We all know the drill: In order to innovate, you need to know what your customers want. In practice, companies either create marketing departments in house or order market research data from outside. The idea is that once you focused on your customers and put yourself in their shoes, you know exactly what they need. You then create a product that would satisfy this need. Bingo!

Bingo? Not so fast. Harvard Business Review has recently interviewed Johannes Hattula of Imperial College London. Dr. Hattula and his colleagues conducted a study on how marketing managers choose products and services. The study found–quite to the opposite of what was expected–that the more managers were trying to “put themselves in their customers’ shoes,” the more they used their personal preferences to predict what customers would want. Moreover, the more “customer-centric” the managers tried to be, the more they tended to ignore available market research data!

Taking to the extreme, the study implies that the products created based on marketing research reflect not the customer needs but rather personal preferences of marketing managers.

Is there any way to get around this problem? The authors suggest two possible solutions. First, managers’ decisions become less egocentric when they were just informed of their bias. I like the simplicity of this solution; however, it’s not clear to me how it will work in practice. Specifically, who exactly should be constantly reminding marketing people that they are biased? Can we make an app for that?

The second proposed solution is to rely on team decision making. As Dr. Hattula argues, “with a group you get different, perhaps opposing opinions and…[hear]…others talk about experiences that are different from yours.”

This makes a lot of sense to me, except that I’d take a step further and replace “traditional” market research with crowdsourcing. Instead of relying on the opinion of a single individual–or even a group of individuals–marketing people should use instead on-line customer forums. Available social media tools allow communicating–in real time, if needed–with literally thousands of potential customers, making marketing decisions both precise and cheap.

In other words, is it time to replace market research with prediction markets? It is.

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