When my co-founders and I started Phase 5 in 1991, it was the middle of a recession. We were three partners who left well-paying jobs in the consulting world to start a company, and I recall the bewildered reaction of friends and family. As it turns out, it was a good time to find ways to better serve clients and innovate. Let me explain why.
During periods of economic decline, businesses and consumers naturally tend to spend less. So those selling to them are competing for a static or shrinking pie. Achieving revenue growth in this environment requires taking a larger share of that pie from competitors, which in turn requires a better overall value proposition. Building a better value proposition in the best of times requires a deep understanding of market needs and drivers of value. In times of uncertainty, consumers can be even more discerning in what they buy, and tastes can change given shifts in the environment.
Chances are, at least some of your competitors will be cutting back on proactive marketing and product initiatives and focusing more on cost containment. However, the experience of past recessions has proven that this approach can be damaging to their long-term competitive advantage. For example, a study conducted in 2002 based on a sample of 154 executives in US business-to-business (B2B) companies found that proactive firms with the right strategic marketing culture achieve superior business performance in a recession.[i]
Innovation for a Lasting Competitive Advantage
This presents an opportunity to innovate and potentially gain lasting competitive advantage. Marketing research can be used to help achieve this in a number of ways:
Innovation Research can be used to identify unmet or underserved needs in a market, relative to existing products and services. We have used Jobs-To-Be-Done and other techniques to successfully identify unmet or underserved needs to guide innovation, and to identify segments of interest relative to these needs. The approach can involve qualitative interviews to understand what different consumers or business audiences are trying to achieve in the context of a product use case, followed by measurement of goals that are most important and their ability to meet these goals with existing solutions (yours and the competitive set). The resulting output helps to identify specific opportunities to innovate (with features or new products) around important requirements that are not being well served by the market.
Positioning Research can help identify white space opportunities that guide innovation decisions, identify messaging opportunities related to existing solutions, and identify segments of interest for opportunities. This typically involves quantitative research but can also include qualitative research to identify dimensions of importance. Using correspondence analysis and other techniques, we can map where brands or products are situated relative to important attributes or desired benefits. Positioning opportunities arise when existing solutions are not perceived to be aligned with important benefits.
Pricing and Trade-off Research using techniques like conjoint can help to understand what customers value the most, along with opportunities to gain market share. Using conjoint analysis, simulations can be run to determine the potential market impact of offering new features within the context of a product category and competitive set. Pricing can also be varied to determine impacts on uptake, revenue and market share, with the ability to optimize the feature/price mix to achieve certain objectives.
All of these techniques are used regularly by our clients. The shift that is required during uncertain times is in how they are applied along with the level of precision. Gaining market share in a tight market is harder to do and requires digging deeper to better understand needs and opportunities. Coming out the other end, you also cannot assume the status quo. Tastes will inevitably shift and those who understand this will have a leg up in the eventual recovery.
This is the second article in a series about how businesses can become more future-proof by becoming more customer-centric. Contact us any time to discuss how Phase 5 can help you on your journey to customer-centricity, and help your organization weather uncertain times when they occur.
[i]Turning adversity into advantage: Does proactive marketing during a recession pay off? International Journal of Research in Marketing, Volume 22, Issue 2, June 2005, Pages 109-125, Raji Srinivasan, Arvind Rangaswamy, Gary L. Lilien.