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Good, insightful data can offer a competitive edge

As old-fashioned as it may sound but there is no alternative to good research as customers now have unprecedented power in the buyer-seller relationship

December 29, 2021 / 07:41 AM IST
Watching and communicating directly with customers is vital for business and deploying good research is more important than ever.

Watching and communicating directly with customers is vital for business and deploying good research is more important than ever.

In a coronavirus-hit world, customers have gained extraordinary power in the buyer-seller relationship. Technology had come to their aid much earlier but the conversion of more people into the powerful position happened over the last two years.

Yet, many small and medium enterprise (SME) owners are reluctant to use research to understand that power because in the past they didn’t find such research useful or their budgets are tight. That reluctance must be overcome because, in the new, tougher business arena, there is no substitute for collecting important strategic information directly from the marketplace.

Information revolution 

A combination of events over the last few years has made it more difficult to compete successfully. As the world got flatter and more businesses viewed their markets as without borders, more competitors were attracted to lucrative markets across the world.

Many multinational companies (MNCs) set foot in India as trade barriers disappeared and investments became easier. Industries started competing with each other.


Many domestic companies found new competitors in tech-driven disruptors and upstarts and the e-commerce revolution widened consumer choices, moving the power in the supply chain toward the end-customer.

The implications of this shift reverberated back up the supply chain and even to the business-to-business arena. On its heels, the internet made information about product specification, price, inventory, suppliers and everything else that a buyer needs to know to wield power over sellers. The result is many more "perfect" markets and customers who know more about what they want to buy than most individual suppliers.

Research, research, research

Knowledge is power, as the saying goes, and knowing more about what customers want is the basis of competitive advantage for sellers. One would expect that companies would be hungry for more information about what customers are thinking, especially when the pandemic has changed buying and consumption patterns across rural and urban areas. Studies show that 75 percent of urban consumers have at least two apps for e-commerce.

Yet, many companies have reduced focus on research, perhaps due to the poor previous experiences—full of impressive statistics and fancy diagrams but sorely lacking in useful information.

Having found no better alternative to bad market research, many have chosen to believe that "I know what my customers want." That is dangerous because the information they are working with is probably faulty for several reasons:

>> The information is not raw and probably filtered. Rarely do top executives gather a representative quantity of data directly from customers, relying instead on the information provided by their salespeople, marketing managers, and, at best, frontline folks. The problem is that such sources may be filtering the information that reaches the decision-maker.

Each of those employee groups operates on its agenda, which may include such matters as sales quotas, job security and incentives. The information is important but it may not include what needs to be known about customers.

>> The information may be biased. When they do receive information directly from customers, it is too often clouded by confusing messages. In some cases, customers believe that every communication with a supplier is a part of a larger negotiation process; they would never let their guard down and admit that the supplier is doing a pretty good job at a reasonable price.

On the flip side, many customers don't want to hurt anyone’s feelings. Even as much as most suppliers want customers to complain to them first so that they can fix problems, most today go to social media to vent their anguish and go elsewhere for something better.

>> The information is based only on facts. This does not sound like a problem but it can be disastrous for a seller because customers do not always make decisions based on facts. For example, an executive may base their decision on the fact that the number of defective products being shipped from their plant is low, which would be irrelevant information if customers think those products aren't working quite right.

The objective of a company is to benefit from customer purchasing decisions, and executives must remember that those decisions are based on customers' perceptions, not the facts as reported by internal systems.

>> Bad inferences are made from good data. For example, customers typically want lower prices. When customers communicate that to suppliers, it doesn't mean that the only appropriate response is to cut prices. When customers say they want a lower price, in addition to the negotiation gesture, it usually means that they don't think the value of the offer justifies the price, and there are many ways to respond to that.

Executives who haven't used good market research have often mentally moved from the original data ("there is a problem with value perception.") to a bad inference ("they won't be happy until we cut prices.").

Watching and communicating directly with customers is vital for business and deploying good research is more important than ever.

Customers have unprecedented power in the buyer-seller relationship and have earned the right to define value as they wish.  That means there is no other way to find out how customers define value than to get it directly from the horse's mouth. Doing away with this will lead to the end of your competitive advantage if it hasn’t been lost to the pandemic already.
M Muneer is the managing director of CustomerLab Solutions, a consulting firm.
first published: Dec 29, 2021 07:41 am
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