The imperative of return on market intelligence
How to translate the intangible value of market intelligence into real dollars? This question regularly haunts MI-professionals. During last week’s M-Brain Conference (formerly GIA Conference) in Amsterdam this question featured big time. In the corridors conference participants exchanged best practices in how to convince CFOs to at least maintain their MI-budgets. Here is my view.
Still uneasy despite quantitative indicators?
There is no lack of quantitative indicators for calculating the value of market intelligence. Calculating MI-expenses per unit of extra sales generated is just one example. However, I have a problem with the causal relation such indicators suggest. How much sales would we really have missed if we didn’t have timely intelligence to act upon? How sure can we be of that?
After all, it is not that relevant, how MI-staff sees it. What’s more important is how sales view the matter. What do such indicators do to the credibility of MI-professionals? Figures are absolute. They lack nuance. How does delivering an absolute but disputable figure contribute to our image as objective and balanced analysts?
What is the value of reducing uncertainty?
The more I reflected on the discussions at the conference, the more I felt that market intelligence as a corporate service function resembles an insurance policy. What is an acceptable price for a fire insurance policy? The price should be much lower than e.g. the value of the house that is covered against fire damage. But how much lower exactly?
No one likes to pay for insurances, but most do anyway. Having no insurance is a risk house owners would rather avoid. Positioning market intelligence as risk insurance reframes the imperative of return on intelligence. It brings us to the question: What can an MI department learn from an insurance sales pitch?
My suggestion is this: The pitch should focus on the house owners’ emotional benefit, assurance (not co-incidentally the French word for insurance I guess). An insurance policy cannot prevent lightning from striking a house and causing a fire. It can, however, protect the owner against the direst financial consequences. Similarly, an MI department cannot prevent a competitor from targeting our firm’s most profitable markets. It can, however, reduce the consequences by ensuring our firm is timely prepared for such a market entry.
How to communicate this to the CFO?
What would an insurance salesperson say to a CFO? She would probably come up with a narrative. After all, great fiction writers like Franz Kafka and Tom Clancy started their careers in insurance. My guess her storyline would be:
- MI can reduce business uncertainty but not remove it; it does, for sure, reduce risk
- Quantifying the value of risk reduction is inherently arbitrary
- The biggest risk is high-grade market intelligence that is not being acted upon by the business
- To prevent that from happening, these are the things that we as MI professionals do to consistently build our credibility with the decision-makers we serve.
- Market intelligence and insurance services get cheaper (and more effective) when you as CFO sign up for a long-term policy i.e. commit to market intelligence. Doing so, you also avoid the transaction cost of annual monitoring of arbitrary indicators.
Signing up is easy. Why wait?
By Erik Elgersma
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