Overcoming internal politics and skepticism to implement customer co-creation

Editor’s note: Kevin Lonnie is president at marketing research firm KL Communications, Red Bank, N.J.

Having been a marketing researcher for over 30 years, I’ve always viewed MR as the conduit to the customer. And with the recent development of proactive research tools, we stand on the cusp of a new golden era where research departments powered by customer co-creation will help drive the insights engine.

As a researcher, you know that it’s never going to be that easy.

Right now our industry remains on the sidelines when it comes to adopting customer co-creation. The major MR trade associations and publications do not currently offer a category/classification for customer co-creation. With this void in the industry, research and development (R&D) departments are recruiting customers directly. 

It doesn’t make our lives easier when R&D is going rogue, bringing in customers on their own to work with developers on new products via agile iteration. And it certainly doesn’t help when our own industry can’t seem to move beyond the Mad Men era of the 1960s when focus groups were cutting-edge. It’s time to step away from the M&M’s in the viewing room.

Customer co-creation

So, what is customer co-creation?

It’s not crowdsourcing. The two terms are often used interchangeably but they are quite different. In a nutshell, crowdsourcing refers to independent ideation (think of the annual Doritos Super Bowl commercial). It’s an open competition, where the respondents work independently. Crowdsourcing is derived from open sourcing. In the case of crowdsourcing, you’re using people instead of computer code. Customer co-creation integrates customer inspiration throughout the agile development process. It’s simply adding your customers to the team. Customer co-creation breaks down siloes and looks to inspire product development teams (e.g., R&D, product and brand managers). You are not outsourcing solutions, you are incorporating customer inspiration into your product development DNA.

How does one implement customer co-creation? Below are five guidelines that I have found extremely helpful to ensure success.

1. Begin with a business issue to be solved.

• Make it relevant. Tackle a business issue that will help prove ROI.
• Although customer co-creation lends itself to product innovation, it doesn’t have to be restricted to product development – use it for any business issue that requires a fresh lens for alternative solutions.

2. Invite key stakeholders and an internal champion.

• Co-creation isn’t just about customer inspiration, it means your internal team is receptive to what customers are saying.
• You will need an internal champion to keep everyone honest and involved.

3. Use the crowd’s inspiration to start crafting your approach.

• The crowd is there to challenge your thinking but it’s your internal team’s role to take that inspiration and start crafting it.
• It’s critical that customer co-creation is positioned as a tool to inspire your team’s thinking rather than as a threat to their autonomy.

4. Agile iteration allows product ideation to evolve.

• On Day 1 you will have your thinking challenged. It isn’t until the last day, two to three weeks after you began the process, that everyone is on board with a new direction.

5. Stay on a tight timeline and create something.

• Consider using a concept board for validation testing.
• Prove that your research team can help your firm achieve its innovation goals.
• As researchers, we know that the kiss of death is, “That’s interesting.” Create solutions that are actionable and measurable.

Now that you understand the fundamentals, why should you care? What’s wrong with the marketing research tools we use now?

If the primary function of the research department is to help our clients make better decisions, then we should be getting better at the game, but we’re not. The success rate for new products is not rising. In fact, recent work by Harvard Business School Professor Clayton Christensen cites a failure rate of 95 percent.

Another reason to consider becoming your firm’s customer co-creation champion is the fact that money is not flowing to MR. Per a 2016 ESOMAR Report, the marketing research industry has been growing at an average rate of 1 percent, over inflation. In other words, our industry fits the definition of stagnation.

The industry is seeing a clear push toward R&D spending. Coming out of the Great Recession, business spending on R&D over the same 2010-2015 timespan increased by 30 percent (from roughly $278 billion to $360 billion in U.S. business R&D spending). Firms are spending money to innovate but they’re not spending it on MR. This tells us that marketing research is not considered the path to the new product development pipeline. Ouch!

Overcoming hurdles 

For my readers who are ready to hitch their wagons to customer co-creation, don’t expect a welcome party. Incumbent creatives will look to smugly devalue the possibility of innovation coming from customers.

Get ready for the C-suite to break out the quote often credited to Henry Ford (though the attribution didn’t appear until the early 2000s) about asking customers what they wanted: “If I had asked people what they wanted, they would have said a faster horse.” 

Corporate inertia, continuing to do things the way we always have and internal politics represent hurdles we must overcome if we are to demonstrate our impact on the bottom line.

I don’t believe a push philosophy will work. Better to employ a pull approach. The argument could be made that our relationship with customers is evolving into a social contract. If we’re no longer going to push out products and expect them to buy, then we need to enter a reciprocal contract with customers. This is where the marketing research function can enter the fray as the source of customer inspiration. Using proactive research techniques, we can harness the wisdom of crowds to improve on that 95 percent product introduction failure rate.

Even with the fact that firms are committed to product innovation, that current practices aren’t working and that customer co-creation is inherently appealing, it’s still going to be a tough row to hoe. That’s because of the power of corporate inertia.

This gets back to the idea of aligning yourself with an internal champion. This individual will provide that commitment to the customer co-creation process while the data for proving ROI is being compiled. There is an expression, “You can’t cross a chasm in two small jumps.” The commitment to customer co-creation requires the courage to leap that chasm to new opportunities, new ways to infuse the lifeblood of your product innovation process with the insights of your customers.  

And look for success stories from firms like Unilever who have been advocating the benefits of proactive MR to power the insights engine. Nothing sells success like success.

Calculating ROI 

Once you commit, you have one final hurdle to cross – calculating ROI.

Many attempts to calculate ROI for marketing research have focused on money saved. For example, switching to an online community from custom ad hoc work could justify the entire cost of the marketing research online community. Or you could attempt to quantify the enhanced confidence of your business decision having conducted MR. These attempts at proving the ROI of marketing research are limited to justifying the cost of the research. In other words, the ROI itself is going to be limited.

On the other hand, if we can prove our ROI via the introduction of a successful new product launch or by improving the success rate of new products from 5 percent to 10 percent, now you are aligning yourself with significant ROI.

As always, the ROI validation needs to go through a defined process, with direct and clear causation that customer co-creation had on the company’s revenue. This does require commitment to the process. Improving the success rate of new products requires sufficient data points to prove causation.

A simple equation would be to look at the revenue generated by the business decision that was enhanced via customer co-creation. We will place that as the numerator. To be fair, we would then need to estimate the percentage impact that customer co-creation had in helping that decision (e.g., the development of a new product offering). For the denominator, we would use the cost of the customer co-creation project. For this hypothetical example, let’s say the new product generates $3 million in new revenue and the time frame is one year. We assign the importance of the customer co-creation portion to be worth 25 percent and consider the cost of customer co-creation, creating the following equation:

Risk vs. reward

Ultimately your decision on whether to embrace customer co-creation will depend on your own risk/reward assessment. Establishing a hands-on relationship with customers represents the future of significant customer insights. Proactive research is consistent with social reciprocity and establishing a customer-centric culture. I believe that as Millennials become the decision-makers of the next decade, they will embrace customer co-creation as a technique that is consistent with their attitudes toward brand relationships.