February 21, 2014

Forecasting innovation success and the O(ther) Information

I came across a recent article of professor Itamar Simonson and Emanuel Rosen titled “Market research can no longer predict what consumers will like”. 
An interesting remark in the article, not unfamiliar to many of us who follow the developments in the increasingly “social” marketplace: The changing consumer behavior and the increasing complexity of the decision making process due to the influence of Social Media content on consumers have changed dramatically the marketing landscape. This is something I keep repeating to my students and everyone else who follows my lectures on social media Marketing.  I usually explain the new situation in this domain using a well known and simple buyer's decision making model, something we find in every standard marketing textbook.   
My additions to the standard textbook model (see figure) are the elements C and D representing two new market information inputs that affect the customer decision: The information from the “broadcasting” web i.e. information about products, services or businesses poster in corporate web sites and the information from the “interactive” i.e. user generated content (UGC) in social media. What I underline always is the importance of this last element and its impact on customer decision making today. By all means this is a major influence factor of this process today. 

The article of Simonson and Rosen touches on a very important point that seems to confirm the view that the customer feedback in the form of social media voice is the most important part of this equation. They write the following trying to find an explanation for the inability of market research to predict the success (or failure) of an innovation like the iPhone when it was about to be launched:
“It’s easy to blame the market research firm for this, but this is not our point. We are trying to explain the inherent difficulties in assessing consumers’ reaction in this new era. First, more decisions today are impacted by what we call O sources of information—“Other” information sources, such as user reviews, friend and expert opinions, price comparison tools, and emerging technologies or sources—whereas market research measures P sources—“Prior” preferences, beliefs and experiences”.
The O sources are therefore a factor bringing instability and disrupts a well-grounded  method of producing information  needing in decision making namely the traditional market research.
What now? All hope is gone? I wouldn't say that, it is simply a question of adopting a new thinking and approaches to the marketing research issue. Together with my colleagues in the University of Twente and other colleagues abroad we are for some time now brainstorming on this specific issue: What is the way to create or predict successful innovations today. We set out to searching for other sources of customer information and sources of behavioral clues that can provide  much better input for predictions and guidelines for innovation than the traditional market research.  You can guess that we consider the social media as a major source of such information but this is not the only source we look to.  Since this discussion and our research design is still in progress I will not expand on this at the moment but I will keep you informed as our research progresses.