Tag Archives: coca-cola

Why Your Customer Research Is Flawed

U.S. pollsters got quite a surprise in the early morning hours of Nov. 9, 2016.

That’s when it became apparent that their sophisticated voter research had completely failed to predict the outcome of the U.S. presidential election.  Longtime Republican political strategist Mike Murphy went so far as to assert that “data died” that night.

Yes, the 2016 U.S. presidential election was a highly visible casualty for data-driven research, but far from the only one.

In 1985, Coca-Cola announced the rollout of “New Coke,” an updated formulation of the venerable soft drink, designed to appeal to changing consumer tastes.

In launching the new formula, the company cited research indicating that taste was the primary driver behind the brand’s market share slide. The firm also pointed to blind taste tests that indicated that a majority of consumers favored New Coke over its predecessor (and over Pepsi).

As it turns out, the research pointed Coca-Cola in the wrong direction. Three months after rolling the revised formulation out, the company acknowledged widespread public discontent and returned the original Coke to store shelves. New Coke was killed in 2002.

See also: 5 Key Customer Experience Trends  

What went wrong? One thing that Coca-Cola failed to account for was the emotional dimension of consumer buying behavior. Even if people said they preferred New Coke in taste tests, many had an emotional attachment to the original formula that – outside of the research bubble – superseded their rational judgment on taste.

This is why an overreliance on traditional research methods (i.e., asking customers what they want or like) can lead a company astray. Surveys and questionnaires do a poor job of accounting for the emotional considerations that drive customer behavior.

As behavioral science has clearly demonstrated, it’s those emotional considerations that often exert the strongest influence on individual decision-making. (As renowned psychologist Daniel Kahneman has described it, “the emotional tail wags the rational dog.”)

Post-mortems on the 2016 election polling have also referred to the emotional “blind spot” of traditional research methods. Evans Witt, president of the National Council on Public Polls, highlighted this issue to NPR, noting that “polls do a poor job with emotion/enthusiasm/commitment”; that may have been an important behavioral influence on what was a very polarized electorate.

There’s another reason, though, why traditional question-based customer research can mislead, and it comes down to this simple truth: There’s a big difference between what customers say and what customers do.

Wal-Mart found this out the hard way in 2009 when it launched a store redesign effort dubbed Project Impact.

The company had conducted customer surveys, which indicated that shoppers didn’t like Wal-Mart’s cluttered, dimly lit stores. They wanted cleaner, more streamlined layouts.

Project Impact sought to deliver on this apparent customer preference by de-cluttering the store – removing endcaps, widening aisles and improving navigability.

Even the store’s famed “Action Alley,” the main corridor separating departments, wasn’t immune to the changes. Traditionally dotted with palettes piled high with fast-selling items, Action Alley was cleared out by Project Impact, opening up sight lines across the entire store.

It all sounded like a good idea… until same-store sales started to plummet. The reason? To streamline the store layout, Wal-Mart had to eliminate, by some estimates, 15% of its store inventory. When customers could no longer find their favorite brand at Wal-Mart, they went elsewhere to pick it up – and shifted their shopping to competing stores that offered a wider product selection.

In addition, it turns out that Action Alley – while perhaps contributing to store clutter – also triggered a lot of impulse buys among Wal-Mart shoppers. When Action Alley disappeared, so did a lot of sales.

Since its founding by Sam Walton in the 1960s, Wal-Mart’s strategy had always centered on offering low prices and a wide selection (“Stack ‘em high, watch ‘em fly,” as Sam liked to say).

Sam apparently knew his customers better than the company’s modern researchers, because it turns out people shop at Wal-Mart for – you guessed it – value and selection. Shoppers might have said they wanted a clutter-free store – but in reality, the clutter was part of the appeal for them, feeding into their hunt for great deals and impulse purchases.

What could Wal-Mart have done differently? Instead of just asking customers what they wanted, they should have observed them in action, navigating the store and making purchases. They should have spoken to shoppers one-on-one, to better understand what shaped their purchase behavior once they stepped foot into a Wal-Mart.

It’s precisely this type of context and nuance that traditional customer research methods miss – because what customers say they want is sometimes quite different from what they actually value.

Indeed, that which the customer values the most may also be the thing that’s hardest for them to articulate. Hence the mismatch between what people say and what people do.

See also: Are You Ready for the New Customer?  

Traditional customer research has merit, but its precision is often oversold. To steer your business in the right direction, don’t just look at the data, look at your customers.

Immerse yourself in their experience and observe them in their natural habitat – because that’s where you’ll find the priceless insights about how to better serve them.

This article first ran on WaterRemarks, the official blog of Watermark Consulting.

Healthcare Costs: We’ve Had Enough!

Healthcare is consuming an ever-greater share of corporate America’s balance sheet. According to the latest Kaiser Family Foundation survey, today’s employers spend, on average, $12,591 for family coverage—a 54% increase since 2005.

Some companies have finally had enough. Twenty of America’s largest corporations—including American Express, Coca-Cola and Verizon—recently formed a coalition called the Health Transformation Alliance. They’re planning to pool their four million employees’ healthcare data to figure out what’s working and what’s a waste of money.

Eventually, they could leverage their collective purchasing power to negotiate better deals with healthcare providers.

It’s a worthwhile experiment. The government has largely failed to rein in spiraling healthcare costs; in fact, by over-regulating the healthcare marketplace, it’s largely made the problem worse.

The private sector will have to take matters into its own hands and find ways to creatively deploy market forces to its benefit.

Collectively, U.S. employers provide health coverage to about 170 million Americans. Because many pay part—if not all—of their workers’ premiums, they’ve borne the brunt of the upward march of healthcare costs. According to the Kaiser Family Foundation, premiums for employer-based family insurance have increased 27% over the last five years, and 61% over the last 10.

Unfortunately, this growth won’t slow any time soon. The Congressional Budget Office estimates that average premiums for employer-based family coverage will reach $24,500 in 2025—a 60% increase over premiums today.

Understandably, companies are desperate to find ways to curb their healthcare spending.

Last year, one of every three employers reported increasing cost-sharing for employees, through higher deductibles or co-payments. Another 15% said they cut worker hours to avoid falling afoul of Obamacare’s employer mandate, which requires firms to provide health insurance to anyone working 30 or more hours a week.

See Also: Radical Approach on Healthcare Crisis

But shifting costs elsewhere simply masks employers’ health-cost problem. They’ll have to address inefficiencies in the way healthcare is delivered to bring about savings that will actually stick.

The Health Transformation Alliance sees three primary ways to do so.

First, companies will have to mine their healthcare data for insight, just as they analyze the numbers for sales, operations and other core business functions.

The Alliance will examine de-identified data on employees’ health spending and outcomes. The hope is to determine which providers are delivering the best care at the lowest cost and to then direct workers toward these high-performing providers.

The U.S. healthcare sector today is awash with ambiguity and a lack of transparency. A knee replacement can cost $50,000 at one hospital but $30,000 at another. Two hospitals may offer the same price on a procedure, but one may have a higher rate of infection.

Such differences matter. According to a 2013 report in the Journal of the American Medical Association, an infection can add, on average, $39,000 to a surgery’s price tag.

Second, employers will have to use their combined buying power to secure better deals on healthcare. Tevi Troy, the CEO of the American Health Policy Institute, the organizing force behind the Alliance, said, “If you brought together multiple employers, you would have more leverage, more covered lives, more coverage throughout the country in terms of regional scope.”

In other words, there’s safety—and potentially lower healthcare costs—in numbers.

Third, employers will have to educate their workers about how they can secure better care at lower costs.

Most consumers are clueless about where they should seek healthcare. They may welcome a gentle nudge from their employer toward a high-quality, low-cost clinic or provider. If it saves their bosses some money, all the better.

See Also: What Should Prescriptions Cost?

And as the Alliance hopes to prove, it’s a lot easier to borrow another company’s successful strategy for executing those nudges than to create one from scratch. An educational campaign that resonates with Verizon’s 178,000 employees, for instance, may do just the same with IBM’s 300-some-thousand staffers.

As Marc Reed, chief administrative officer of Verizon, explained, “What we’re trying to do is to make this sustainable so that kind of coverage can continue.”

Corporate America has been saying for years it cannot afford the healthcare status quo, with costs rising ceaselessly. But if employers use their healthcare data wisely—and capitalize on their collective bargaining power—they may discover that salvation from their health-cost woes lies within.