I have mixed feelings about focus groups.
On one hand I think they're bunk, particularly if you're innovating breakthrough new products. On the otherhand they are the most cost-effective way to get some (any) customer input. The problem is you're more likely to get negative feedback from any focus group. This kills any risky project and is very counter productive to the business.
This article in BusinessWeek Online talks about Yahoo, Pepsi, and AOL's abandoning focusgroups and taking a more innovative approach to new products/services.
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