Market Research May Be Killing Your Company's Growth
Three big "Watch Outs" for business leaders who want research to drive top line growth.
Go with me on a quick thought experiment. Let’s say your boss asks you to buy her an apple. A really nice juicy one.
You do a quick Google search on your phone and find the research shows, with 70% confidence, that dark red apples are the juiciest. The store clerk tells you, in his experience, darker the apple the juicier it will be. And though you're not an apple eater, you know through experience that darker plums and darker pears are the juiciest.
So what should you do? Buy her a light green apple, of course! Why?
- 70% confidence is not a high enough level of statistical confidence.
- The store clerk’s opinion is just anecdotal evidence.
- You shouldn’t bias the decision with your own personal experience.
Spoken like a true market researcher!
This little exercise illustrates how market research can inhibit innovation and risk taking in your organization—and put a damper on top-line growth. The problem comes down to something fundamental: the difference between how business leaders and market researchers think about business decisions. Researchers spend their careers crunching numbers and listening to consumers, with one goal in mind: find the answer. But when it comes to business decisions, there rarely is one clear-cut answer—that’s why successful leaders take into account multiple perspectives and weigh probabilities to come up with the best decision among imperfect options.
So there’s a basic disconnect between what the business leader and the market researcher are trying to accomplish. What’s the consequence? Market researchers tend to be better at helping you get data than helping you draw conclusions and recommend courses of action. It’s incumbent upon business leaders to make sure research results are applied in a way that makes business sense.
How can business leaders do this? In 15+ years consulting with both business leaders and market researchers, as well as from my own experience as a brand manager at P&G, I’ve seen again and again three big watch-outs that can lead to sub-optimal business decisions when applying market research:
Watch out #1: Arbitrary statistical confidence thresholds - If you have anything less than 95% confidence in research results, you can’t trust the result, right? Poppycock! Let me put it to you this way: if you could have 90%, or 80% or even 70% confidence that something was right, would you factor this into your decision-making? Of course.
This is the difference between making a business decision, in which you need to weigh potential benefits and risks, and making a decision about something like the safety of a new drug. If you’re marketing a new drug, you better have VERY high confidence (99%+) it will not kill anyone. But if you’re a business manager making a marketing or pricing decision, wouldn’t you rather have 80% or 70% confidence vs. just rolling the dice? At The Seidewitz Group, we test statistical significance at multiple levels so our clients can use this information to make business decisions—as opposed to rejecting anything that doesn’t meet an arbitrary standard.
Watch out #2: Don’t ignore evidence from other sources - Market research is one source of data. In many cases, it might be the most important source. But it’s not the only source. Market researchers are often quick to dismiss data from the sales force, customer service, secondary sources, etc. as “anecdotal.” And this not completely unfounded; you do need to be cautious using these information sources. They can be biased, inaccurate or incomplete.
However, anecdotal or other non-research data sources can play an important role in corroborating research data, especially when confidence intervals are low (say, 80 or 70%). Anecdotal sources can also bring into question research conclusions, even if confidence levels are high. If your call center data, sales force feedback and online information all contradict research that has a 95% confidence level, you might want to think about running another study. Even with 95% confidence, there’s a 5% chance (one in every 20 studies) that your research got it wrong. Factoring in as many data sources as possible gives the highest probability of success when making a business decision.
Watch out #3: Don’t Ignore personal experience - One of the bedrocks of market research is to get out of your own head and into the head of the customer. We preach this all the time at The Seidewitz Group. People project their personal opinions onto the customer at great risk (this is the dreaded and ubiquitous confirmation bias).
But you can take this too far. Personal experience can and should inform decisions, as long as it’s done with your eyes open that it can be biased and not representative of the whole. We believe in collaborative processes that involve business decision-makers (not just market research staff) before, during and after the market research—so their personal experience informs the research and the voice of the customer becomes part of their personal experience. We have found this to be a powerful way to incorporate personal experience into a customer-driven strategy development process.
The cost of these watch outs, when repeated again and again, by people throughout your organization and across multiple business units, can be enormous: new ideas terminated too soon, experiments stifled as too risky, dissenting opinions muzzled as inconsistent with research. At The Seidewitz Group, we see this happen all too often, and it ends up inhibiting innovation, risk taking and growth—the exact opposite of what you hoped for from your market research.
Just like the person in the apple thought experiment, you have the choice of being constrained by your market research, or finding ways to make research drive growth. When customer insights are used as a source of inspiration, when research is used not just to weed out the worst ideas but also to strengthen potentially game-changing ideas, when managers are empowered with multiple sources of information and understand the strengths and weaknesses and probabilities of each—that’s when market research helps accelerate rather than inhibit growth. Business leaders need to make sure this happens, and be constantly on the lookout for the big market research watch-outs that may be killing your company’s growth.