January 06, 2009

WARNING: You Cannot Rely On Market Research Alone

I talked to a entrepreneur today who, buoyed up by initial feedback from market research, was ready to set up a new business line, create a new web site, sign up customers and start offering discounts.  Halt I cried, you cannot rely on market research!  You're going to need more than positive feedback to build a successful business.

While listening to the market, and specifically your customers, is vital. the ability of traditional market research to accurately predict buying intensions is patentently limited.  I know this from 10 years selling the market research services to industry and projects involving more than 20,000 interviews with international business buyers and consumers.

When I urge caution in how market research is interpreted for making decision, I am not talking about issues of statistical validity, or reliability.  I am talking about the fact that just because a buyer tells you that he is interested in buying and you tick the appropriate box on the questionnaire, does not mean that the buyer will in fact buy when your product, or service, when it is launched.

Now it is not that the interviewee is deliberately deceiving you.  It is just that market research questionnaires and real world buying scenarios are two very different things.   I would much prefer to base my decisions on sales calls than questionnaires. 

There are of course things you can do to get a more accurate picture:

1.  The first is get face to face with the customers - telephone interviews and postal or online questionnaires can only do so much.  Next make the call more of a sales call, presenting the customer with more information, including prices, sees visuals/demos, etc. - the things that are essential to him/her making a considered opinion.   

2.  Even if you are at concept stage, create a visual, or prototype, however simple, that will enable your customer to give a more considered and informed reaction to your product.  People have limited time and attention, so make it easy for them to get to the nub of the issue - whether they want your product, what features they really need, etc.

3. Ask the right people, at the right time and in the right way.  For example, if you want to ask people about domestic appliances, then the best place to do so is in a electrical retail outlet - after all the people there are potential customers and are in 'the buying zone'.

No matter how accurate your picture of the market is, the interpretation is everything.  Most importantly scenario-based sales forecasting is key and in particular the assumptions you make about the percentages that are actually going to do what they said in the questionnaire and the implications of the same for your business.

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