Marketing Profs, February 23, 2010

The Secret to Success in a Down Economy: Market Intelligence
By Barbara Bix

Especially in a down economy, it's important to understand where the opportunities are--and how to capitalize on them. Luckily, today's companies have many avenues for gathering this information.

Still, marketing research and analysis are expensive--especially today when marketing resources are at a premium. So, the questions arise, "What is the role of market intelligence in today's company--and where should one focus?"

One company's approach to market intelligence

To get an answer, I turned to the head of market intelligence at a medium-sized corporation. I was interested in speaking with him for three reasons:

• Like many of my clients, his company markets software
  solutions to other businesses.
• His company has dedicated an entire department to market
  intelligence and therefore must value this function
• Learning where companies that value market intelligence
  devote their resources and why may prove valuable for other

His department has three primary responsibilities:

• Collecting, mining and leveraging customer and prospect data,
• Focus on a single benefit
• Managing the company's market research activities, and
• Leading the strategic planning process.

Collecting, mining, and leveraging customer and prospect data:

For most businesses, the fastest and most cost-effective way to win business is to sell into the existing customer base. Therefore, it's no surprise that this company devotes most of its market intelligence budget to analyzing and reporting on its existing customers and prospects.

The company gathers customer and prospect data from a number of sources. In addition to records of day-to-day interactions with customers by Sales and other customer-facing organizations, these sources include web metrics and the feedback from the company's industry-specific customer councils.

The market intelligence team then processes that data. Examples of data processing activities include: ensuring data quality by deduping data and identifying missing information on prospect profiles; looking for trends in buying behavior to further segment the market and thereby identify better target lists for marketing campaigns; performing predictive modeling to forecast sales; and producing reports that aid in identifying, routing, and nurturing promising leads.

While its worthwhile for any company to mine its own data, if for no other reason than to help replicate success, this company has an added incentive. Having been in business for a long time, its customers and prospects represent a large share of their target market. This means that product groups can run queries to test hypotheses about how particular market segments, for which they have sufficient data, might react to future products and/or marketing campaigns.

Market research

The primary responsibility for conducting market research falls to the company's product and industry groups. The market intelligence group, however, is responsible for ensuring the quality and consistency of that research across product groups.

The market intelligence team ensures quality and consistency by developing standard processes for describing markets, assessing demand, anticipating the speed of adoption, determining the nature of the investment, and setting development priorities. Then the team educates and works with the product and industry groups to execute these processes.

As at many technology companies, many product ideas originate with Engineering. Product Marketing then uses the processes provided by the market intelligence team to validate product concepts and confirm that there is sufficient demand to justify proposed investments.

Product Marketing draws on its deep domain knowledge to describe the target market and develop user personas. This effort often includes conducting customer interviews to validate the product concept and assess the homogeneity of the customer population. Product Marketing may also use the company's customer database to identify products that would have appealed to similar buyers--and rate the level of similarity--with the goal of predicting the level of demand and speed of market adoption.

Since Product Marketing has begun using the processes described above, the company has done a much better job of assessing market demand. In about half the cases, Product Marketing found that members of the target market failed to describe the product in the same way and therefore determined that demand was not consistent enough to justify launching a new product. In many of these cases, however, the company incorporated some of the proposed features into new releases of existing products.

Strategic Planning:

The market intelligence team also manages the company's strategic planning process. The primary goal of this process is to stay abreast of market opportunities and ensure that the company is continuing to make the right investments.

The company has a long-term multi-year strategic plan to ensure continuity. Each year, the market intelligence team works with each of the customer-facing groups to incorporate any changes in market dynamics, or customer requirements, which could affect the company's long-term direction. Every six months, they also review the tactical plan and make adjustments, if needed.

The product groups are responsible for reviewing the market and competitive landscapes, aggregating new customer data, noting and incorporating any changes, and resetting priorities--and or direction-- when appropriate. The market intelligence team supplies the analytics, helps with forecasting, and assesses the processes to ensure accurate and consistent reporting.

The market intelligence team also works with the customer-facing groups to create revenue forecasts by product, industry, and geography. The company then uses these forecasts to set financial goals by territory around the world. The goal here is to match investments and spending with anticipated growth and revenues.

Next steps:

The company, like most companies, is also moving from mass marketing to one-to-one marketing and from conventional media to online media, and likely social media. As more information becomes available on-line, the company is reducing its dependence on analyst reports and increasing its investment in web analytics.

From a strategic planning perspective, one of the next steps is to compare the financial data the company uses to justify investments to actual sales and expense data. Then, the company can use that intelligence to develop better predictive models--and ultimately make better investments. Another is to deepen the integration of the various product plans to improve portfolio planning.

From a tactical perspective, the focus is on getting better at understanding how prospects and customers search for solutions and the types of information they require at every stage of the buying process. With so many prospects and customers turning to the web first, this information is essential for maintaining high search engine rankings and serving up content that motivates action and increases conversions. Next up, the market intelligence team would like to work on developing best practices for using social media.

Market intelligence is essential in today's economy

This company's activities may be a harbinger of things to come. Here are two more anecdotes that indicate that more companies may be stepping up their investments in market intelligence.

One of my clients told me that the reason his company has invested so heavily in deepening its understanding of the market--and developing compelling value propositions --is that changes in the economy have dramatically altered the way that they do business.

Two years ago, they had so many deals coming at them that they simply went after the ones that they could close the quickest. Today, however, companies are making relatively few purchases. Moreover, decision makers will only buy from companies that understand their businesses, and provide solutions that directly address their requirements.

Last week, a general manager at a major medical device company told me that his company has increased its investments in market intelligence over the last two years. His organization did so because they found that they were losing sales to the competition, because prospects did not perceive valuable distinctions between the solutions.

One of the company's board members, observing that the B2B marketplace was becoming more competitive, noted that they could no longer just address market requirements--and needed to uncover latent needs. At his recommendation, they decided to emulate consumer goods companies and perform extensive qualitative and quantitative research on an ongoing basis. These activities have enabled them to develop products that customers find valuable--and regain the competitive edge.

Market intelligence is more accessible than ever

Thanks to improvements in technology and to the social web, even bootstrapped small companies can cost-effectively access and process market information. Examples of relatively, inexpensive easy-to-use sources of market information include highly-specialized blogs, search engine analytics, off-the-shelf customer relationship management (CRM) and sales enablement systems, and hybrid solutions that integrate basic functions from several of these technologies to help businesses determine what's working and then replicate success.

Larger better-capitalized companies have even more options. They can purchase better systems, and they can afford the human resources to make better use of the systems already in place.

But resources are tighter

Still, everyone is trying to do more with less. What this means is that companies that formerly invested in market intelligence as well as strategic and tactical marketing are now figuring out where to make cuts. If the want ads are any indication, many smaller companies are beefing up marketing communications at the expense of strategy and market intelligence.

On the other hand, some of the larger companies are taking the opposite approach. As one sales executive told me recently, "A few years ago, we had lots of opportunities and pursued those that were easy to close. Now that everyone has to justify every penny they spend, we really have to understand and communicate our unique value to even get in the door". Consequently, his company has stepped up their market research and invested in honing its value propositions in each of its major market segments.

What role does market intelligence play in your organization?

How about your company? Where do you turn for market information and why? How do you use it?

How are you reacting to the tight economy? Have you cut back your marketing resources or increased them?

Are you spending more money on pinpointing your most promising prospects and understanding what induces them to buy? Or are placing your bets on extending your reach--and/or reiterating your current messages?

If you choose to comment, please include the size of your company and the industries and geographies you target to help others interpret your responses.

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