How well do you understand your market's requirements and opportunities?

Citation

Burian, R.W. (2000), "How well do you understand your market's requirements and opportunities?", Strategy & Leadership, Vol. 28 No. 5. https://doi.org/10.1108/sl.2000.26128eab.002

How well do you understand your market's requirements and opportunities?

How well do you understand your market's requirements and opportunities?

Robert W. Burian

Abstract Business managers frequently assume they know what their customers want and need. This article contains a tool that can be used to measure how much (or how little) managers know based on the breadth and depth of their listening to the voices of customers and prospective customers. Opportunities for increasing understanding are identified. By expanding their listening resources, business managers can expect to experience more marketing successes and fewer failures.

Keywords: Marketing opportunity, Marketing research, Customer requirements

"What people in business think they know about customers and the market is more likely to be wrong than right," says Peter Drucker[1]. Where do you and your organization stand in fully understanding the benefits customers seek and your business must provide in order to be competitive in the marketplace? Experience has taught me that, given the opportunity, prospective customers can identify, define, and prioritize their requirements for your products and services to an extent unknown to most business managers. The key to this level of understanding is listening openly, deeply, and early – before making design commitments.

...Management teams frequently overestimate how much they think they know about the wants and needs that underlie consumer purchase selections...

Management teams frequently overestimate how much they think they know about the wants and needs that underlie consumer purchase selections. They also underestimate the effort needed to fully understand a market. Harvard Professor Ted Levitt, criticizing the US automobile industry when foreign imports were taking increasing market share in 1960, stated: "Detroit never really researched the customer's wants. It only researched his preferences between the kinds of things which it had already decided to offer him"[2].

Strategic planning is more likely to be focussed on "finding out what is possible in the minds of the people (within the organization) who wield power," observes Professor Russell Ackoff[3]. Customers often take a back seat to top management's desires. Ackoff urges business leaders to plan toward a positive goal rather than away from past experience. A thorough knowledge of the market's requirements and opportunities will provide a challenging target toward which to plan. Management needs a tool to measure how thoroughly they understand their markets.

Inspired by the Baldrige Award process, I have created a simple evaluation process that business managers can use to measure how much (or how little) they know of their market requirements and opportunities. Chief executives, marketing managers, and product development teams attaining good scores on this assessment will experience more successes and fewer marketing failures. Even those who support the Baldrige Award "aren't perfect," says Bradley Gale. "Some become so fixated on idealized engineering processes that they fail to ask what really makes a customer happy"[4].

My evaluation process consists of two forms: an assessment form and a scoring form (see sidebars). Make a photocopy of the first one and use it to document what your team has accomplished in understanding the market, keeping in mind that not all questions are of equal value. When the assessment form is completed, use the scoring form to tally what you have accomplished and to see what remains to be done.

The notes on the scoring form explain the rationale behind the numeric values. The higher the score, the more likely your new products will be brought to market within budget and on schedule, your offerings will meet sales forecasts, and your business will experience success.

The market requirements and opportunities hierarchy

Questions 4, 5, and 6 on the assessment form address three levels of requirements and opportunities that frequently cause confusion. All are correct, and all are interrelated. The three levels are represented in Exhibit 1. At the highest level are the benefits consumers seek in a product or service offering. They are relatively few in number. They, in turn, drive a larger set of features and functions that are needed to deliver the benefits desired. The relevant features and functions, in their turn, drive the need for a much larger set of supporting specifications. The primary goal when satisfying customers is to be able to deliver the benefits they desire better in the future than you have in the past and better than the competition delivers them today.

Exhibit 1 Market requirements and opportunities hierarch

Designers and engineers often equate market requirements with design specifications. They reason, understandably so, that they need the specs before they can design and build the product. Marketing professionals, on the other hand, are more inclined to think of the product's features and functions when speaking of market requirements. They believe features and functions persuade customers to buy. Both groups agree that the supporting relationship between the two levels is necessary to create a successful product in the marketplace.

My experience in listening to the voice of the customer leads me to believe that there is a third, higher level of market requirements – the benefits customers seek in the products and services they buy. As a marketing professor once observed, "People don't buy quarter-inch drills. They buy quarter-inch holes." The benefits an offering provides, "what it does for me," are the consumer's principal concern. The customer's set of desired benefits constitutes his or her brand-selection criteria when making a purchase decision.

Market-driven planning depends on our ability to truly understand the market's buying behavior. To do this, we need to dialogue with consumers at the benefits level. This is where they are most comfortable. With this aim in mind, Ted Karger calls for a different kind of research. "Growth planning requires informational activities markedly different from what is typically asked for and provided by marketing research." Karger calls for "guidance research," that is, information from consumers showing us where they want to go[5].

Market requirements and opportunities defined

Questions 1 to 20 on the assessment form address the tasks for identifying and defining the wants and needs of prospective customers. The last two questions, 21 and 22, are used to distinguish "requirements" from "opportunities."

Marketing requirements meet four criteria:

1. 1.

   They are things that potential customers tell us they want or need.

2. 2.

   They are stated at the "benefits" level.

3. 3.

   They are very important in their priorities.

4. 4.

   They are presently being provided at a satisfactory level by your competitor(s).

Thus, marketing requirements are those benefits you must provide to the same level as your leading competitor in order to meet competition. In contrast, marketing opportunities are those benefits that you may provide at a level better than your leading competitors in order to beat competition.

Marketing opportunities also meet four criteria, the first three of which are the same as above:

1. 1.

   They are things that potential customers tell us they want or need.

2. 2.

   They are stated at the "benefits" level.

3. 3.

   They are very important in their priorities.

4. 4.

   They are not presently being provided by you or your competitors to the level desired.

...Ironically, business will spend significant funds to discover the reasons for a market failure when they should be spending that money up front before making irrevocable planning decisions...

Product designers and engineers find comfort in these definitions. They bring a measure of credibility to the need for satisfying potential customers. Requirements must be provided to the level that is available from the leading competitor. Opportunities may be offered in order to outperform competitors. Both are relevant to the perceived wants and needs of the prospective customers.

My impression is that most business managers have an incomplete picture of their markets' requirements. Since they are highly focussed, their vision often is too shallow. As Alvin Toffler observes: "Smart decision makers … have to take account of all kinds of 'outside' factors that once could be safely regarded as irrelevant"[6]. Forler Massnick notes: "Organizations make mistakes and miscalculations every day in regard to surveys. In the customer satisfaction field, the consequences of amateurism can be serious"[7]. Clearly, management needs more than a few focus groups to achieve a high rating on this assessment form. Ironically, business will spend significant funds to discover the reasons for a market failure when they should be spending that money up front before making irrevocable planning decisions.

Robert W. Jacobs cautions: "We must increase our consciousness about the assumptions we use and their utility"[8]. Years of experience often convince business managers to assume they know their customers' wants and needs. The market requirements and opportunities assessment form will show you how much more deeply you need to go in order to fully understand your market.

References

1. 1.

   Karger, T., "Adopting the market-driven way to grow", unpublished paper by the president of The Nowland Organization, Inc., Greenwich, CT, 1988.

2. 2.

   Levitt, T., "Marketing myopia", Harvard Business Review, September-October 1975.

3. 3.

   Ackoff, R.L., "The corporate rain dance", The Wharton Magazine, The Wharton School, University of Pennsylvania, PL, Winter 1977.

4. 4.

   Gale, B.T., Managing Customer Value: Creating Quality & Service That Customers Can See, The Free Press, New York, 1994.

5. 5.

   Karger, T., "Need for a different type of marketing research", unpublished paper by the president of The Nowland Organization, Inc., Greenwich, CT, 1986.

6. 6.

   "Riding the third wave: a conversation with Alvin Toffler, Tom Johnson, and Lawrence Benningson", Strategy & Leadership, July/August/September 1999.

7. 7.

   Massnick, F., The Customer is CEO: How to Measure What Your Customers Want – and Make Sure They Get It, American Management Association, New York, 1997.

8. 8.

   Jacobs, R.W., "How to create your preferred future, faster", Strategy & Leadership, July/August/September 1999.