Research: customer assessment efforts seen wanting.

• Author: Marshall, Jeffrey
• Position: Economist Intelligence Unit survey

Despite spending nearly $20 billion annually on market research, companies report a huge capability gap in understanding customer needs, according to a new survey by the Economist Intelligence Unit (EIU) on behalf of management consulting firm Marakon Associates. This gap helps explain why many companies are finding it difficult to generate above-average rates of "organic growth" (growth from existing lines of business) versus growth through acquisitions.

Two-thirds of executives surveyed agreed that "having the right information and insights to tell us what customers/consumers really want" is very important. Yet only 16 percent rated their companies as doing a topnotch job of it. The 50-percentage-point gap is particularly notable in light of the efforts companies have made to get close to customers.

Over the past two years, for example, 87 percent of respondents said they had improved their ability to spot emerging consumer trends; 56 percent said they had invested in customer relationship management (CRM) technology and 49 percent said they had conducted large-scale segmentation studies.

"Clearly, these efforts have not paid off for many companies," says David Meer, a New York-based partner and head of Marakon's customer value group. "Either the research investments have not produced insights that lead to a meaningful advantage over competitors, or the companies are unable to act on the insights collected."

The survey, conducted early in 2004, elicited responses from 201 senior executives and managers across a wide range of industries, geographies and job functions. Large companies (those with sales of $500 million or greater) comprised about 40 percent of respondents.

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Beyond the difficulty of understanding customer needs, companies reported significant capability gaps in attracting and retaining enough creative individuals (46 percent of respondents) and reacting quickly to changes in the marketplace (45 percent). Organizational barriers were highlighted as another big obstacle to generating organic...