Should Corporations Listen to their Customers? Should they Conduct Market Research?

Rochester, NY (PRWeb) November 30, 2006 -- Insert "listen to your customers" in Google. What do you get? More than 75,000 hits. Try the key phrase "voice of the customer." What do you get? More than 530,000 hits. What about the phrases "customer" and "focus group"? 15.9 million. "Customer" and "interview"? 21.7 million. "Customer" and "survey"? 30.4 million! Every management consultant and marketing professor tell corporations to listen to their customers. Should they? And if they do, will they learn something meaningful? A recent study by Professors Dan Horsky, Paul Nelson, and Steven S. Posavac published in the Journal of Consumer Psychology provides some interesting answers (Horsky D., Nelson P., Posavac SS. Stating Preference for the Ethereal but Choosing the Concrete: How the Tangibility of Attributes Affects Attribute Weighting in Value Elicitation and Choice. Journal of Consumer Psychology, 2004, Vol. 14, No. 1&2, Pages 132-140).



The study asked a group of 41 participants to rank the relative importance of two attributes: Prestige and Price. Then the study asked the participants to buy one of two brands of wine: Macon-Villages, a high-prestige, expensive French wine, and Columbia Crest, a low-prestige, inexpensive American Wine. Now, wouldn't you expect that the participants, who said that prestige is more important, will buy the high-prestige Macon-Villages wine? And the participants, who said that price is more important, will buy the inexpensive Columbia wine?

The results show that 12 participants said that prestige is more important than price but chose the low-prestige/low-price brand, and 3 participants said that price is more important than prestige but chose the high-prestige/high-price brand. A total of 37% [(12+3)/41 of the participants said one thing and did another thing!

37%! And this flip-flop occurred in a very simple situation. How many customers will show such inconsistency in a situation with many attributes and many brands? 50%? 90%? 100%?

Now assume that a corporation paid for this market research study and is planning to use the results to improve its business. According to the study, 63% [(14+12)/41 of the participants said that prestige is more important than price. So the corporation opens a chain of wine stores that specialize in prestige wines. When the stores open their doors the corporation discovers that the potential market share is a little more than half (54% or 14/(14+12)) of the initial estimation. Devastating! As it turns out, 46% [12/(14+12) of the customers just cannot be trusted. They say one thing in market research settings, and do something totally different in real life.

Summary:
So, should corporations listen to their customers? It depends. No, if they only listen. Yes, if they measure the psychological intensity, or psytensity, of every idea communicated by the customers, and use the few ideas with high psytensity to construct the story hidden in the customers' words. If they are not measuring psytensity, if they take the customers' words at face value, they should be prepared to face some nasty surprises.

On a broader scale, should we all listen to our own inner voices? Maybe not. Remember the story of the fisherman and the gold wish? Remember the fisherman's regret? Let's be careful of what we wish for. We might not be as introspective as we think we are.

Mike T. Davis, Ph.D., SCI, Rochester NY

SCI is the inventor of Computer Intuition™, a psycholinguistics based program that analyzes the language that people use to describe themselves and their environment, and "converts what they say into what they'll do"™. SCI uses the Computer Intuition program to uncover the hidden story, the underlying psychological framework that produced the text, but is not found in the text. When clients hire SCI's services, they send to the company their qualitative data. SCI inputs the data to the computer, which calculates the psychological intensity, or psytensity, of every idea found in the text. The ideas with the highest psytensities are most suggestive of the hidden story. SCI then documents these ideas, the hidden story, and SCI's recommended actions in a report called "Do this, do that"™. Within a week of receiving the data, SCI is ready to present the results to the client. SCI's clients include many Fortune 500 companies, such as Apple Computer, Sears, Allergan Pharmaceuticals, Chrysler, Citibank, IBM, Motorola, Eastman Kodak, Hewlett-Packard, Anheuser-Busch, Gannett Newspapers, Cincinnati Gas & Electric, Xerox, and Frontier Communications. SCI also serves many smaller companies and individuals that came to realize that Computer Intuition™ is the only tool for a correct analysis of text.

In the Science on Decision Making series, SCI's researchers analyze papers from scientific journals that include interesting findings on the relationship between decision making and analysis of qualitative data. More reports are available at http://www.computerintuition.com/Reports.htm

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