Is NPS a useful indicator of a target acquisition’s value?


"Research is a process where you can spend a lot of money and come up with zero. Isurus guides me quickly through the key decisions, helps me avoid the pitfalls, and makes sure I walk away with high-value implications."

-Vice President of Marketing, Enterprise Content Management System Provider

Jeana McNeil

Jeana McNeil
Vice President

Is NPS a useful indicator of a target acquisition’s value?
07.23.2019

A recent Wall Street Journal article called attention to the “cultlike” following that NPS has garnered among CEOs in recent years.  Their analysis found that in earnings calls by S&P 500 companies, “NPS” or “net promoter” were cited 150 times by 50 different companies.  It was also mentioned in 56 proxy filings from 2018. The WSJ articles goes on to question whether companies have put too much emphasis on the one number system that is Net Promoter.

When evaluating an investment target, you’re likely to discover a trove of NPS results in due diligence.  The adoption of NPS extends well beyond the S&P 500. Organizations of all sizes and across industries use NPS to measure the health of their customer base and improve customer experience, with the hope to ultimately increase revenue and profitability.

CALCULATING THE NET PROMOTER SCORE

In light of the WSJ article and other criticisms of NPS, how much should you rely on it as a useful indicator of the target’s value? 

Why did NPS become so popular?

While NPS has its detractors—pun intended—the system has important merits.  Net Promoter grabbed attention as a metric that correlates directly to revenue growth and shareholder value.  

NPS also gained popularity because it resolved problems with previous customer satisfaction measurements.  Before NPS, companies relied on a collection of metrics to gauge satisfaction and loyalty. Because the collection of metrics was hard to communicate simply, they were often combined into a single number “Customer Satisfaction Index”.  While the index provided one number, it was hard to communicate and use.  The index required managers to unravel the index to the component level to understand shifts in customer perceptions and to identify improvements.  Against this historical context, the simplicity of NPS is very appealing.  One question is simpler. It feels more actionable because it is easy to understand.

5 recommendations to evaluate NPS data quality and validity

While NPS is used effectively by many organizations, the WSJ article makes a valid point that Net Promoter shouldn’t be adopted or used without critical analysis.

So, what does this mean for commercial due diligence? If your target acquisition provides NPS data, use these five recommendations to evaluate the data before you rely on it as a meaningful indicator of the customer health or business value.

#1 Representativeness

Who took the survey?  A good place to start is to ask whether the NPS data are representative of the customer base, or skew toward specific customer segments/profiles. If so, consider how might that skew impact the NPS results.  Data heavily skewed toward long-term customers can result in a higher NPS. Conversely, data skewed toward accounts in Japan can drag the NPS down due to cultural differences in how “likelihood to recommend” is interpreted across cultures.  If skewed, weight the data to see how a more representative sample effects NPS.

#2 Sample size

How many customers provided data for the NPS?  In addition to representation, take a look at the number of customers who provide data—the sample size.  A criticism of NPS is that it is “noisey”.  The Net Promoter is less stable than a traditional survey metric because it is derived by subtracting Detractors from Promoters.  Smaller sample sizes exacerbate the extent to which NPS can fluctuate due to noise rather than real changes in the customer base. 

#3 Trend over time

Is the trend over time erratic?  In addition to the most current results, review the NPS trend over time.  Due to the noisiness of the calculation, NPS can fluctuate over time simply due to small sample size.  Changes in the composition of the data (mix of customers surveyed each wave) can also cause fluctuations.  Examine the NPS in historical context.  If it fluctuates from one year to the next, the current year’s score may reflect noise in the data rather than reality in the customer base. Conversely, a steady progression of improvement indicates a consistent measurement methodology and/or effective customer experience management.

#4 Relevance

How relevant is the NPS for the category? Is “likelihood to recommend” an appropriate question?  Fifteen years ago, I worked with a major US online dating brand that had just launched in the UK.  Very few Brits used online dating at the time, and some social stigma existed around the category.  The client had just learned about Net Promoter and wanted to implement it.  We found that even when consumers liked the brand a lot, they hesitated to “recommend it to a friend” because of the social stigma associated with online dating at the time. People were a little embarrassed to discuss it with friends, and therefore “unlikely” to recommend.  One can imagine many consumer products where customers are reluctant to “recommend” a product or service.  This effect is also relevant for B2B categories. For example, a bank may keep confidential the cybersecurity vendors it uses and therefore be unlikely to recommend when asked.

#5 Manipulation

Can employees manipulate the Net Promoter data, and are they incented to do so?  Every car buyer has been counseled by their salesmen to give “only 10 and Yes” responses to the follow-up survey that determines a significant portion of compensation.  The same behavior can occur when employee or executive compensation are tied to Net Promoter results.  It is important to understand to what extent the target’s staff are incented to manipulate results.  If a strong incentive exists, consider it a red flag to look at other metrics and gather objective/independent data.

If your analysis of the target’s existing NPS data raises questions, consider an independent assessment of the health of the customer base rather than relying on data provided by the target.  Depending on your resources or timeline, options range from a set of targeted in-depth customer interviews or a more comprehensive survey to assess Net Promoter and other indicators of customer health and future revenue contribution.

Joe Radwich

Joe Radwich
Vice President

Insights for the Next Recession
06.13.2019

Over the past six-months economist have increasingly sounded the alarm about the recession just around the corner. Does market research have a role in helping companies prepare for this possibility? We think the answer is: Yes.

Business publications and financial pundits offer varied advice on the best strategies for surviving and thriving in the next economic downturn. A recent article in the Harvard Business Review advocated taking a long-term view, avoid costing cutting and focusing on growth opportunities. On the other side of the spectrum some strategic advisors recommend building up a large financial reserve and avoiding taking on any additional debt. And some recommend a two-pronged approach.

Regardless of your world view on how best to prepare for recession, a few things seem inevitable. In a general economic slowdown:

  • Customers and prospects face greater budget constraints
  • New investment decisions receive more scrutiny and take longer
  • There are fewer sales opportunities

Collectively these trends make it hard to find and win new business.

Primary research insights can help companies focus on the market segments with the most opportunity, identify the outcomes prospects are willing to invest in, and optimize their upper funnel activities.

Identify Segments of Opportunity

When fewer sales opportunities exist, marketing and sales resources need to focus on the segments most likely to buy, especially if sales and marketing budgets are cut.

Segmentation research can identify the segments:

  • Willing to invest in solving the pain-points your offering addresses
  • Where your value proposition resonates
  • That recognize and value your competitive differentiation

With these insights’ companies can better target sales and marketing resources to areas of the market most likely to provide a return on investment.

Empower Internal Champions

When budgets shrink, indirect competitors grow.  Companies become willing to live with the status quo longer. Their current solution may no longer meet their needs, but when it comes to justifying investments it’s easier to defend the need for an existing product, than to advocate for a new solution.

Competition for budget also increases in economic downturns. When faced with a shrinking budget, functional leaders rarely make across the board cuts. Instead they prioritize their investments. Some areas may be unaffected by a shrinking budget, or even have their budget increased. Other areas may be slashed altogether.

Understanding the strength and nature of these indirect competitors helps identify the full scope of barriers you face. This not only helps position your offering; it can also help put your internal champion in a better position to sell the solution to the other stakeholders in the decision.

Align the Upper Funnel to Triggers

The number and nature of the triggers that prompt a prospect to investigate new solutions narrows during economic downturns. When the economy is strong, companies and functional leaders find it easier to think and act strategically. They tend to be more open to new ways of doing things. They explore solutions and vendors that they may have to grow into.

Economic downturns place rational and irrational pressures on functional leaders. In turn, their outlook becomes more tactical. This influences how they react to messaging, sales presentations and processes. Rightly or wrongly they focus on the near-term, and tactical, pain-point or jobs-to-be done. And on price.

This makes them less receptive to high-level messaging. They also have less patience for sales processes that bring prospects through an extensive discovery process that drifts away from what the prospect identified as their core need.

Identifying the tactical needs that trigger interest enables you to incorporate them into messaging and sales processes. This helps reassure the prospect that their tactical needs will be met, which may open the door to a wider conversation.

Better Fishing

In economic downturns it can be tempting to reduce the budget for market and customer insights at a time when they may provide the most value. When there are less fish in the stream, success requires knowing where the fish are more likely to be, and the bait that will attract them.

Joe Radwich

Joe Radwich
Vice President

Six reasons customers churn in B2B markets
04.16.2019

When B2B vendors see an uptick in churn, stakeholders generate multiple, sometimes conflicting, hypotheses about the causes: It’s because of a recent price increase. New competitors entered the market. Competitors offer a service or functionality that we don’t. Customers don’t recognize the value the company provides. While it is important to take fast action to stop the bleeding, you don’t want to invest time and resources in a perceived problem only to see little change in customer attrition.

Product failures and price increases are the most common drivers of churn. Absent obvious causes, companies struggle to respond to increased customer attrition. Isurus’ research in B2B markets shows that outside of product failures and price increases, the market dynamics behind customer churn generally fall into six broad categories.

  1. Competing Priorities
  2. Convenience Seeking
  3. Latent Value
  4. Management Change
  5. Mainstream Convergence
  6. Upgrading

This list provides a framework for B2B marketers and product managers to systematically analyze the dynamics behind customer churn. Armed with a clear sense of churn causes, the company can invest time and resources efficiently to address the problem.

1. Competing Priorities

It’s not you, it’s me. No one wants to hear this break-up line, but it happens even in B2B markets. A customer is satisfied yet forced to end a relationship because of across-the-board budget cuts. Their budget pressure may stem from functional level needs or broad corporate initiatives. It may simply be that costs increased dramatically, but budgets stayed flat.

Budgets are spread thin by an increasing number of activities, service providers, and line items. For example, the number of traditional and digital marketing channels has exploded. The marketing team may have to rob Peter to pay Paul to cover all relevant channels. In some industries regulations lead to higher compliance costs and cause cost-cutting in other areas.

Vendors that serve mission-critical needs are less impacted in this scenario. The vendors that offer the “nice to haves” often absorb budget cuts. For example, as real estate and construction costs increase, commercial contractors may look for alternative business insurance carriers, even though they are happy with their existing carriers and coverage. Hospitals’ costs for labor, insurance, technology, and infrastructure typically outpaces revenues: The budget squeeze flows down to medical supply wholesalers who feel the pressure from the purchasing department.

In the above examples, the customer didn’t value their marketing firm, insurance carrier, or wholesaler any less. It’s the relative value that changed: They faced budget pressures, and other areas of the business had priority from a funding perspective. When forced to switch from a vendor they are happy with, most customers recognize they will have to live with a solution that is good enough.

2. Convenience Seeking

Customers will leave a vendor they are happy with to gain efficiencies or make their lives easier. The clearest example of this is when customers streamline their vendor portfolio. They move to suppliers that provide multiple products, better geographic coverage, or work with a preferred channel partner.

Sometimes this is a conscious effort. Other times it just happens. As Microsoft adds features to Office 365, the software firms that provide project management, collaboration, and other supplemental functionality feel the crunch. The individual tools in Office 365 may not be as robust as stand-alone solutions, but they come bundled with O365 which makes it easy to use them. Here again, most customers recognize that they give up something by switching vendors but believe it is worth the gains in convenience or streamlined operations.

3. Latent Value

Customers lose sight of the full value a vendor or product can provide. Organizations often pigeon-hole vendors into the need for which they use it most often. As their needs evolve, customers don’t always consider if an existing vendor can address the need. Instead, they look for a new solution. Another scenario is that a new solution enters the organization in response to an external event: A stakeholder saw a product at a trade show or heard a sales pitch. This external event can ultimately lead to budgets being split between solutions or in some cases a migration to a new vendor.

In another example of lost value, after an accounting firm cleans up the books and tax accounts, the client reverts to managing its accounting with internal resources. Or, after a rebranding exercise, a customer cut ties with their advertising agency believing they have the road map in place and just need to follow the plan. In both cases the problem isn’t that the customer doesn’t value what the vendor provides, it’s that they aren’t aware of the additional value the firms can provide moving forward.

4. Management Change

A change in management often results in a change of vendors. A new CXO may place different value on the products vendors provide. For example, the previous leadership valued a component manufacturer for thought leadership and ideas it brought to the customer. The new regime believes innovation should come from within and feels low-cost, commodity suppliers are good enough. Even if they value the product, new leadership can still prompt a change in vendors. A new VP of Sales may bring in the CRM/SFA they are most comfortable with, or the VP of Strategy may bring in the consultants they worked with at their previous firm.

5. Mainstream Convergence

Higher churn rates in fractured technology markets can indicate mainstream convergence on a platform or approach. For example, online backup drove churn rates among tape-backup solution providers before it became a significant competitive threat. Once online backup gained acceptance, there was no going back, and churn among tape-backup solutions increased. In other instances, as technologies and applications become mainstream, the larger technology vendors (Microsoft, Oracle, SAP, Salesforce, Etc.) begin to offer comparable solutions. They are often not as robust or user friendly as the vendor solutions that created the marketplace. But they can be good enough and convenient for customers to use.

6. Upgrading

Fast growing customers bring an additional set of churn dynamics. As a customer grows, the vendors they started with may not be robust enough to meet their expanding needs. Growth also exacerbates the churn dynamics previously outlined: They need suppliers that provide more products and wider geographic coverage. New senior managers come on board and start to consolidate vendors.

Conclusion

Churn in your market may be driven by a combination of these factors or something different altogether.  The first step is to objectively determine the specific reasons churn is rising. Gather input from internal stakeholders and directly from lost/lapsed customers.

Some churn drivers are unique to specific accounts or small segments of accounts. Other drivers occur systematically and typically have deeper implications for your product or market.

If customers leave to divert budget to competing priorities, adding new features to your product is unlikely to reduce churn. A Good-Better-Best product bundle may be the best response. If customers need to streamline their vendor portfolio, demonstrate why it’s worth the extra effort to use your solution. In emerging technology markets churn can indicate the direction the market is moving away from your approach and have major implications for future strategy.

When faced with increased churn, use a systematic framework to take the wider view of possible market dynamics to ensure you focus on the right problem.

Joe Radwich

Joe Radwich
Vice President

Make Your B2B Brand Strategy Relevant to the Sales Team
08.27.2018

You’ve analyzed your brand strengths and weaknesses, conducted research to understand your brand equity relative to key competitors, identified open market positions, developed your brand strategy, and set tactical marketing plans into motion.

But what have you done to help the sales team embrace and operationalize your brand strategy? Have you helped them understand how it will make them more successful? Put more bluntly, have you told them what’s in it for them?

As many B2B marketers can attest to, the sales team doesn’t always embrace the marketing team’s brand strategy. One barrier is a degree of mistrust between sales and marketing. But much of the resistance stems from differences in the two teams’ motivations and KPIs. Marketing has the responsibility—and luxury—to think in terms of long-term strategies. Sales must meet its numbers today. The inherent tension between these two sets of objectives can send sales and marketing down different paths, weakening both.

Improving alignment on brand strategy across sales and marketing benefits any B2B firm but is especially valuable for organizations that have modest marketing operations, but extensive sales teams. In practical terms the sales reps are often the primary channel for a company’s brand strategy.

One way to improve the alignment and encourage the sales team to take ownership of your brand strategy is to treat them as your customer and sell them on the strategy. Effective brand strategies are built on understanding the needs of the end-customers and articulating, and positioning why:

  • Your solution meets their needs better than their current vendor;
  • It’s worth the pain-and-suffering of switching to your product/service;
  • And, how your solution will improve their desired business outcomes

As a B2B marketer, if you can address these same questions for your sales team about your brand strategy you gain a much higher chance that Sales acts on the strategy – they will buy it.

Answering these questions requires more than just presenting the brand strategy in a slimmed-down strategy deck. It requires understanding how the sales team operates, their pain points, etc. To do this we recommend conducting internal research with three levels of your company’s sales organization: Sales leadership, sales managers and frontline sales reps.

Sales Leadership: Your sales leadership sets the tone and broad strategies for the sales force. This includes the type of sales approach used (Challenger, Sandler, etc.) which sets the framework for how sales reps interact with customers and prospects – how they identify prospects, the questions they ask, how they present your product’s benefits, etc. It is also important to understand how your sales leaders view the market, competitors and your competitive differentiation. If your brand strategy varies too much from how sales leaders view the world, they will struggle to trust your recommendations.

Sales Managers: Your sales managers can help you understand the specifics of your company’s sales process: What’s presented in the first call, how much does the prospect usually know about your product/service, when is collateral provided, at what point are different stakeholders involved in the conversation, how much interaction do reps have with clients (literally number of calls, length of calls, number of emails), etc.

Frontline Sales Reps: If you want frontline sales reps to embrace the brand strategy you need to understand their needs, fears and challenges. Their income and job security depend on their ability to sell. Being human, this makes it hard for them to switch from an approach they feel is working, even if a new approach is better in theory.

Once you understand your sales team’s perspectives, processes, needs and challenges you will be in a better position to articulate how your brand strategy plays a role in every stage of the sales process from identifying the prospects mostly likely to buy to upselling customers. In addition, you will better understand how to incorporate the brand strategy into the sales process in a way that minimizes the amount of disruption to the sales team.

The outcomes of the process are typically shared with the sales team in multiple formats, including an overall strategic plan for the sales leadership that demonstrates how the brand strategy fits with their sales protocols and process, refinements to sales playbooks and training documents, and workshops and training sessions with sales managers and frontline reps. The more open and collaborative these sessions are, the more likely the sales reps are to embrace and own the brand strategy.

Isurus partners with onPurpose Growth to help B2B marketers work through this process and build the linkage between brand strategy and on the ground sales. While, we bring expertise, experience and resources to the process, B2B marketers can handle the process internally by following the steps outlined above and improve the chances that their sales function buys what marketing is selling.

Joe Radwich

Joe Radwich
Vice President

B2B Customers Are Not Logos
02.28.2018

People don’t want to be a number. B2B customers don’t want to be a logo.

An increasing number of companies refer to existing and potential customers as logos, e.g. Our goal is to add 20 more logos this year. It’s gone so far that a search on LinkedIn will produce individuals with titles like VP of New Logo Acquisition. We think referring to customers this way is a mistake. Beyond being jargon, it sends the wrong message to employees. Customers and prospects are better terms. A customer is a person or organization your company has a relationship with. A logo is a stamp.

This may seem like an exercise in semantics. But Language matters. How you describe customers and prospects in internal documents and conversations sends a message to employees. It subtly turns customers into a score, rather than a relationship.

Many organizations are sensitive to this issue when referring to employees. Employees are partners, associates, leaders, representatives, etc. These labels elevate the relationship the employee has with the organization. Even firms that don’t use aspirational terms for employees don’t call them cogs, underlings or wage-workers.

The use of the term “logos” to refer to customers appears to have originated in the financial services sector where banks and private equity firms display the companies the invest in using PowerPoint presentations. In this situation a logo represents an abstract connection. An investment.

But customers don’t want to be logos. They are organizations full of people with goals and challenges. Customers want to believe that their vendors have their best interests in mind and want to help them succeed. Your employees will be more motivated to help a customer or a person that your organization views as a relationship, then they will to help a logo that is keeping score in a PowerPoint deck. At least we think so.

Joe Radwich

Joe Radwich
Vice President

Design Thinking in Research
01.21.2016

Although it’s been around for decades, Design Thinking is enjoying a burst of heightened awareness as recent articles and books advocate the approach for everything from reaching corporate objectives, to developing advertising and value propositions, to achieving your personal New Year’s resolutions.

As a research firm we applaud this reawakening of the value of design thinking – its principles have always been a central part of thoughtful primary research designs.

Design thinking traces its origins back to the late sixties and early seventies, when scientists and engineers began talking about solution thinking. Commercial market research as we know it today developed around that same time. Whether the two disciplines influenced each other or are an example of convergent evolution, the results are the same – both design thinking and formal market research share a philosophical approach to understanding customers and markets.

The five broad step in design thinking are:

  • Empathize: Gain an understanding of the user, their world and their needs
  • Define: Define the real, underlying problem(s), not necessarily the one on the surface
  • Ideate: Generate a number of different solutions that could address the problem
  • Prototype: Create a prototype(s) of the solution(s) that you feel best addresses the problem
  • Test: Get reactions to the prototype(s).

Well designed research follows similar principles.  The catch phrases and analogies used in market research text books, manuals, presentations, etc. echo design thinking.

  • The problem the client comes to you with is not the problem
  • The customer doesn’t want a drill; they want a hole
  • Move from a product/engineering orientation to a market orientation
  • Taking the outside view
  • Provide the voice of the customer

Analogs of the broad components of design thinking are built into large multiphase studies, dynamic Agile research engagements, and are even present in standalone studies.

  • Multiphase research: These studies typically start with exploratory qualitative research to understand the customer’s day-to-day processes, needs, wants and challenges. The development team takes what they learn and develops/refines the solution for the market’s problems. The solution is then evaluated with more qualitative research or a quantitative survey. Further research is conducted as needed.
  • Agile research: Agile research is a phased approach that breaks the design into multiple, smaller research components within a compressed schedule.
  • Standalone study: In a single study, discussion guides and surveys include an exploration of how the customers do things today and the challenges they face before testing reactions to a solution, ad, etc.

Although design thinking principles appear obvious and easy to follow, it can be hard to do so in the real world when an internal team has developed a potential solution it feels strongly about. The development process and accompanying research can end up focused on the solution rather than the customer. They compare solution features and focus questions on what the customer thinks of the product. This can result in a false positive: In a side-by-side comparison the solution looks superior to competitors, and customers at the trade show seemed excited about it, but once introduced sales fall short of expectations.

Steve Jobs and Apple provide one of the best-known examples of design thinking – and research. It is a commonly believed myth that Apple never does any research. It does, it just focuses research on customer needs rather than their reactions to product ideas. Jobs believed successful products require a deep understanding the customer’s world.  We agree, and bringing this “outside in” perspective is the value research provides. Some of our clients are very internally focused or have a strong engineering background. At the beginning of the study they question if we have the technical background to fully understand their products. We tell them: We don’t have to; we’re there to help them understand their customers.

Regardless of the challenge—developing a new advertising campaign or improving your retirement planning—the principles used in research and design thinking can help you come to a solution that addresses root causes and drivers rather than surface appearances.

Joe Radwich

Joe Radwich
Vice President

Spurious Correlations: Shark attacks and sales at all-you-can-eat buffets
07.23.2015

Did you know that the Total Revenue Generated by Arcades correlates with the Number of Computer Science Doctorates awarded in the United States? Makes sense, right?

Hold on before you start using this fact to impress people at cocktail parties. It comes from Tyler Virgen’s website Spurious Correlations (which is also available as a book on Amazon). Virgen’s mines data and plays with the X and Y axes to create ridiculous but fun correlations such as the link between margarine consumption and divorce rates in Maine and the link between drownings in pools and movies starring Nicholas Cage.

As silly as these correlations are, they illustrate how our minds automatically look for relationships between events and create explanations for them. It’s easy to ignore the base rate and craft a plausible story that people who like video games like computers or that the use of margarine in the 1960’s was tied to the weakening of traditional family values. This tendency is built into our genes and has helped our species survive for millennia – it’s better to see and overreact to false positives than miss a real threat. Unfortunately, in modern times it leads us to things such as confirmation bias which makes us to see trends in the data that support the story we want to tell.

As marketers and strategists we must be vigilant to ensure we see the data for what it is, and not what we want it to be. We also need to think about how others will interpret the data we present in charts and reports when we aren’t there to explain them. Charts that exaggerate differences for the point of discussion can easily be misconstrued the further they are distributed across the organization.

So be careful with your data, you don’t want to be the one in your organization that identifies the correlation between shark attacks and sales at all-you-can-eat buffets.

Joe Radwich

Joe Radwich
Vice President

Unintended consequences of empathy: A new Golden Rule for marketers
06.17.2015

Making an effort to imagine yourself in your customers’ shoes may give you a false sense that you understand what your customers want. This counterintuitive statement stems from research conducted by Johannes Hattula of London’s Imperial College and his colleagues. Fortunately there are steps you can take to ensure you are not projecting your opinions onto your customers.

Dr. Hattula’s research indicates that the more empathetic you are (or try to be) the more likely you are to assume your customer preferences would be similar to your own. Put another way, when you try to put yourself in your customers’ shoes you actually think What would I do or want in this situation, rather than What might someone else want. This is engrained into our culture: The Golden Rule says Do unto others as you would have them do unto you. Unfortunately from a psychological standpoint the more empathetic a person is the more likely they are to use their personal feelings to predict what someone else would want. The research indicates that the effect doesn’t change with age or experience.

You can see this effect in your home life. Have you ever wanted to do something nice for someone who was having a bad day but found that the person didn’t appreciate your efforts or worse was annoyed by them? While they probably appreciate the effort, perhaps it backfired because you did what you would want in their situation, which isn’t necessarily what they would want.

These same dynamics can play out in the business world. Product managers with higher levels of empathy believe they understand the market thoroughly and are more likely to ignore research and data that conflicts with their views than less empathic managers. Sometimes they are right – but the Steve Jobs of the world only come around so often. As researchers we see this effect when conducting focus groups: Clients observing the groups fixate on an individual who most closely resembles their own views.

This tendency isn’t all bad. In fact, it is the core of many successful businesses whose customers seek out vendors that match their attitudes and philosophy: A conservative investor may seek out a conservative bank or a bleeding edge tech start-up may seek out the advertising agency that pushes the limit. This works well for existing products and relationships. However, when a vendor introduces new products or enters new markets, mistaking your perceptions for those of your customers can create problems. It can be seen in the number of product introductions that fail despite the product team honestly believing they are creating what the customer wants – their intention is good, but the execution misses the mark.

Fortunately there are easy steps you can take to ensure the level of empathy you have for your customers doesn’t backfire.

  • One of the easiest is to remind yourself of your biases. In Dr. Hattula’s research, simply reminding people that their own biases exist reduced much of the egocentric effect. It makes you step back and think rationally about what is important to you and how it may be different than what others want.
  • Group decision-making counters the effect. Since individuals have different opinions, the discussion helps people recognize their own biases and perceptions.
  • Soliciting outside opinions or using market research can provide a less biased view of the market’s wants and needs.

Regardless of what you do to counter the effect it is useful to remember that as people we have an innate tendency to assume other people want the same things we do.  Perhaps the new Golden Rule for marketers should be Do unto customers as they want to be done unto – leave your wants out of it.