What’s your Insight worth?
No, really, how much?
Maybe this isn’t something you think about all that often. Chances are though, it could be the most important question to ask yourself before your next meeting – or coincidental lift journey - with the Chief Executive or Finance Director.
As Insight people, we often say that we ‘inform decisions’ or talk about how we are the ’voice of the customer’. How often do we hear an Insight professional talk about how much revenue they generated this year? In our experience, almost never!
And yet, the role of Insight is to add value. In commercial organisations, the most common mechanism for generating value is to increase sales and therefore revenue. Effective Insight teams align themselves with strategic priorities to support these revenue generating activities. So why don’t we talk about it in those terms? In many cases, the answer is simply that we don’t take that step and make the link.
Small beer?
Let’s think about a simple example. A major brewer wants to launch a new beer. Without the Insight team, and all that they do, what would the company do? They would develop the new beer, try it out to satisfy themselves that it is saleable, then produce and promote it. And let’s be honest, that’s what micro-breweries do all the time. They don’t have research budgets. They don’t have ad agencies. They just try it and see.
So, what would the likely outcome be? Well, with skilled people developing the beer, and experienced marketers thinking about how to promote it, and a good creative ad agency, they might well be fairly successful and generate reasonable revenue.
Now let’s add in Insight. Insight helps define the target markets, gets customers testing potential variants of the new beer, uncovers unmet needs and gaps in the market, and then refines the advertising to maximise impact. At each stage Insight increases the effectiveness of key elements of the process, which improves the chance of success. At the end of the process, after each of these marginal uplifts is applied, the result is higher revenue. But how much higher? How do we put a figure on the impact of Insight?
A pragmatic and intuitive approach
We firmly believe that with a pragmatic and intuitive approach to assessing the impact of Insight, it is possible to put a figure to how much value good Insight generates.
So how do you do it? The answer is remarkably simple, even if in practice it takes a little time to become adept at it. There are 4 steps:
- Assess the financial size of the area you are working on – typically the revenue
- Find out what the target is for changing it through the initiative you’re working on e.g. % increase in revenue, or decrease in customer churn, or share to be won of a new market
- Multiply the two to get the ‘size of the prize’
- Make an assessment of how much impact Insight is likely to have - maybe 5%, 10%?
That last step is the scary one isn’t it? Make an assessment – what does that even mean? Well, it’s an estimate, an educated guess. This can be challenging for us when we’re used to dealing with actual data, detailed analysis, research findings. But really, it’s at the heart of the Insight mindset – the ability to take the information that’s available to us and think critically to fill in the gaps.
Often, there is historical evidence that can be drawn on, or a logical approach to demonstrate what might have happened if Insight had not played its role. The more you do this, the more your ‘make an assessment’ methodology will be refined and developed into a robust set of rules of thumb. A great way to do this is to take others in your organisation through your methodology – particularly those with specific business knowledge or experience. Be open about your approach, point out your assumptions, and get them involved to challenge and pitch in their own ideas.
Ultimately, what you end up with is an estimate that is certainly likely to be pretty accurate within an acceptable range. Often, even when you’re using the most conservative of assumptions and quoting the number from the lowest end of your estimated range, what shocks people is just how much Insight contributes.
Are you ready?
Imagine if you can demonstrate to your Finance Director that £100k of external budget plus internal resource has added £10m to the revenue, you shouldn’t be surprised that their reaction will not be to question whether it is really £5m or £15m. What they will in fact say is “How can I get more results like this?”
If you assess all Insight work you do to estimate the value it generates, and prioritise accordingly, there are a great many ways that Insight can produce results like that. Some will be revenue generators. Some will increase margins. Others will help cut costs.
The result is the ability to place a financial value on the whole Insight portfolio. And this isn’t pie in the sky. There are Insight teams that have learned to do this, and it works. Not many – but they are there. The question is, are you ready to join them?
How the IMA can support you
We will be discussing the topic of Insight Commerciality at our next Insight Forum event on Wednesday 28th November in London.
If you are a client-side Insight leader, then your organisation could benefit from Insight Forum membership. But don't take our word for it - the IMA offers a limited number of free 100 day corporate membership trials so there might be an opportunity to attend the next Forum event as our guest before you decide. Please contact us for more details.
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