Among market research experts, there are often conversations about organizations that move ahead without solid market research. Hindsight being 20/20 it is easy to say: “What were they thinking!”
The problem can be that the business model is beautiful and the concepts are rational, but research was inadequate to deal with the elusive potential customer.
In the 1990s, this included “dot coms” and has lately involved a lot of organizations that have been around for a long time and still failed. This has included store front retailers with significant brand equity who startled markets when they failed (e.g. Circuit City, GI Joes, Linens & Things, etc.).
Often those in business, focused on the practical, do not have the patience for research. “Many a business” is searching for profits with 5-8 people around a board room table. Million dollar decisions are being made without research and without checking in with the customer. Research is expensive and customers are idiots, right? You know what to do, right? You’re going to keep your job as long as you can and cut costs to save your job, right?
In the dot com era, we heard it all the time – “the model has changed and we don’t have the bandwidth for research.” Unfortunately, sometimes this was shorthand for “I’m really close to VC money and I don’t want to screw this up by giving information to investors.”
These brilliant business people often do not realize that customers are not as brilliant and often either don’t care, are unaware of your product/service, or are completely irrational. Most people don’t yet know what a Tesla roadster is, let alone how to get one. Yet the business model is beautiful.
The models have changed, but research is not something to be left out of the mix for several reasons. The first is something that is as true today as it was in the first days of commerce:
1) Customers are irrational. They make impulse buys. Customers often spend more on things that are bad for their health than things that are good for them. People buy books they don’t read and fitness equipment they don’t ever use. Even if customers are rational, it is typically after they buy something – that is, customers act on an emotional trigger to buy something and then use rational arguments to justify why they bought the “new outfit,” “make up,” or “vacation.”
So what this means to the greatest minds in business, is that the customer doesn’t always get your great ideas. Often research is needed to see the “misperceptions” and the reasons that your potential customer is buying your competitors “inferior product.” The truth is that your product is better – well not really if the customer doesn’t buy it – you’ll soon be out of business.
2) How we communicate with customers has changed. It used to be that there was one newspaper and three television networks and you could hit all your potential customers.
This has now changed. You need to look at communication models where you only pay for people who are coming in your store or visiting your website. Branding for the sake of branding is your ego talking – real branding and research create sales. Otherwise, you are likely on the way to failure and this may be the first time you acknowledge it. Define your customer so that you are targeting the correct customer. You don’t get a return on investment from “tire kickers” and people who will never buy your products or services.
3) The best businesses focus on increasing the number of customers, frequency of purchases, repeat purchases, likelihood to recommend and increasing the revenue per year from each customer.
Recognize that if you are not growing, you are being beaten by the competition and inflation. Therefore you must have growth strategy. Some of the aforementioned retailers that failed had warning signs when they stopped growing. Don’t let denial keep you from information that works. Once you know what you are dealing with your can deal with it. If you deny that you are not growing you are “rationalizing” worse than your customers are – and remember customers are not rational!
Even worse, in the current environment, no one is loyal. Large utilities and government agencies are buying from foreigners and people outside of their community, consumers favor “Sam’s Club” over the local vendor who has served them well in the past, and people are even leaving the country for medical procedures. This last one is perhaps most amazing because you would think that for life and death procedures, eye surgery or plastic surgery that you would go with someone you have used in the past. Not in the new world of business. The truth is that most of us have been burned by buying fitness equipment we don’t use, cars we don’t need, investments in stocks that plummet, and cosmetics and beauty products that really doesn’t improve our lives. And, at no other time in history has the consumer trusted business less. So ask yourself: how can you make trusting customers that would have pride in choosing you? Pride and trust are the two biggest emotional triggers – but it is not what you want – the focus need to be on what your money paying customer wants.