrics to project future revenue or assess whether processes need to be improved, misinformation can result in miscalculations or missed opportunities. Market research reduces the risk of these issues by providing more accurate results to decision-makers.

Third, many companies are simply not good listeners. In these cases, market research can play an important role in helping address that shortcoming and improving the organisation’s ability to respond to market needs. This substantially reduces risk by allowing companies to drive decisions from a market perspective, rather than an internal or operational perspective.

Fourth, many companies, especially national and international companies, have many markets across multiple geographies. When the geography is large, companies are often faced with trying to make sense of massive quantities of data or managing the collection and analysis of data in multiple languages or cultural environments. In these cases, using third-party researchers to help handle the workload or provide interpretation of data through a local lens can reduce workloads and improve results.

Effective Research Keeps the End in Mind

One of the reasons many executives are sceptical of the value of market research, and particularly thirdparty research, is that many research studies are expensive and, yet, fail to deliver actionable information that effectively reduces risk or improves return. Unfortunately, neither of these problems should exist. Market research can be quite inexpensive relative to the risk it is attempting to mitigate, and well-constructed market research always provides value, even if the results simply validate existing beliefs.

In many cases, companies who have experienced problems with expensive or ineffective market research have themselves to blame. As with other forms of outsourcing, external research firms can only perform well if they thoroughly understand the questions they need to answer, the budget available to answer them and the format of the information required at the end of the process. When the commissioning company does not accurately brief the market research firm, selects a market research firm that does not have sufficient general business knowledge in addition to marketing and technical research skills or is not very clear about their own expectations, the market research investment is less likely to provide the insurance coverage the company expected.

To be effective, market research projects should be managed carefully, keeping the desired outcomes firmly in mind. In particular, managers who are responsible for market research, whether internal or external, should do the following:

Identify Assumptions and Define Risks

Chapter 11, ‘Evaluating Returns on Marketing Investments,’ addressed the importance of assessing risks in the process of estimating potential returns. Risks in the planning process emerge from assumptions about the market on which marketing strategies are based.

In many cases, the risks are small. For example, a health care organisation that wishes to promote its cancer treatment capabilities may be considering a brochure to be distributed in doctors’ offices that targets patients considering alternative treatment venues. The message and aspects of the hospital’s services that are featured must be appropriate to the audience, or the brochure is unlikely to make an impact. On the other hand, the cost of this particular marketing tactic might be quite low. If it fails, the resulting financial failure is similarly low. Because the risk is low, any research conducted regarding placement, response or stylistic preferences could quite easily be performed by someone within the health care organisation itself.

On the other hand, some risks are quite significant. If an international consumer product manufacturer is considering a major change to a product with strong brand loyalty, as Coca Cola once did relative to its traditional cola beverage, the risk of failure is quite high. If the product change is significant and loyal customers switch products as a result, it may be difficult to regain their trust and encourage them to resume their purchasing behaviour, even if the change is reversed. If the investment in the change is also quite large, the financial loss in the event of a poor decision might be substantial.

In most cases, the risks are somewhere in between, and they may be more difficult to pinpoint. For example, we recently conducted a research study on behalf of a client whose executive team and company culture are not market-focused. This isn’t to say that they aren’t good at what they do. In fact, the company is one of the largest in its industry, with a track record of successful performance. They are also extremely conscientious about performance, a strong factor in their success. Nonetheless, they recognised that they were not systematically listening to their market, and they were about to embark on a strategic planning process.

The strategic planning process would result in important decisions about operations, investments and marketing over the upcoming years. If the company’s understanding of its market was accurate, the results were likely to be good. However, if the company was missing something, the company might slip relative to its competitors in a highly competitive market, resulting in significant financial losses. The company wasn’t sure what it didn’t know or what the risks might be, but it did understand that if it made incorrect assumptions, it could lose footing against competitors. The executive team worked with us to develop research that helped them better understand the market’s perception of the value they, and their competitors, brought to the market.

Assess the Appropriate Investment

In the previous hospital example, the low potential loss justifies a low investment in risk mitigation. Just as it would be expensive and potentially impossible for an individual to insure against every possible risk, it is impractical to eliminate all risk from marketing decision making. In this case, the organisation might determine that the investment of a few hours of time on behalf of medical professionals and marketing team members, for which the hospital would incur little or no incremental expense, is sufficient to mitigate that level of risk.

In the consumer product example, in which the risk is substantially higher, the company might invest more heavily in market research. It might, for example, invite customers to compare the two products and provide feedback, followed by a limited roll-out in a single geography to assess the reaction. Although these two programmes might involve more substantial financial investment than the informal, internal feedback in the hospital example, if the research averts a Coca-Cola-sized calamity, it would be well worth a more substantial financial investment.

Regardless of whether the risk is large, small or in between, the key is to understand the size of the financial risk first and then assess the level of investment that would be appropriate to convert assumptions to facts and reduce those risks. This helps ensure that the investment remains proportionate to the potential benefit associated with eliminating or reducing the risk.

Start With the End

There is an old saying that if you don’t know where you are going, any road will get you there. This is particularly true of market research. If you are simply looking for information, there is plenty to be had. I have seen dozens, if not hundreds, of market research studies that are full of interesting, but completely useless, data. Most often, this is because the researchers did not understand the types of information that would be required to make the decisions for which the research was originally requested.

When working with a market research professional inside or outside the organisation, it is important to be extremely clear and specific about the type of information you need, and the format in which you need it, in order to make a decision. For example, if you will be interested in whether there are differences in answers based on gender, usage, geography or any other factor, these should be identified in advance so that the researcher can design the study with these requirements in mind.

Similarly, many researchers will include a variety of demographic or segment-based data as a part of the datagathering process. If that information is not practical or relevant, it should not be asked. For example, many organisations ask my company’s research team to include questions about respondent income in research studies. Sometimes, the data reveals interesting information about the income levels of participants, but often, that is the end of its relevance. Many companies find they cannot use the data because their databases don’t track the income levels of customers or prospective customers. In these cases, when the results cannot be used for any practical purpose, it would be best not to ask the question.

It is also important to anticipate how you will respond to information when it is received. Many researchers sit across from clients who, at the end of an expensive study, hear the results and say, ‘Yes, but did you ask them what would happen if we did it this way instead?’ To prevent this issue, the market research team and the management team should talk through how they would respond to the potential range of responses, particularly relative to questions with a limited range of responses. If additional information or options should be presented, it is more cost effective to identify these before the research begins.

The managers responsible for market research should be specific about the format in which the data should be delivered in order to be useful. In some cases, static numbers are sufficient. In other cases, the information is only useful if it can be compared to industry data, historical information from previous studies or in other formats. When the data will be compared to the results of other studies or the information will be gathered routinely to track progress, the researcher will need to format the question appropriately for this purpose.

When a company does solicit input, it should also be prepared to act on what it hears. For example, if a company retains a research firm to inquire about customer satisfaction and receives a low score, it should be prepared to take action. Although many individuals are happy to provide feedback to the companies who serve their needs, they will be less likely to respond in the future if they see no response to their concerns. When a service business conducts this type of study, especially if the population is small, I often recommend that the company send a thank you note either directly or through the third-party researcher that summarises the action the company will take as a result of the feedback the customers provided.

KEY MARKET RESEARCH TOOLS AND CONCEPTS

Like other areas of marketing, market research has become very sophisticated and specialised over the past 100 years. It also suffers some of the definitional issues that are prevalent in marketing in general.

Marketing research and market research are often used interchangeably. However, many marketing experts consider them to be different types of research. Market research is generally considered to be systematic research designed to uncover or validate information about markets overall, including customers and noncustomers, market segments, competitors, market perceptions and market trends. Marketing research is much more focused on the specific processes, activities and intermediate metrics of your marketing efforts. Marketing research is used to assess brand familiarity, measure ad views, test concepts or copy or measure customer satisfaction, among other things. It can also be used to test new marketing initiatives that are under development prior to actually launching them.

From my perspective, market research is the more comprehensive term because it includes both listening to the market overall and listening for specific information about marketing activities. For the purposes of this chapter, marketing research will be discussed only as a subset of market research.

Types of Research

Two basic types of market research are primary research and secondary research. Primary research relies on data gathered directly from the market itself. Secondary research is gathered from libraries, census information or other sources that gathered the information, often for different purposes. Although both types of research are valuable, when the financial risk of an assumption is significant, it may be more appropriate to gather primary research, rather than to rely strictly on secondary data.

Two types of primary research are qualitative and quantitative studies. Qualitative studies focus on generating a deeper understanding of market perceptions and opinions through conversations. It typically involves a small set of market participants, which means that the results can generally not be statistically relied upon to be representative of the overall population. However, qualitative approaches typically provide the researcher with an opportunity to explore information in greater detail. Common qualitative approaches include one-on-one interviews, pilot or beta testing, observational research and focus groups. In general, the results provide directional guidance, rather than definitive answers.

By contrast, quantitative studies focus on generating more statistically representative, numbers-based data. Quantitative research is mathematically based and may be used to test a particular hypothesis or theory. It relies on the selection of a representative subset of the population of sufficient size to be statistically reliable at a level acceptable to the organisation requesting the research. Because of the size of the population and the desire to have comparable data, the researcher asks defined questions, with limited opportunity to probe responses in greater detail. The most common quantitative approaches include mail, e-mail, telephone and intercept surveys.

The results of quantitative data are generally expressed with a level of statistical reliability, such as 95% + /- 5%. The confidence interval, expressed as a percentage, indicates the margin of error in which the answer is likely to lie. The confidence interval is the second percentage: + /- 5% in this case. For example, if 55% of the population responded ‘yes,’ and the confidence interval is 5%, the actual percentage of the population that would answer ‘yes,’ if the entire population were asked, is likely to be somewhere between 50% and 60%. Fifty-five per cent less 5% is 50%, the lower end of the confidence range, and the upper end is 55% plus 5%, or 60%.

The confidence level indicates how sure you can be that the response is, indeed, within that range. The confidence level is indicated by the first percentage, which is 95% in this case. A confidence level of 95% indicates that there is a 95% chance that the actual answer is within that range and a fairly small chance (5%) that the actual answer is outside of the margin of error range. Most researchers strive for a 95% confidence level for market research.

Three factors affect the size of the confidence interval. The first is the sample size. The larger the sample size, the more likely it is to reflect the population overall, and the smaller the confidence interval will be. However, the relationship is not linear. For example, if the population is 1,000, the sample size is 100, and the percentage responding ‘yes’ is 55%, the confidence level in our previous example would be 95% + /- 9.26%. However, if the sample size were to double, the confidence level improves, dropping to 95% + /- 6.17%.

The second factor that affects the confidence interval is the percentage of the population that selects a particular answer. If 99% of the sample size responded yes, the margin of error is reduced because of the overwhelming response rate. Using the previous example, with a sample size of 100, if 99% of the sampled population said ‘yes,’ the margin of error would be 99% + /- 1.85%. If 50% of the population said yes, the confidence interval would be + /- 9.30%.

Finally, the size of the population overall affects confidence intervals. If the population is small, the confidence interval will be smaller. For example, if the population in the previous example was 100, instead of 1,000, and the sample size remained at 10% of the population, the small size of the overall population would cause the confidence interval to rise dramatically. If 50% say ‘yes,’ the confidence interval at a 95% level rises to + /- 29.55%.

Bias Risk in Research

Both qualitative and quantitative research approaches are subject to bias. In fact, it is almost impossible to completely avoid bias in research design. However, an understanding of the most common forms of bias can help the non-marketing manager more effectively identify potential problems, particularly with internallyconducted research.

The most common types of bias include the following:

• Selection and sampling biases. Confidence levels and confidence intervals assume a random sampling of the population. If researchers only conduct research at certain times or in certain places, the sample population may not reflect the actual population. Researchers who sample on a convenience basis, polling only people who are easily accessible during their work day, are more likely to be subject to this bias.

  Another common source of this type of bias is the selection process. When a sample selects itself by opting in or out of a study, the responses may be biased because there may be a difference in opinions between those who choose to participate and those who decline.

• Interviewer or moderator bias. In qualitative studies in which the interpretation depends heavily on the facilitator who is asking questions in response to what he or she hears, one of the most common sources of bias is moderator bias. This occurs when a moderator interprets participant comments or responds in non-verbal ways to what is said based on his or her own perception of the topic. This can also happen in telephone interviews when an interviewer modifies a response based on his or her interpretation of the respondent’s reaction.

  This can also arise in the interpretation of data, when a person allows their personal opinion to influence their interpretation of either qualitative of quantitative data. This type of bias can be a particular concern for internal market research functions in which individuals may interpret results based on what they wanted or expected to see and are not specifically trained in the art of unbiased research interpretation.

• Design bias. Bias is introduced in the design process in many ways. Often, the source is the question itself, which may lead the respondent to answer in a particular way or in the array of responses from which the respondent may choose. For example, the question ‘How significantly will the following action affect you?’ assumes that the respondent will be affected by the action. If he or she might otherwise have answered that it would not affect him or her at all, he or she may feel more likely to interpret an impact with this form of question. Similarly, if a survey asks ‘Which of the following do you read?’ and does not offer a ‘None of the above’ or similar response, it may be prompting inaccurate responses.

  Confusing language or a lack of parallel construction in survey questions can also result in inaccurate responses. For example, if the question asks about the number of times per month a respondent purchases a product, but the response options are outlined in times per week, the respondent may miss the change.

• Measurement and response biases. These issues arise when respondents shape their responses in a way that they suspect will please the researcher or beneficiary. For example, it is common for researchers asking about intent to donate or volunteer for a non-profit to receive overly positive response rates. Although respondents may respond with rosy intents in the survey process, the actual participation rates are often considerably lower. This problem is particularly pervasive in studies asking about socially undesirable behaviours, such as violence or criminal activities, or when participants know their behaviours are being tracked or observed.

Research Design

The effectiveness of a research instrument is typically assessed for both validity and reliability. Validity refers to whether the research answers the question or questions for which it was designed. Reliability addresses whether the research will deliver data that is representative at the expected level. Qualitative research is less representative of the overall population, but the research team should still take precautions to minimise bias and ensure that the information is at least directionally accurate. Quantitative research should be more accurate, and researchers should take particular care to address potential sources of bias in the design and execution of the research.

To mitigate the risk of certain types of biases, researchers often alternate the use of qualitative and quantitative research. For example, a researcher might interview or host focus groups with clients or prospects to get a better understanding of the range of possible responses to various questions and then use that understanding to design questions for a quantitative survey. This initial qualitative step reduces the risk of overlooking response options that a typical respondent might expect to see in a quantitative survey.

In other cases, companies may conduct blind research studies in which the respondent does not know who requested the research. This reduces the incidence of response bias because the respondent cannot tailor responses to an unknown audience. In double-blind research studies, both the respondent and the individual conducting the interview or survey are prohibited from knowing the organisation for which the research is being conducted. This design structure is intended to reduce both response bias and interviewer bias.

Although researchers are trained to develop research tools to be as free of bias as feasible given the budget constraints and the importance of accuracy, mistakes do happen. It is important for a non-marketing manager involved in overseeing the research process to monitor for sources of bias that may skew the research results.

The Art of Interpretation in Research

Have you heard the story of the woman who met Picasso on the street and asked him to sketch something for her? Picasso agrees, and five minutes later, hands her a piece of paper with a simple pencil drawing.

‘That will be $10,000,’ he says.

Shocked, the woman protests. ‘That much money for only five minutes of work?’

Picasso nods, and with a smile, explains. ‘It did not take me five minutes. It took me 30 years.’

The art of interpreting market research is similar. There are many market researchers who can conduct a study and create a set of attractive infographics to illustrate the results. When the project is simple and the risk is low, it is reasonable to hunt for the best price among the many competitors.

However, if the risks that the research is designed to mitigate are more significant, and getting the wrong answer or misinterpreting the answer could have a significant negative impact, an investment in a more sophisticated level of research and analysis is more appropriate.

Insight and interpretation requires a knowledgeable professional with the business experience to interpret the results in the context of your unique organisational objectives and who understands the importance of statistical nuances. It also requires someone with enough marketing expertise to help you translate the data into an actionable plan, which, in my experience, is the most effective way to ensure success. Without that level of insight, the results will stand little chance of providing the risk mitigation that research is intended to deliver.

Sophisticated market research is often more expensive. However, given that the results will be forming the foundation of your strategic planning process, the reduction in risk may be worth the added investment.

When considering options relative to third-party researchers, managers should listen carefully to the questions the researchers ask when planning, particularly when it comes to their understanding of your organisational objectives, and to their experience outside of the simple realm of data gathering.

QUESTIONS FOR NON-MARKETING MANAGERS TO ASK ABOUT CULTIVATING SYSTEMATIC LISTENING

To ensure that your company has the tools and systems required to listen to the market effectively, the nonmarketing manager should consider the answers to the following questions:

• How well does our organisation listen to the market? When we get information from the market, do we act on it? Or does the feedback simply get filed with the report that brought it to our attention?

• Do our executives model the way by actively engaging in conversations with the market themselves?

• What processes or programmes support internal communications about market feedback?

• How do we reward people who pass along market feedback? Is their input ignored or valued?

• Are there assumptions about the market that we are making in our business or marketing planning that we have not validated? How much risk do they pose to our organisation’s financial health?

• If we are supplementing learning with internal or external market research, how often do we do so? Are we using external resources appropriately? Did we select a research team that has the requisite knowledge to interpret the data in a business context so that we are maximising the value we get out of our research investment?

CHAPTER 15 SUMMARY

Market leaders benefit from the Crystal Ball Effect, the perception among their competitors that they are better at predicting where the market will go and how to get there first. They don’t actually have a crystal ball, of course, but they do have stronger listening skills than their competitors.

Market leaders actively listen to the market, asking clarifying questions and pursuing issues and concerns with the eagerness of a friend wanting to help. They do so in three key ways. First, their executive team takes a personal interest in what customers are saying. They pay calls on customers, talk with customer-facing employees, respond to customer complaints or concerns or maintain an active presence in social media. And they do more than listen. They take action on what they hear.

Second, they actively build company-wide processes to gather information and incorporate feedback. In some cases, these processes are informal, encouraged by positive reinforcement and internal communications. In other cases, the organisation builds more formal structures, sometimes within the marketing function and incorporated into other aspects of operations. In all cases, the information these more formal structures gather is systematically reviewed and shared within the organisation, and the input forms the basis of a continual improvement process.

Finally, the company uses formal market research, using either internal or external research resources, to supplement on-going processes. Whereas some research is used to measure outcomes, the market research related to listening is designed to gather market information that reduces the risk involved in business decisionmaking. To be effective, market research should be budgeted based on the size of the financial risk and the potential impact failure could have on the company and designed with the information required to mitigate that risk firmly in mind.

Market research, like other aspects of marketing, has become highly technical and specialised. Two main types of research are primary and secondary. Primary research is divided into qualitative research, which is based on discussions and concept exploration, and quantitative research, which is based on statistical sampling and numerical outcomes. Market research must be carefully designed to minimise the impact of bias and generate valid and reliable results. In addition, companies should be careful to select a research team that provides the appropriate level of interpretive expertise. If the insight is critical or the risk associated with poor outcomes is significant, a company should identify a research partner who can interpret the data in a business context. Although many researchers are adept at the mechanics of conducting a study, fewer are skilled in the art of interpretation.

This combination of executives who model the importance of listening, systems and processes that facilitate the gathering and distribution of data and formalised research to mitigate risk and provide added insight are the source of the market leader’s insight. Together, they provide the insight required to generate the Crystal Ball Effect.

Endnotes

1 Fuller, David W., Telvich, Tim and Shechter, Brenda. ‘The Empire Built on Values,’ The Costco Connection, January 2012. www.costcoconnection.com/connection/201201/i1=issues#pg27

2 Balu, Rekha. ‘Listen Up!’ Fast Company, April 30, 2000. www.fastcompany.com/39485/listen

3 Ritchie, James. ‘Most U.S. companies listen to customers on social networking sites,’ Cincinnati Business Courier, June 20, 2012. www.bizjournals.com/cincinnati/blog/socialmadness/2012/06/most-us-companies-listen-to.html

4 Fowler, Geoffrey A. ‘Are You Talking to Me?’ The Wall Street Journal, April 25, 2011. http:/online.wsj.com/article/SB10001424052748704116404576263083970961862.html