Succeeding and Failing with Market Research

 

Introduction

The term ‘market research’ means different things to different people. To the specialist, it is a very formal activity involving a randomly selected representative sample (or a focus group), carefully constructed questions, solid statistical methods and elaborate tests of significance. To the generalist, it is a much less rigorous process, often involving a couple of phone calls to a couple of key customers (or salespeople), a quick conversation and a general impression of an answer that can just as well be wrong as right.

Recognizing this, it becomes clear why most market research fails to perform its key objective: to move the business forward to new levels of sales and profitability.

Effective market research is a very careful balance of costs and reliability using methodology around specific questions that are always at the heart of the vendor-customer relationship, always difficult to answer and always important drivers of the key decisions a company needs to make about its marketing, products and services, offers it makes, response to competitive activities, and training and direction of its sales force.

This should be the test of the market research project: On its basis, can the company confidently move forward to better pricing, solid growth and greater profitability.

All too often market research fails to meet this test. It fails to capture the right information and it fails to drive needed changes in marketing, sales product management and finance. This paper looks at the nature of this sad failure, at its ten most common components and provides a checklist for managers contemplating a market research project to insure that it will not be just another failure.

 

Failure #1: Ask the wrong questions.

These are the important questions that any strategic market research project must ask.

1. Why do customers buy from you?
2. Why do customers buy from your competitors?
3. How much are they willing to pay for your products and services?
4. What services and options would lead them to pay more? What benefits do you deliver that they would forego in order to get a lower price?
5. What stops them from buying more?
6. What do they mean by ‘quality’, ‘service’ and ‘reliability’ in the context of your specific marketplace and your specific offerings?
7. What levels of quality, service and reliability are expected? Are they satisfactory?

In addition to these ‘magic 7’ questions, there are always questions that are specific to your own circumstances. This is why general research conducted for an entire industry so often fails to move the business forward. It cannot address your specific needs, questions or opportunities

Failure #2: Ask the wrong people

In the introduction, we alluded to market research that relied on a few favorite customers, or even on salespeople to acquire the required market intelligence. Many market research designs are flawed in that they may be more broadly based than the unfortunates in our introduction, but they still speak only to customers. We have found that very often it is the people who don’t buy from you, or those who may not have ever heard of you who have the most valuable insights. A population to survey must include customers, prospects, lost-business contacts, and individuals who fit their profile but may have never heard of the company. It must recognize the decision landscape and if the purchase decision is made at the “C” level, the survey population must include all of the supporting players as well as the strategic decision makers—functional managers, financial buyers, purchasing agents (if applicable), systems buyers, strategic buyers. The survey infrastructure must track the provenance of each respondent, so the market intelligence can be sorted according to the respondent’s role in the buying decision. Failure to cover all these bases will give a warped and misleading cast to the intelligence gathered.

 

Failure #3: Failure to pay survey respondents

One of the most common questions my company often gets is how we manage to reach the appropriate people, especially in B2B research: the decision makers, the influencers, the functional managers and purchase agents. The answer is really simple. We pay them. Failure to pay respondents not only reduces the headcount of the survey but more importantly, it will rarely entice the right persons to take the survey. Executives and decision makers are always busy and, unless they are compensated, they are unlikely to spend the time it takes to fill in a survey.

Thus, surveys conducted without compensation are likely to capture the sentiment of the wrong people, or at least will tilt the results toward these wrong people.

 

Failure #4: Use the same researchers your competitors use.

There are many industries where some research firm has carved out a niche serving as many companies as possible in that industry. These firms tend to sell the same information, the same analyses, and make the same recommendations to all of their customers. In a day when commoditization is the constant threat to companies’ profitability, using an industry-standard researcher is a losing proposition. Almost by definition, they cannot give you a competitive edge,. They cannot find the unique value propositions that will carry your products and services against your competitors. Using the same researchers your competitors use is a fast train to commoditization, less competitiveness, less uniqueness, less ability to differentiate yourself from the competition.

 

Failure #5: Failure to incorporate both quantitative and qualitative methods.

Quantitative and qualitative research gathers different kinds of information and they reinforce each other. Quantitative research—surveys held to high standards of rigor and statistical significance—is necessary to gather information about selection criteria, willingness to pay, comparisons of value perceptions along known axes. It is very informative, but it is limited to the issues and choices already known by the researchers. Qualitative research—free-ranging interviews and discussions, word associations, open-ended questions—is much less formal, but in some ways it is even more valuable. It opens a channel for respondents to provide choices the researchers may not have considered, insight into decision behavior, and drivers for business growth in unexpected direction. Qualitative research also enables clarification of quantitative responses, enlargement of the meaning of specific answers. Quantitative research without the qualitative supplement provides interesting statistics, but rarely moves the business forward. Qualitative research without the quantitative base may provide interesting direction, but rarely provides insight.

 

Failure #6: Reveal your name

When respondents recognize that the survey is being conducted for a specific vendor, the conversation becomes a sales call. Their motivation and mindset changes from “let me help you get better products and services,” to “I will tell you what it takes to get a better deal.” They shade, distort and withhold information in the expectation that they can influence the vendors to offer lower prices and better deals. Anonymous research is more difficult to conduct, as potential respondents are sometimes reluctant to participate without knowing who the recipient is. (But see Failure #9, below).

 

Failure #7: Present findings without conclusions

Last week we reviewed a market research report being offered to the broadcast industry. The report consisted of about 400 pages of charts. The charts showed the answers to several questions, each chart showing the answer to a specific segment or sub-segment. The report offers data, but no conclusions. There is really no information content to the report. It’s just a bunch of data and companies cannot act on data; they need information, practical advice and action plans. The report sold for $12,500 and was available to any marketers who wanted to buy it. So it was most likely going to sit on a shelf.

 

Failure #8: Present conclusions without recommendations

Market research professionals are generally ill-equipped to make coherent business recommendations. As statisticians and technicians, their professional credentials are rooted in data, science and numbers. But a key value of any market intelligence is what do you do with it? How to can you turn data into actionable information? At Atenga, we pride ourselves on being businessmen (salespeople, executives) first and research professionals second. So, while we deliver the data with all the statistical processes and tests, we can also advise our clients on what to do with it. In the past year, we’ve recommended very specific actions to:

• Change a $20m company’s price list, adding about $450,000 in profit with simple optimizations
• Change a company’s messaging to counter specific negative perceptions in the marketplace that were inhibiting sales
• Change a company’s bundling strategy (in very specific ways) to capture the “solution-seeking” segment of the marketplace
• Provide less-technical documentation, to address the marginally technical buyer, a segment hereto for ignored by the company
• Change sales processes to address specific circumstances that accounted for nearly $7 million in lost sales.
• Trained a telesales force in upselling, generating an immediate revenue increase of 15%.

 

 

Failure #9: Present recommendations without action plans

In today’s economy, individuals and companies have relatively little “slack” in their workloads. This means that even very specific recommendations have a likelihood of being ignored without specific action plans.

So the reports need to contain specific action plans to accomplish the changes to the company’s business. These action plans must also be made in conjunction with your company’s input so they take account workloads, other priorities, and resource availability.  This planning step is critical to the success of the research project.

 

Failure #10: Failure to take action, to change

This is the biggest failure of all. More often than not, the research project provides data; sometimes it provides information, less often it provides recommendations and actions. But it almost never drives the significant change that should be its benchmark for success. And this not the company’s fault. It is the market research organization’s fault. They fail to provide actionable recommendations and detailed action plans. They fail to follow up and coach the company on the implementation.

Bottom line – market research that does not avoid the mistakes mentioned in this paper and without driving actions and change becomes an expensive doorstop.