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Impact of Customer IQ in Product Innovation


The purpose of this article is to analyse the impact of Customer IQ on product innovation and the opportunities arising from the use of Customer IQ in new products and services.
Product Innovation Methods
There are many ways to do product innovation, the prominent ways are Technological innovation and another is Market oriented innovation. Technological innovation of a product is the modification made to technical attributes of a product while Product innovation has a broader meaning, particularly in a business context. In business, Product innovation is not just about technological modification; it represents the upgradation of all elements of the marketing mix.
Market research and Product innovation
Market oriented Product innovation relies on two methods for obtaining market information. The first one is external method and other is the Internal or the Statistical method. In the internal method, the information we get from respondents is analysed and decisions are taken internally by the research analysts for the organisation. In the external method, the strategy decisions are based on knowledge acquired from the respondents through interview.
How Customer IQ is related to Innovation?
Innovation differentiates a product from its competitors, for instance when an innovative product is introduced into a market, the customer uses the product based on his concept. The understanding is based on his intellectual capacity. He uses the product in different ways; here we see that the customer’s IQ plays an important part in innovation and gives its own contribution to innovation.
Mapping the Customer behaviour using Lavidge and Steiner model
The functioning of customer IQ reflects in the behaviour of the customer. So, the behaviour of a customer or the reasons behind the purchase decision of the customer can be fully understood by mapping the purchase journey of the customer using the Lavidge and Steiner model. The six steps are
  1. Awareness - Awareness of product from different channels mainly advertisements.
  2. Knowledge - Acquires knowledge about the technology or different features of the product.  
  3. Liking - Develops a favourable attitude towards the product or its features.
  4. Preference - Prefers the said product over other brands or substitutes in the market. He prefers the product due to its unique features.
  5. Conviction - Customer develops opinion that the product is good enough and meets his needs and requirements.  He is sure that the product meets all his conditions and satisfies his wants.. He is convinced it is a safe purchase.
  6. Purchase- The customer makes the actual purchase.
In the Customer purchase journey, all the six steps are more or less related to the IQ level of the Customer. We get that the Customer is not just demographic; they have ability to think, analyse and conclude.
Defining Customer IQ and its impact on business
Customer IQ is useful for the company to arrive at a conclusion on the understanding power of a customer who uses their product.
Customer IQ helps to acquire deeper insights about the customer. So businesses can service the customers better and helping them to deliver better outcomes.
Customer IQ has become a necessary input for New product development, Design product advertisements, Instruction manual on usage, Packaging design and After sales service.
How to measure Customer IQ  
Customer IQ is measured by calculating the cognitive ability of a customer to understand the product. It is calculated by using a questionnaire focusing on the customer’s capacity to understand the Product’s utility, Price affordability, and Distribution channel, Reliability of advertisements, Physical appearance and people behind the product. In the Questionnaire, Assign different weightage points for all answer options to calculate the Customer IQ of the respondents. The sum total of the weightage points for each respondent gives the Individual Customer IQ. Using this method, the companies can find out which percentage of the population has a certain level of IQ. The Customer IQ, thus derived can be used by the company to do market segmentation based on IQ and also to prepare marketing Strategies based on IQ.
Distinction between Normal IQ and Customer IQ
Normal IQ is measured by calculating the analytical or cognitive abilities of a person in relation to their age group. The IQ is calculated using the equation Mental Age / Chronological Age x 100. Here, Mental age is your cognitive abilities relative to what others can do of different ages.
The method used to measure Customer IQ is the same as Normal IQ, but in business context. It is calculated by using a questionnaire based algorithm to calculate the overall ability of a customer to understand the product's usefulness, affordability, distribution channel, reliability of advertisements, after sales service, design etc. We have to assign different weightage to the answer options.
Relevance of customer IQ in different business sectors
The relevance of Customer IQ was high for the services sector as a whole but its influence was seen to be most high in the Teaching and Consulting segments and less in the Investment Management, Airlines and Advertising segments. The role of Customer IQ was evidently less in the goods sector as a whole.
Conclusion
Research confirms that customers are capable of making purchase decisions independently based on their thinking, analysis and conclusions. The biggest impact will be on the Companies as they will now have to look beyond their R&D development centers for Innovation. Companies have to work with customers to foster innovation.

By Thomas George, Director of DoWell Research GmbH

Enhancing innovation by crowdsourcing and co-creation with users in product/service design, Open innovation consulting.

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