Key reasons why market research works
In this chapter, you will learn why market research continues to be a useful tool in the age of big data.
Method Academy by Fastuna, 2021
They say that the era of research began with the political analysis of George Gallup in the thirties of the last century. In the FMCG business, we have successfully used market research to support decision making for decades. Their experience has been borrowed and adapted by retailers. Research is also widely used in IT and eCom for UX design.
The point we’re trying to make is that research is popular. It is so effective that the annual turnover of the entire industry is approaching $ 50 billion. If the research industry was a country in GDP terms, it would be in 108th place out of 200.
Here is the reason WHY (it works!)
Reason 1. Market research has predictive power
Research results correlate with business outcomes. It has predictive power and is a true reflection of reality.
Research results correlate with business outcomes. It has predictive power and is a true reflection of reality.
Will your product launch be a success or failure?
Companies in the FMCG sector can fairly estimate the future demand for their products by pre-testing their products before launch and evaluating product performance after launch. Those companies can collect accurate databases by asking consumers the same set of questions repeatedly during pre-tests and collecting the same performance metrics after launch. All that information helps them to forecast their next product launch with better accuracy.
One of the most accurate forecasting systems, Nielsen BASES, is proven by real-life product launches and its accuracy of forecasting product success or failure reaches 95%.
Will your ad campaign have an impact?
Preliminary tests of commercials (also known as 'copy tests') allows you to predict their performance reliably. This data helps avoid airing weak execution and gives creators good feedback on what should be improved.
Is your pricing plan competitive?
Price research methodologies allow you to simulate various scenarios reliably. For example, they can help answer "What happens if I raise the price by 5%" or develop competitive pricing plans?".
Do you need to improve your Customer Experience?
UX research allows you to measure and improve Customer Experience (UX) in such a way that it radically affects user satisfaction metrics (such as Net Promoter Score (NPS), Customer Satisfaction Index (CSI) etc.) and business metrics (sales, conversions, etc.)
Would your target audience love your new show?
By showing 100 people a pilot episode of a new series and asking, "Would you watch a show like this?" you can predict the broadcast share of the series with an accuracy of ± 1 percentage point and decide on the feasibility of further production.
Companies in the FMCG sector can fairly estimate the future demand for their products by pre-testing their products before launch and evaluating product performance after launch. Those companies can collect accurate databases by asking consumers the same set of questions repeatedly during pre-tests and collecting the same performance metrics after launch. All that information helps them to forecast their next product launch with better accuracy.
One of the most accurate forecasting systems, Nielsen BASES, is proven by real-life product launches and its accuracy of forecasting product success or failure reaches 95%.
Will your ad campaign have an impact?
Preliminary tests of commercials (also known as 'copy tests') allows you to predict their performance reliably. This data helps avoid airing weak execution and gives creators good feedback on what should be improved.
Is your pricing plan competitive?
Price research methodologies allow you to simulate various scenarios reliably. For example, they can help answer "What happens if I raise the price by 5%" or develop competitive pricing plans?".
Do you need to improve your Customer Experience?
UX research allows you to measure and improve Customer Experience (UX) in such a way that it radically affects user satisfaction metrics (such as Net Promoter Score (NPS), Customer Satisfaction Index (CSI) etc.) and business metrics (sales, conversions, etc.)
Would your target audience love your new show?
By showing 100 people a pilot episode of a new series and asking, "Would you watch a show like this?" you can predict the broadcast share of the series with an accuracy of ± 1 percentage point and decide on the feasibility of further production.
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Reason 2. It’s a quick way to find actionable answers to all your business questions
Over the years of its existence, the industry has developed and validated practical working methods to answer various business questions. You can answer any of the questions that might arise in the business and need feedback from consumers or customers. Research a quick way to get this feedback by using a variety of practical market research methods.
Over the years of its existence, the industry has developed and validated practical working methods to answer various business questions. You can answer any of the questions that might arise in the business and need feedback from consumers or customers. Research a quick way to get this feedback by using a variety of practical market research methods.
The table below shows some key research methods and gives examples of the tasks they solve:
Reason 3. Business Metrics are not enough
Business metrics as a stand alone performance indicator are not enough to drive business growth. Metrics describe the actual result but don’t give you the reasons why and also can’t give you any feedback upfront, before launch. Research complements and sometimes completely replaces metrics.
Business metrics as a stand alone performance indicator are not enough to drive business growth. Metrics describe the actual result but don’t give you the reasons why and also can’t give you any feedback upfront, before launch. Research complements and sometimes completely replaces metrics.
Though there is a clear difference between metrics and research, metrics and research don't exist separately. Metrics are an important part of research methods. They, like polls, interviews, observations and experiments, form our picture of reality, inform us about the results achieved, and provide keys to identifying problem areas and points of growth.
Metrics not only help to assess the result, but they also allow you to understand the possible reasons for such a result. For example, in the case of low sales or conversions, you can delve into the data and search where exactly the low indicators were (in which channel, on what geography) to understand what influenced this — coverage, current users, frequency of purchases, average check, or something else. Advanced mathematical and statistical analysis methods help identify relationships between metrics, test hypotheses, and draw generalized conclusions — what works and what does not.
Sometimes metrics are not enough, and at times, they don’t exist at all — like at the stage of idea or prototype. Even for an existing product, metrics cannot answer important questions such as:
- why people don’t buy your product or service (barriers);
- why they don’t use it as it was expected;
- why do they use it (drivers);
- what is missing in the product?
Also, metrics are often incomplete. For example, in an ad, the number of impressions is not equal to the number of people who saw the ad. How many people remembered it? How many of them told their acquaintances about it?
Metrics and research together provide a comprehensive understanding of the business, both from an internal perspective and through the eyes of the audience. Their combined use improves the quality and speed of decisions.
Reason 4. Research is a small investment to lower risk significantly
For clarity, compare the cost of research with the cost of producing and launching a weak product or an ad that won’t be in high demand i.e. that will fail.
For clarity, compare the cost of research with the cost of producing and launching a weak product or an ad that won’t be in high demand i.e. that will fail.
Developing a new product
To develop a new product, let's say, a new toothbrush, you may need a cross-functional team. That could include product developers, marketers, procurement and raw materials specialists, supply chain, and business analysts who all get together to ideate and assess the risks. Even at the idea development stage, you are already investing money into this new product development (NPD) as you are at least paying salaries. Going into the later development stages, you may invest hundreds of thousands into product trials, legislations, approvals, etc. If you don't test with real consumers for the demand, your product may fail, and you will lose your money. That will negatively impact your Company's performance.
You can check a dozen ideas at the concept level using a quick survey. The cost is just a couple of thousand, and you'll get your results back within hours, not days or weeks.
The survey will allow for the:
Airing a new advert
Creating and shooting a commercial costs hundreds of thousands, and airing a commercial in mass media often costs millions. During the draft stage or even with an animatic, you can check its appeal for a couple of thousand (less than 1K on www.fastuna.com!). Here's an example.
So you will understand whether the idea is appealing to your target audience, whether it is worth investing in production and if yes, what can be improved to get the best hit, maximising ROI of your media spends.
Changing the packaging
To launch and test a new packet design of crisps, you need to spend thousands of euros. And if the new packaging sells the product worse than the old one (sometimes it happens — check the Tropicana case!), then there will also be lost profits. A quick consumer survey will allow testing the new packaging concept for just a fraction of the packaging costs. This research will show whether the new packaging will perform better than the current and/or competitors' packaging.
To develop a new product, let's say, a new toothbrush, you may need a cross-functional team. That could include product developers, marketers, procurement and raw materials specialists, supply chain, and business analysts who all get together to ideate and assess the risks. Even at the idea development stage, you are already investing money into this new product development (NPD) as you are at least paying salaries. Going into the later development stages, you may invest hundreds of thousands into product trials, legislations, approvals, etc. If you don't test with real consumers for the demand, your product may fail, and you will lose your money. That will negatively impact your Company's performance.
You can check a dozen ideas at the concept level using a quick survey. The cost is just a couple of thousand, and you'll get your results back within hours, not days or weeks.
The survey will allow for the:
- cut off unpromising ideas,
- prioritising promising ideas, and
- clarifying and tweaking those ideas
Airing a new advert
Creating and shooting a commercial costs hundreds of thousands, and airing a commercial in mass media often costs millions. During the draft stage or even with an animatic, you can check its appeal for a couple of thousand (less than 1K on www.fastuna.com!). Here's an example.
So you will understand whether the idea is appealing to your target audience, whether it is worth investing in production and if yes, what can be improved to get the best hit, maximising ROI of your media spends.
Changing the packaging
To launch and test a new packet design of crisps, you need to spend thousands of euros. And if the new packaging sells the product worse than the old one (sometimes it happens — check the Tropicana case!), then there will also be lost profits. A quick consumer survey will allow testing the new packaging concept for just a fraction of the packaging costs. This research will show whether the new packaging will perform better than the current and/or competitors' packaging.
Early research can help reduce uncertainty, significantly increase the likelihood of success, and reduce error costs.
To understand if you need research, compare the cost of the potential error cost (implementation + loss of profits) vs the validation cost via consumer survey.
Why is it a myth that research doesn't work?
They don't know how to 'cook it' correctly!
You need the right ingredients to make your soufflé rise, just like you need the right tools and the right application of those tools to get the best results from your research to make your business grow.
They don't know how to 'cook it' correctly!
You need the right ingredients to make your soufflé rise, just like you need the right tools and the right application of those tools to get the best results from your research to make your business grow.
Perhaps you have read the book by Robert Fitzpatrick "The Mom Test" (which we love here at Fastuna!). The only thing you may remember from it is that "everyone lies". As such, you may think that you cannot ask questions about the idea of a product and get the truth. It is a misleading statement taken out of the context of the book. Another reason to be discouraged by research is that you may have had a bad experience in applying research in the past.
In experienced hands, research is an effective tool, especially when you know how to 'cook it' properly!
The result of good research is data — digitized opinions, attitudes, emotions — which all affect the outcome. Research is no better or worse than metrics. They complement each other well, giving the business a complete picture of the world.
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