Succeeding and Failing with Market Research
The term 'market research' means different things to different people. To the specialist, it is a formal activity involving a randomly selected representative sample of a company's market, carefully constructed questions, reliable statistical methods, and elaborate tests of significance. To the generalist, it is a much less rigorous process, often involving phone calls to a couple of key customers (or salespeople), a quick conversation, and a general impression of an answer that is as likely to be wrong as right. Willingness to pay for research is different as it takes that formal market research process to the next level. Traditional market research captures the perceptions and preferences of a market. It is a good start, but it is not good enough. It tells the company what potential customers prefer. Willingness-to-pay research tells a company what customers want to buy and how much they are willing to pay for whatever they buy.
Recognizing this, it becomes clear why most traditional market research fails to perform its crucial objective: to move the business forward to new levels of sales and profitability. Willingness-to-pay research, however, will transform a company.
Willingness-to-pay research uses methodology around specific questions at the heart of the vendor-customer relationship. These are questions that dig deep into the monetized value of a product or service, the crucial drivers of the critical decisions a company needs to make about its marketing, products, services, offers, response to competitive activities, and the training and direction of its sales force.
Traditional market research fails to capture the correct information and analyze the data sufficiently to drive needed changes in marketing, sales product management, and finance. This article looks at the nature of this sad failure and its ten most common components. It provides a checklist for managers contemplating a market research project to ensure that it will not be just another failure.
Failure #1: Ask the wrong questions.
These are the essential questions that any traditional market research project fails to ask, but willingness-to-pay research does ask.
Why do customers buy from you?
Why do customers buy from your competitors?
What is the monetized value of a product's or service's benefits?
What options would increase the monetized value? What benefits would the market forego to get a lower price?
What stops them from buying more from you?
What does the market mean by 'quality,' 'service,' and 'reliability' in your specific marketplace and use cases?
What are the levels of quality, service, and reliability expected? Are they satisfactory, and how does that affect the monetized benefits of your product or service?
In addition to these 'magic 7' questions, there are always other questions specific to your circumstances.
Failure #2: Ask the wrong people
In the introduction, we alluded that traditional market research often relies on a few favorite customers or salespeople to acquire the required market intelligence by asking customers a few questions. This is not enough, especially when talking to customers about the future features and functions they would want. Customers will lie about how much they would like to pay for these. They will underrepresent the value they see. Simply, they want a better deal next time they buy your product or service.
Likewise, traditional market research fails to disqualify respondents who are irrelevant to a company's business. You cannot just ask respondents a few yes/no questions in a way that a respondent can figure out what the answer needs to be qualified to enter a survey.
Having said that, the people who don't buy from you or those who may not have ever heard of you have the most valuable insights. Thus, 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 that 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 straightforward. We use survey panel companies that have access to many millions of people and pay them for taking a survey. Executives and decision-makers are always busy, and unless compensated, they are unlikely to spend the time necessary to fill in a survey. In a narrow market, this compensation can be substantial.
I'm sometimes sent an invitation to take a survey or see an invitation on social media. Unfortunately, these non-paid surveys are typically very, very short. So short, they do not form any true insight into the company. Likewise, surveys conducted without compensation will likely 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 constantly threatens 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, and 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, reinforcing each other. Quantitative research—surveys held to high standards of rigor and statistical significance—is necessary to collect information about selection criteria, willingness to pay, and comparisons of value perceptions along known axes. It is very informative but 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 and adds a layer of color and nuance to the dry quantitative research. 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 an unexpected direction. Qualitative research also clarifies quantitative responses and enlarges the meaning of specific answers.
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 change from "let me help you get better products and services" to "I will tell you what it takes to get a better deal." The shade distorts and withholds information in the expectation that they can influence the vendors to offer lower prices and better deals. Anonymous research is more challenging 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
I see this all the time - often, a client shares a prior market research report, saying - this was a useless exercise. A report consisting of many pages of charts offers data but no conclusions. Just a bunch of data that companies cannot act on data; they need information, practical advice, and action plans.
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 substantial value of any market intelligence is what do you do with it? How can you turn data into actionable information? 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 advise our clients on what to do with it.
Failure #9: Present recommendations without action plans and follow-up.
In today's economy, individuals and companies have little "slack" in their workloads. Even precise recommendations are likely to be ignored unless part of an action plan. Therefore, these plans must be developed in collaboration with the company, and progress must be monitored.
Failure #10: Failure to act, to change
This is the biggest failure of all. A traditional market research project provides data; sometimes, it provides information, and less often, it provides recommendations and actions. But it rarely drives the significant change that should be its benchmark for success. And this is not the company's fault. Market research organizations 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 without driving actions and change becomes an expensive doorstop. Willingness-to-pay research is the opposite. Precise. Business-oriented. Actionable.
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