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Why do companies buy customer research at all?

Why do companies buy customer research at all?

Should I invest in customer research? Whenever I get this question, my answer is usually something like: I don’t know. How would you know, if you should? What are your metrics, for making this decision? What happened in the past, that made you think about this question? We don’t sell something to companies, unless they need it. Whether someone needs our services can never be our decision.

However, as we sell customer research, we researched this exact question. Why do people buy customer research at all. Or in Jobs to be done terms: For what job do they hire customer research. We found, that there are five main jobs, that companies hire our research sprints for:

  • Help me to improve my product
  • Help me to communicate more efficiently
  • Help me to gain structure for the data I am working with
  • Help me grow my company
  • Help me to grow as an individual

Of course, they hire many other things for the same jobs as well. Especially those, that we don’t focus in, like the “help me to grow as an individual”. The biggest job, that most people have, is “help me to improve my product”. That’s why our slogan as UTXO Solutions is “Build better products”. This is our focus.

But what exactly does “improve my product” mean? Isn’t a great product something every company wants? How is “improve our product” different from “have a great product”? And why is this important in itself?

Improve your product?

I honestly don’t think, anybody wants to improve their product. Nor does anyone want to spend money on it. “Help me to improve my product” is a job, we and others are hired for. But a great product, is a solution to other jobs in itself.

If you are a product manager, you may hire having a great product for a social job, “Help me to be respected by my colleagues”. Maybe it’s for a promotion or for your need for self-actualization. Maybe you just want to experiment with a new technology and that’s why you want to build a certain product. This defines your metrics for a good product and thus your metrics for progress. You will value very different things then the CEO of the company. He could hire a great product for profits. Generating money and having a business that thrives. Even if a profitable business could in turn generate similar progress for him: Peer recognition and a sense of self-actualization.

The question, if you need to improve your product, depends on how well your current products does the job you hired it for. And on how good you think, it will do it in the future. With ChatGPT, Sam Altmann currently has an amazing product. Yet he invests a lot in improving it. Because he knows, that he is in a tough race. Campbells almost didn’t change their canned tomato soup since over 100 years. And even their slogan almost didn’t change since the 1930s. You only improve your product, if you need to.

Do I need customer research to improve my product?

If you know what to do and only need to do it, then no. Just do it. If you think you know what to do, but aren’t sure, the answer is still no. Map your assumptions. Test your assumptions with some experiments. See if your wrong. If your are right, just build and deliver the product or service.

Customer research helps you, if want to improve your product or marketing, but don’t know how. And even then, it may not be the best solution. It depends on what kind of innovation you are looking for. There are three kinds of innovation:

  • Preservation innovation
  • Efficiency innovation
  • Market creating innovation

Let’ look at them in more detail:

Sustaining innovation

This is usually not, what we associate with innovation. It’s basically the same thing with small iterations. Campbells tomato soup between 1900 and today. Most newer models of the same car. Hair-cuts since they use electric hair clippers as well. You do the same thing with minor adjustments.

Efficiency innovation

You do the same thing, but with less input or effort. Energy efficiency is the obvious thing that comes to mind. But lean processes to get a service done better, faster and with less resources are efficiency innovations as well. The whole idea behind kaizen and the success-story of Toyota at the time are prime examples. Innovate to get more for less.

Market creating innovation

These are the breakthrough innovations, that change the whole game. Artificial intelligence, Bitcoin, 3D printing, electric vehicles, internet, smartphones, food-printing, robotics. Megatrends like these are the obvious things. But there are loads of smaller things, that created new markets as well. Like food delivery, e-bikes, self-publishing of books, do it yourself electronic shops. Maybe not as revolutionary, but still with a huge impact. New markets are everywhere, where there are no solutions.

These different types of innovation sometimes blend into each other. Instant noodles in Asia have been an efficiency innovation in the beginning. They kept improving as a sustaining innovation. But when introduced in the African market, they became a market creating innovation. Not only because of a new cheap source of food, but also for the new logistics being built.

Every company needs all three types of innovation, but not all at the same time. If you didn’t have a market creating innovation for some time and your market is shrinking, it may be time to act. Customer research can have a huge impact in all three innovation fields, but is most needed in the last two. You can often find low hanging fruits for efficiency gains when talking to your customers. They know, which features of your product, service or portfolio can be left out. And when you enter new markets, you simply don’t know what to do and thus benefit a lot from finding it out. But if you just want to keep on going like always and everything is working fine, why innovate now?

Do I need to innovate at all?

In short, yes. Sooner or later, every stagnant business will die. Either your market shrinks or your competition outperformes you. And the rate of change is accelerating, so it may be wise to start rather sooner than later. Innovation debt is the amount of progress you should have made but didn’t. The bigger it is, the harder it is to overcome. And the more radical you have to change as a company, if you want to survive. Or as a chinese proverb goes: A broken roof is best repaired before the rain.

But whether now, is up to you to decide? Innovation is only one challenge in business. If you have more important things to do, do them.

But if you want to innovate, consider doing it with us

We do great customer research sprints, that deliver great results in no time

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