Market research guides your marketing strategy and should underpin everything you do as a business. As businesses march ever more relentlessly toward improved metrics, market research should be the first arrow you pull from your quiver. Yet, many of the same managers demanding better metrics fail to grasp the importance of market research or how market research in digital is different from traditional market research.
There’s almost nothing in business more critical than understanding your target market. Insights gleaned from that market inform every bit of your business strategy, not just your marketing strategy. Knowing your audience allows you to build the right products at the right price and distribute them in the right outlets. Insights help you craft communication, including tacit communication such as store design, characteristics necessary for your salesforce, and develop forecasts that are the beginning of the budget process.
Today, we’ll discuss the importance of market research and how market research in digital is different from traditional market research.
Why firms resist market research?
Doing good market research is really HARD, and it takes time and money if you want to do research right.
Too often, businesses do market research WRONG; resulting in business decisions that not only don’t help improve market performance but may hurt performance. Think about Coke when they introduced New Coke, which is the classic example of getting market research totally wrong (although it worked out for them in the end).
Here’s the result, according to the resource:
This decision became the most costly marketing mistake ever as within a few days of original coke being withdrawn there was a huge backlash from both consumers and the media. The company received over 400,000 phone calls and letters of complaint from customers unhappy with the decision to replace old Coke.
What Coke discovered is that they didn’t ask the right question so their decision was flawed from the beginning.
Coke was smart enough to realize they were responsible for the failure, not the market research technique itself. Some businesses aren’t so willing to admit their own mistakes and, instead, believe that since their market research efforts didn’t give them the right answer, the failure is the fault of market research rather than a failure of the people who DID the market research.
Here are some other excuses firms use to avoid doing market research:
- Survey data is inaccurate
- Market research takes too much time and costs too much money
- Our internal data, such as sales data, tells us everything we need to know about what customers want
- I can’t wait to get better data or I’ll lose momentum (or lose the opportunity)
- Plenty of 3rd party data is available
- Consumers don’t really know what they want anyway
- I don’t know how to do market research
Working in market research, marketing strategy, and branding for over 30 years, I’ve heard every excuse in the book — at least a few times. You’ll even hear marketing folks, including some pretty high-powered marketing academics, say that consumers don’t know what they want, can’t express their needs in a cogent manner, and what they say has little to do with how they really feel. These folks prefer to observe what consumers do and make assumptions about why they did that. Of course, past consumer behavior isn’t always a good predictor of future behavior, either. So, firms who believe everything they need to know about what consumers want based on analyzing sales data miss the boat by a wide margin.
I’ve had mid-career folks from Fortune 50 companies, who should know better, tell me that all they need do is extend the trend line to predict sales. They then use this mythical forecast for everything from making production and buying decisions, to guiding innovation. For instance, they believe extending a popular existing brand is better than crafting a new one.
The reality is that consumers don’t buy products, they buy solutions. If you’re solving a problem that doesn’t exist, you’ll always struggle with sales. If instead, you recognize a problem still exists despite existing solutions, you have a fair chance to totally disrupt the market and find financial success. Hence, while hotel chains vied for customers with “heavenly beds” and other gimmicks, Airbnb recognized that travelers just wanted a clean room at a reasonable price in a good location. By eliminating the high cost of building a structure, Airbnb offers travelers what they want with very limited overhead or risk, which they’ve transferred to others.
Thus, understanding the underlying attitudes, problems, and needs that guide consumer behavior is a much better predictor of future behavior. That’s why predictive analytics (models built by understanding the why’s behind behavior) nearly ALWAYS outperform descriptive models (models that merely describe behavior).
How digital communication makes market research better.
Digital communication makes market research MUCH better. Digital communication helps firms overcome most of their excuses for not doing market research.
Here are some ways market research in digital worlds is much better:
1. It’s more accurate
Survey data can be inaccurate, especially if you don’t know what you’re doing. Issues such as insufficient sample size, poor question wording, inattention to data validity, implicit bias build into questions, and other issues create problems, which lead to inaccurate results from your market research. Listening in social media overcomes many of these problems — if done correctly.
Social media listening allows the market researcher to enter the living rooms, coffee shops, and sit around the dining tables of consumers to hear what they’re talking about. Rich data collected from social media listening, if interpreted properly, gives firms a very clear picture of the consumer, what’s important to him/her, how they make product decisions, and who influences those decisions.
Unfortunately, social media listening has become a business for some firms who lack the ability to process and interpret natural speech with machines so their insights are pretty anemic, often consisting of only positive, negative, and neutral attitudes.
Don’t feel the need to approach social media listening as a quantitative exercise. Instead, borrow from ethnography to develop a deep understanding of a fraction of the people talking about your brand or their problems as they relate to your product market. For example, a colleague followed conversations around the initial release of Microsoft’s Surface computer. Within days he had a list ready for the development folks that included suggestions for features or upgrades to existing features to build into the next version.
Digital communication is ubiquitous
People on social are always talking about brands. So collecting data is fast. If necessary, a client can contact me in the morning and I’ll have data ready by the evening. The analysis takes a little longer, but you get the idea. I can give you predictive insights within a week. (Of course, this type of service doesn’t come cheap).
Internal data is valuable
Sure, following a trend link to predict the future is often worse than using a crystal ball. But, you do have data to guide decision-making. For instance, tracking lift from campaigns through your website provides great insights as you craft your next marketing campaign, especially if you used A/B testing in constructing the campaigns.
I can follow an ad containing a 20% off coupon, for instance, and I can tell you just how much more profit you made with the coupon than without. I can tell you whether returns were higher with a 20% discount or an increase in ad spend. I can tell you which demographic groups were most affected by which marketing tactic.
Next time you face a discount decision, you have the ammunition you need to guide that decision.
Customer DO know what they want
The problem is their decisions require a balance between different wants. Balancing these wants against available resources (time, money) requires complex heuristics that require fairly sophisticated market research to uncover. Thus, rather than deciding between the green or red brand products, consumers face difficult decisions between things like cooking at home versus going to a restaurant and having less money saved for their summer vacation.
Market research failure
Market research failure, regardless of the excuses, is really a function of not knowing what you’re doing. Market research seems tantalizingly simple. You ask some questions, add up the answers, and, viola, you know your consumer.
Unfortunately, the reality isn’t that simple. And, taking a market research class in college isn’t going to help you much. That’s why some schools now offer a Master’s Degree in market research (which is a much better option than getting an MBA for those with a marketing undergrad). Market research is REALLY complex and requires much more than a single course.
Good market research also requires experience doing market research, not just studying market research. And, a good market researcher should be able to handle both qualitative and quantitative market research because different types of problems require different solutions.
Increasingly, we’re moving more toward marketing analytics that encapsulates both market research and analyzing existing data from places like Google Analytics, sales data, and secondary data. Marketing analytics requires complex modeling strategies rather than just statistics but provides better insights to guide decision-making.
Check out the infographic
I’ve included a nice little infographic about using market research in digital marketing scenarios. This infographic re-envisions social media as not simply a tool for selling products, but for guiding decision-making that benefits the organization with higher revenue far into the future.
We feel your pain and we’re here for you. Whether you need social media listening, qualitative market research, or quantitative market research, we have the skills to get you the answers you need. Just contact us to learn how we can help.
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