Customer feedback represents a rich source of ideas for product innovation. However, the traditional methods of customer feedback collection– surveys, focus groups and ethnography–are labor-intensive and costly, so that only large and resource-rich firms can take full advantage of this approach.

An alternative way of collecting customer feedback is netnography: gathering insight (needs and wants) of social-media-active consumers by following their conversations on various online forums, in particular, social networks and microblogging services. Due to its ability to generate a lot of data points at only a fraction of the cost of traditional methods, netnography is available not only to large, but small companies as well.

Obviously, Facebook represents potentially the most useful netnography venue. Boasting 1.94 billion monthly users and hosting 60 million business pages, Facebook looks like a particularly attractive source of customers’ product ideas. But does Facebook really deliver on this promise? A recent study provides a positive answer to this question.

Irene Bertschek and Reinhold Kesler (from the Centre for European Economic Research) have conducted a study of the role that customers’ Facebook activities play in the corporate innovation process. The study shows that the adoption of a Facebook page and actively soliciting customer feedback has a significant positive effect on the firm’s product innovation. Interestingly, it’s the negative user comments on Facebook that were especially instrumental in improving existing products and creating new ones. It’s also interesting that collecting customer feedback positively correlated with product, but not process innovation, an observation consistent with my prior note that external “crowds” are usually inefficient when applied to optimizing internal processes.

Previously, I described another study that found, perhaps, to a surprise of many, that product ideas generated by external users were better (in terms of novelty and customer benefits) than those proposed by a firm’s own professional designers. Moreover, it was found that the ideas that received the highest marks overall came predominantly from the outside users.

Taken together—and interpreted within a broader concept of “consumer innovation”–both studies strongly suggest that input derived from crowds of external users, including customers, can be applied to the whole chain of product innovation: from collecting customer feedback to generating product ideas. It may well be that in the future firms’ competitive advantage will be determined not by the creativity of their internal R&D teams, but, rather, by the firms’ ability to attract the most creative crowd of external users.

p.s. You can read the second issue of my monthly newsletter on crowdsourcing here: http://mailchi.mp/b3e5728661b4/yes-to-science-no-to-betting. To subscribe to the newsletter, go to http://eepurl.com/cE40az.

Image Credit: http://www.italiangoodnews.com/eurostat-community-innovation-survey-italian-enterprises-among-innovative/