The relationship between the value and cost of information, or the Mexican Renave paradox.
Today, organizations are changing. And that change is taking place fundamentally in the same direction: towards the customer. It doesn't matter if the change process is called quality, service, or reengineering. Such guidance requires, above all, in-depth knowledge of the customer and leads to a fundamental marketing activity responsible for the task of understanding and predicting their purchasing behavior.
This in-depth knowledge has the purpose of facilitating the realization of exchanges in the short term, supporting with information the decision-making on product, price, distribution and promotion. And in the long term, the purpose of establishing brand loyalty, providing information for market segmentation strategies, product and service differentiation, and brand positioning.
Orienting a company towards the customer means using this deep knowledge not only to predict the buying behavior of customers, but to modify it in favor of the commercial relationship that you want to develop with them. In other words, better understand the customer, to better serve the customer.
In its traditional conception, the role of Market Research is to provide management with information that reduces the implicit uncertainty in decision-making. The value of information is a function of the degree to which it reduces uncertainty; that is, to the extent that it is relevant and accurate. But also, that information must be obtained in a timely and efficient manner, so the cost of obtaining it should not exceed its value.
The best way to understand these concepts is by imagining decision making as a gamble. For example, in the case of a boxing fight in which we do not know who will be the winner, betting in favor of one of the opponents requires, in addition to the bet money, certain information. This information can come from our own intuition, that is, based on our experience we predict who will win (it beats us that the winner will be so and so).
Unless, in the absence of experience, we do not know in favor of who to bet, deciding on one of the two boxers is equivalent to playing a toss. A coin toss gives us a 50% chance of hitting the winner. The same currency, used to buy the newspaper and read about the fight and the opponents, can substantially improve our probability of winning.
The information has value, that is, it reduces uncertainty to the extent that it is relevant to the decision we must make. And it must be exact, precise. It does not take much knowledge of boxing to understand that the weight, age, range or the record of fights won and lost of each boxer, correctly recorded by the newspaper, will help us to decide better than their place of birth, religious beliefs or the number of your family members.
Information has a cost, regardless of the source from which it comes, and this varies depending on the efficiency and timeliness with which it is obtained. Knowing the characteristics of the boxers by interviewing each of them personally would be as expensive as getting the newspaper one day after the fight.
When a company wants to offer a new product to the market, it is playing a bet and the manager can play it for free or rely on his intuition to make the decision, but in reality he must consider. What information helps to predict its acceptance?
In this context, it is obvious that if the information has value for whoever makes the bet, it is precisely the decision maker who pays for it. In fact, companies invest a significant part of their operating budget in getting to know their customers deeply. Ignoring this simple principle can lead to absurd situations.
Nobody is used to paying to provide information. Even when it is provided free of charge, it does not wait for something in return, even if it is only the expectation of better care from the entity to which data has been provided, be it a company, government office or association of any nature.
For this reason, it is surprising for the Mexican motorist to have to pay the government to register their automobile information in the National Vehicle Registry (Renave). Those who must pay for it (and are willing to do so) are the users of this information: the government itself, the automobile assembly and marketing companies, the manufacturers and marketers of parts and components for replacement, etc.
Also motorists would pay, of course. But not when buying a new car, but before selling or buying a used one, to know if they bet on you or not. That is, to reduce the uncertainty involved in buying a car that belongs to someone else.
This explanation does not solve the problem, it simply shows that there is a wrong perspective about who and when the users of the information to be recorded are.
It is better to make decisions with information than without it and it serves the decision maker to the extent that it reduces their uncertainty, that is, to the extent that it is relevant and accurate. The cost of obtaining it in an efficient and timely manner should not exceed its value and should be covered by who uses it, not who provides it.
