We’ve all seen it happen. You’re in a meeting, and a strategic question is raised related to marketing, sales, or product development. Everyone has a different opinion.
“I think we need to consider…. “
"Really, it’s all about…"
“Our competition is killing us, and we need to…."
Ultimately, it’s not necessarily the best opinion or the smartest opinion that “wins? - it’s the loudest voice, usually belonging to one of the most senior people in the room.
Maybe this person is good at telling stories. Or maybe there’s some anecdotal evidence that makes him or her more persuasive. Maybe they actually are pretty smart and genuinely well-liked.
But what they are NOT is a customer.
Companies are in the business of winning the customers’ choice. If customers aren’t choosing you over your competition, then you don’t have a business. Therefore, it makes sense that decisions should be rooted in customer choice data and analytics.
So… why are we instead listening to opinions and anecdotal evidence? Why aren’t we bringing the customer (or customer data) to the table when making decisions?
Honestly, it’s most commonly because we don’t fully recognize the risk we are taking, and/or we don’t know how to change. The good news is that this is correctable, and, if we can correct it BEFORE our competition does, then we can gain a significant competitive edge.
The risk to businesses is great. Without customer choice data, good leaders, even the best leaders, can make some pretty bad decisions due to cognitive and behavioral biases roughly 75% of the time.
Two primary biases are at play:
- Confirmation bias, wherein we unknowingly give more weight to information that is consistent with our own beliefs. Similar to this is availability bias, which the tendency to make decisions based on what you already know.
- Overconfidence bias, wherein we overestimate our own abilities and underestimate the strengths of our competition. In fact, one study found that up to 80% of executives have misperceptions regarding their company’s relative performance to competition. At Vennli, we find that the alignment between internal perceptions about of how customers make choices vs. actual customer data is, at best, only 63%, with businesses most commonly overestimating their competitive advantage over the competition.
These biases can lead to some significant miscalculation of how customers will respond to marketing and business efforts, and they can certainly provide a handicap to reaching organizational goals.
Our co-founder, Professor Joe Urbany, has utilized Vennli’s customer choice strategic model with over 1000 eMBAs over at Notre Dame. As part of these projects, executives predict the value they believe that customers seek and then interview real customers to learn the truth.
He learned that if knowing how your customers make choices prior to doing any research was the test, just about all of his executive students would fail.
Joe witnessed four basic perception gaps between what executives predict and what customers actually say:
- There are other competitors that customers consider than initially thought. (When Joe surveyed 421 past executive students, 28% indicated that customers brought up competitors that they had not considered.)
- There are considerations customers think about when making choices that you don’t know about.
- What you think is important to customers may not be (and vice versa).
- What you think customers choose you vs. your competition is often wrong.
When we misread the environment, we make decisions based on flawed thinking, leading us to take unnecessary risk. Unfortunately, no matter how aware of our own biases we attempt to be, we’re not immune.
Luckily, there are ways to de-bias our thinking and make better decisions. The tricky thing is that the very nature of these biases means that we don’t consciously recognize when we’re in jeopardy. Therefore, to mitigate our risk, we need to get in the habit of using customer data to inform our decisions and test our personal assumptions as much as possible.
Chip Heath, author of books such as “Made to Stick" and “Decisive" wrote about a time when he was asked, “If people are so bad at making decisions, how did we make it to the moon? To which he replied, “Individuals didn’t make it to the moon; NASA did.
This is a fundamental insight. With better organizational decision-making processes in place, we can overcome our personal biases and make decisions that will ultimately drive company growth and build competitive advantage.
The use of customer data must become commonplace and embedded in the culture. During decision-making discussions, you should be able to answer the following:
1) What customer choice are we talking about, and how do customers make this choice? (What factors are important to them, and how do we compare to our competition?)
What is the customer choice at the root of this strategic decision? For example, if you’re analyzing lagging sales indicators, then you’re considering the purchase decision. If you’re talking about a new marketing campaign, you might be talking about the customer’s choice to engage with your brand in some way.
Once the customer choice is identified, review data related to that decision. We’d recommend not only considering what factors (features, benefits, values, etc.) are most important to customers, but also pull in the competitive nature of choice. After all, customers have options!
For example, Vennli visualizes customer choices in a Venn diagram that is easy to interpret:
When you compare your performance to each of your competitors side-by-side, what can you learn about your place in the competitive market? Also consider if there are segments of customers that make this choice differently and how that may impact your strategy.
2) If we follow this suggested course of action, are we likely to win more customer choices?
This is essentially a form of scenario planning, which many organizations engage in, but it’s uniquely focused on winning customer choices. This is the underlying driver of just about all metrics and forms of ROI you can measure. Assess the impact of each suggested course of action on the customer choice and consider each alternative.
In Vennli’s data visualization, the goal is to build and defend your Green Zone by moving customer choice factors into your competitive advantage. For example:
- Are there opportunities to grab unmet customer needs in the Yellow Zone before a competitor does, thereby gaining the first-mover advantage?
- Are there ways to increase positive customer perceptions of currently less important factors in the Blue or Gray Zones?
- Or are there ways to neutralize a competitor’s core advantage in the Orange Zone?
Strategic decisions should be based on whether the outcome will impact customer choice in your favor.
Bringing the Customer to the Table with Customer Choice Insights
Every interaction with a customer is a market research opportunity and companies these days often have tons of customer data points, so it’s not hard to slip into data overload. In order to easily bring the customer’s voice into the strategic planning discussion, the insights have to be actionable. The key is to capture the right data in the right way, and then visualize it in a way that is easy to communicate and interpret. It starts with analyzing how customers make choices and then having on-demand insights to bring to the decision-making process.
In order to be heard in the board room and create a customer-centric culture, we have to talk in the language of business. That’s why it’s so important to capture customer choice insights, as it is hard to deny the correlation to business outcomes. Click-through rates and numbers of impressions are important, but they are not going to gain enough attention or respect in a heated strategic debate. The data has to have a real, direct impact on the strategic outcome that’s desired… which ultimately is winning more customer choices, resulting in growing the bottom line.
Visualizations of customer choice are powerful and bring what matters most to the customer to the table. Even when faced with innate perception biases, it’s hard to ignore and therefore drives better decision-making. When you create a culture that demands customer data, specifically customer choice data, when making financial and resource decisions, then you can feel confident that you are moving in the direction of growth.