Researchers must meet changing management needs for improved customer knowledge and quality improvement goals

Editor's note: Robert Eng, Ph.D., is chairman of the marketing department at Babson College and president of Feedback Marketing Services Corp., Wellesley, Mass.

Global competitiveness gave rise to total quality management (TQM) and continuous quality improvement (CQI) in the early 1980s. Many corporations have heeded the call to restructure operations for efficiency. TQM and CQI have created substantial revenue opportunities for researchers . . . sort of. More and more we hear the following from clients:

"I need much more information than before and I need it more often."

But we also hear in the same breath:

". . . and by the way, I have less of a budget to do all of this."

There are indications that the market research industry is failing to meet clients' demands. The quality movements have revealed some structural inadequacies in the research business. The information needs of decision-makers have evolved at a pace and in directions that the research industry has not matched.
This article describes the prevailing principles of TQM and CQI that full-service research agencies need to understand to win and keep quality-driven clients.

Client dissatisfaction with research on the rise

An American Marketing Association-Advertising Research Foundation study of client satisfaction with research products and services described quite a bit of discontent with research process 1. The major concerns were timeliness, data quality, cost and the relevance of findings to decision-making and profits. The finger-pointing is aimed at in-house as well as independent full-service research groups.

In-house market research departments have felt the impact of corporate cost-cutting and the dissatisfaction with the quality of research; their numbers have been reduced. Of the companies who still have research departments, almost one-third (30 percent) are not satisfied with their research department and would certainly consider closing them!2

While the industry isn't exactly at a crossroads, the relationship between researchers and client managers who have profit center responsibilities is at a critical stage. The specter of companies making decisions without waiting for research says more about managers' lack of confidence in research than their philosophy about the role of research in key decisions.

Much of the intellectual effort in market research has been narrowly focused on tactical issues in research - sampling methods, data collection procedures, questionnaire design issues and data analysis. A recent article criticized the pace at which the research industry was falling behind corporations' advancements in analysis and decision-making, ". . . it appears that market research never developed its own vision"3. It is clear that the leaders of the market research industry must think strategically about the relationship with their clients.

Serving the quality-driven client

Researchers must define their business to be in line with clients' view of information. Some have done so but most have not.

We have found out that you win the TQM and CQI client by espousing four views spawned by the quality movements.

1. Customer knowledge is a strategic asset,

2. Customer measurement must be continuous and proactive,

3. Customer satisfaction must be directly linked to business activities, and

4. All business activities must come within cost targets

Customer knowledge as a strategic asset

While we in the research business have always argued that customer research spending is an investment, it has only been recently that corporate clients have turned to research for something more than just tactical projects. Unfortunately the market research industry has not responded4.

Figure 1 explains why clients with quality programs are disappointed with market research. TQM and CQI customers have shifted away from short-term focus to long-term visions.

Any business decision at the moment is evaluated not only for its immediate impact but also for its long-term implications. Unfortunately, in many cases market research has not adapted its products to meet the changing information needs that accompany the changing perspectives in decision making. We in the market research industry must understand that our current and future clients have shifted to strategic views and their information needs are now broader in scope.

What pushed Corporate America to adopt strategic perspectives? Michael Porter from the Harvard Business School gave rise to the notions that really shape the corporate view of customer knowledge as a strategic asset. His value chain model is arguably the foundation on which corporate strategy throughout the world is built. The singular thread that ties all aspects of the business together is the unquestioned focus on creating added value for the customer.

If researchers are to have credibility with quality-driven customers we must understand that one of a company's most important strategic assets is knowledge about the customer and all that affects customer satisfaction5. It is an asset of no less importance than a patent on a new drug, state-of-art robotics for General Motors or prime retail location for Bloomingdale's.

There will always be tactical research projects. However, any particular project should be viewed as merely a single tile in the mosaic describing and explaining the customer. The results of any project must be structured to build a customer database.

Measurement as a continuous and proactive process

The heart of any successful TQM or CQI program is customer focus and continuous improvement6. The prestigious Baldrige Award is given to corporations that demonstrate the use of all possible means of listening to customers, proactive customer systems, measurement beyond current customers and high levels of customer satisfaction.

Companies must continually improve to meet the changing customer needs and combat aggressive competitors who promise to deliver better satisfaction.

Nimble, entrepreneurial companies are superseding the big-budget, large-scale annual customer survey with continuous monitoring with a vision toward the future. Ideally, customer measurement should take place at the moment of transactions. At the very least, it should take place at the end of every transaction cycle.

The large retail chains provide a good example of what quality driven corporations would like to see in customer measurement. A common sight in a regional bagel chain, a national chain of coffee stores, a hair-styling franchise or a quick-serve restaurant is the customer comment cards located at points of purchase or exit. The intent is to get information continuously and at all moments of the transactions process.

The prevailing thought is that customers do in fact care enough to tell what they think but they are not going to expend any effort that they think is out of line with importance of the comment.

With respect to continuous feedback, the effort gets an "A" grade but the results deserve a disappointing "D." Customer comment cards are inexpensive and non-intrusive but the response rate is typically very poor and the depth of information very shallow. On the other hand, the annual customer satisfaction surveys using store intercepts or in-depth telephone interviewing are similar to shooting a 25-year high school reunion picture - an impressive undertaking, tough to locate all the persons you want, very expensive, and often a poor description of those who participated.

Link marketing activities directly to customer satisfaction

A recent news story about health care organizations in a major metropolitan area reported that the two health care organizations with the highest quality of operations were rated the lowest in quality based upon customer perception7. It's no wonder that regulatory agencies have mandated customer measurement since many health care providers are either uninterested or untrained to undertake such efforts.

Most quality-driven companies have very good, if not excellent, tracking systems for their operations. Unfortunately, many of them do not have customer measurement systems of corresponding quality.
Business activities must be directly linked to customer satisfaction measures. Otherwise, it is difficult if not impossible to determine how to maintain customer loyalty. The battle for customer loyalty is infinitely more intense today than it was a couple of decades ago. The pressure to act decisively and react quickly to market share threats is intense.

Most methodologies only provide "still-life" pictures of the customer satisfaction at the moment. Companies really need true time-series or "motion video" of marketplace dynamics to tell them how they got there and what they can do about it.

What is the future of customer measurement? First, the future is exciting. Second, it will be technology driven and it must be linked with a company's internal measurements as never before.

Imagine a retail store setting such as a quick-serve restaurant. Historically, the store has three sets of measurements - operational data such as amount of french fries used and the temperatures at which they were cooked, data about transactions at the counter such as the number of orders with hamburgers with no french fries and two soft drinks, and after-transaction data which monitors customer perceptions past the counter.

Using technology such as smart sensors and radio frequency transmission, data collection can be conducted on all aspects of the operation in real time. Thus, customer satisfaction that is expressed at the table about service or food quality can be linked directly to personnel and back-room operations. This information provides a dynamic picture of what is happening.

Real-time customer measurement with linkage to activities is a challenge and an opportunity for market researchers. The need for real-time customer measurement is being addressed but not really being solved.

Target costing for all business activities

Target costing - a phrase that comes from CQI - is another call for the research industry to re-engineer the way it works with clients and implements market research projects. The underlying concept is very simple to understand. Take the price that a customer is willing to pay for your product or service. This is your sales revenue. Next, define how much profit you want out of that selling price. Then, subtract the desired profit from the selling price and you have the cost that your business activities must come in under.

The "target costing" principle has touched on all aspects of the business including the budget for market research. The days when we simply passed the costs onto an unquestioning client are pretty much gone. It's getting tougher and tougher to get a client to accept a bill of $30 per hour for an interviewer when the client knows the interviewer may getting less than half of that. More than ever, it is the client who sets the cost per respondent target for the research company to meet.

One of the largest banks in the world, ABN AMRO, outsources its consumer research to a market research firm. This decision to turn it over to outsiders was born of the need for more effective research at less cost. Outsourcing of course is not new. However the kind of working relationship between ABN AMRO and the research agency may become more common. ABN AMRO sets the strategic information needs and directs the research to agency deliver within the given budget. The research agency keeps only 40 percent of the budget. The rest goes to other agencies who have the necessary experiences and specialties.

Writing is on the wall

Forty top business executives operating industry giants such as Texas Instruments, Kodak, Campbell Soup, Dow Chemical, General Electric, Prudential and others of the same stature were posed the question, "How important is re-engineering to the future success of your company?" A resounding 83 percent said "critical for future success and survival"8.

The writing on the wall has been there for a long time and the market research industry hasn't read the message that it must re-engineer its own operations to meet the requirements of the quality-driven organizations.

How does the market research industry go about this?

1. Develop greater capabilities to design research projects that have true strategic impact for its clients. The market research personnel must adapt to the major shifts in the perspective of the managers. Clients' managers are being trained to operate cross-functionally now and their demands on research have been shaped accordingly.

2. Develop methods and products that meet client demands for continuous, real-time information that connects customer feedback with business activities. Some of the solutions may lie with technology and others with research procedures. All solutions depend on the ability of the market research industry to think outside of the box while thinking as the client would think.

3. Fundamentally change the operations of the research company. Data collection and analysis procedures have not changed in decades. They are still labor intensive, involving interviewers, supervisors, statisticians and technical writers.

TQM and CQI are more than buzzwords. They are facts of life which every market research organization not only must learn to live with but also become part of. The following slogan is one that research companies need to adopt from their own clients:

When it comes to our company, the only opinions that count are those of our customers!

Who could argue with that?

References

1 Peters, B. "AMA-ARF Study Reveals Industry Trends," Marketing News, Volume 28, Number 12, June 6, 1994, pp. 14-15.

2 Holmes, M. And Reid, J. "Company Market Research Department -- Expansion, Contraction, Privatization," Marketing and Research Today, Volume 16, Number 1, February 1995, p. 4.

3 Hugen, R. and Meulman, M. "Traveling So Fast, They Can't Stop for Research?", in Making the Decision, Proceedings of the 48th ESOMAR Marketing Research Congress, p. 60.

4 Baldinger, A. "Defining and Applying the Brand Equity Concept: Why the Researcher Should Care," Journal of Advertising Research, Vol. 30, No. 3, June-July 1990, pp. 2-5.

5 Webster, F. Market-Driven Management, New York: John Wiley & Sons, 1994.

6 Rao, A. Total Quality Management, New York: John Wiley & Sons, p. 57, 1996.

7 Stein, C. "Top Quality HMOs Not Rated Most Popular," The Boston Globe, April 2, 1996, p. 37ff.

8 "That's Benchmarking - Not a Fad or a Quick Fix, but a Way of Managing Change," Financial World, September 1993.