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How much does market data research matter anyway?

When businesses need specific market data for reasons varying from entering new markets to boosting existing ones to rolling out new products to targeting new customers, they generally turn to advertising agencies or research services.

“When businesses need market facts of their own, they usually don’t have the resources to collect the data,” said Kurt Rushing, director of business development for Southern Research Group & Focus Center of Jackson. “In an instance such as this, they will turn to a full-service research agency.”

Research agencies have various ways of collecting data, including surveys conducted by phone, direct mail, e-mail or one-on-one interviews.

“However, in the past decade, focus groups have become a particular favorite of companies across North America and Europe,” said Rushing. “With a focus group, you can test existing or future products with recruited individuals that fit your demographics. In doing this, your company can formulate more effective and targeted marketing campaigns that speak directly to the people you are trying to reach in a way that interests them.”

Research firms also conduct studies in advertising awareness, competitor analysis, customer satisfaction, market segmentation, mystery shopping and new market assessment.

“The mistake that businesses often make is by not conducting research, they run the risk of running ads that are ineffective or launching a product that performs below expectations,” said Rushing. “The goal of any market research is the ability to use the results to impact the bottom line. If businesses can remember this point when making their most important business decisions, then the cost of the research pays for itself.”

Businesses must remember that markets, competitors, potential buyer groups, influencers and customers are people, not just statistics, said Lou Ann Flatgard, senior vice president of account services for Jackson-based Maris West & Baker.

“And to introduce a new product or service into a market, it’s people who decide if they buy it,” she said. “Research helps us determine how people feel, but even more importantly, why they feel the way they do and how it might impact their reaction to your product or service. Companies like ours can then offer an ‘informed objectivity’ in converting the research results into real world applications to attract audiences to your product or service.”

For one client, Maris West & Baker conducted “friendship cells,” a unique form of qualitative research that allowed the firm to probe deeper into the “why” about consumers’ feelings and attitudes, said Flatgard.

In “friendship cells … small groups of friends are grouped together in a home, literally a living room, to eliminate potential intimidation like you have with a more formal focus group of strangers around a conference table,” she said. “Friends talk openly among each other as a moderator probes deeper into the informal conversation.”

John McKie, senior vice president of marketing for Jackson-based GodwinGroup, said companies could gather market data themselves through secondary research like trade industry groups, publications or online information. Reports are available for relatively nominal fees featuring detailed data in a broader range than general trade information.

“A business owner may need to conduct some primary research, talking to existing or potential customers for information specific to them,” he said. “Even though focus groups of a dozen people, for example, are very colorful and detailed, and gives you a chance to engage people in conversation to find out how and why they feel that way, it’s qualitative, meaning that it gives you that richness and detail but you can’t take those results and project them over a larger population. Someone might say, well, four of 12 people felt this way, so 25% of the population will, too. No, it simply shows you how to wrap your hands around what people are thinking.”

A common mistake marketers make is to think that focus groups are a panacea, said Jim Neidorf, senior vice president and director of marketing of The Ramey Agency of Jackson.
“Focus groups are really good for marketing concepts, for looking at product innovations and for talking about impressions about issues like one chain versus another,” he said.

To gain meaningful data, McKie said, “You’ll need to conduct a quantitative study, which includes interviewing 200 to 300 people, usually by phone, direct mail, Internet or intercepts.”

When “Benji: Off The Leash” opened at theaters recently, McKie conducted intercept interviews by asking moviegoers exiting the theater their opinion of the movie.

“Interviewing your own customers can be extremely valuable,” he said, “because they’ll definitely tell you what they think.”

When a financial institution wanted to increase sales of a particular product, hosting focus groups worked well, McKie said, by including customers who had already acquired the product and those who were prime candidates for buying it.

“By surveying both, we gained key insight into how the institution might need to change the product or service or pricing,” he said. “Sometimes we get so close to our own business, we miss signals. We don’t look at it like consumers. Before I came here, I worked at McRae’s for 22 years and we thought we knew everything in the world about retail. We knew a lot, but we lost sight of what the customer saw when he or she walked in the door. From time to time, we needed to talk to some of them to snap us back to reality.”

Research has to be actionable, McKie pointed out.
“Many businesses have spent hundreds of thousands of dollars on research and they get thick books with lots of complicated graphs and charts and regression analysis,” he said. “It’s very impressive and very intimidating and they get very little use out of it. You’ve got to be able to say, ‘Now that I know this, I can change my product or service accordingly.’ We try to help our clients close the loop between ‘isn’t that interesting?’ to ‘what can I do about it?’ We give them recommendations to take action on.”

Even though no one would comment on specific costs for market data research, except to say it depended on the size, scope and amount of detail required per project, the price for focus group research usually starts at around $3,000, said McKie.

“When you start talking to a small business owner about a price like that, they usually don’t have the money,” he said. “Anybody with skill searching Google and Yahoo that has some patience can usually handle the secondary research themselves. You can get quite a bit of information from census data, for example, but sometimes it takes learning how to navigate the site to find the specific information you need.”

Neidorf, who often contracts market data research to Southern Research Group and then interprets the research by crafting marketing plans and creative briefs for clients, said collecting market data by phone is a diminishing art.

“It gets harder and harder to obtain statistically accurate information on the phone,” he said. “You don’t want to have a chatty type of conversation on a phone interview in order to gather information that is statistically reliable. Instead, we have more reliable data through intercept research. When you look someone in the eye, they size you up and know you’re not selling them anything. You can’t have that same connection over the phone. People half-believe you.”

Direct mail is not a very accurate method of data collecting, said Neidorf.

“Respondents of direct mail represent a subset of the population that is quite different from the whole, particularly this year with political polling,” he said. “It bothers me that direct mail responses are very low, even though some direct mail companies offer incentives, like a dollar or two, that makes people feel guilty about not responding. Some marketers are happy with a 20% return or even lower, but that doesn’t provide a good representation.”

E-mail surveys are fast becoming an accurate form of statistical measurement, said Neidorf.

“E-mail is very fast and it’s cheap and if you properly calculate your margin of error, e-mail surveys are a very good measure of consumer response to various issues because it requires very little effort for people to respond,” he said. “The problem always is to have a good list of e-mail addresses and to be careful not to be considered as spammers.”

Reading market research results accurately is a more delicate issue than gathering data, said Neidorf.

“I think we’re getting better at it, but this is a skill and an art as opposed to a scientific proposition type of business,” he said. “Market research is very valuable for businesses, but there are always exceptions. Sometimes people go with their gut feelings. I doubt anyone did any market research on hoolahoops. It was somebody’s gut and it took off. On the other hand, people did a whole lot of research on the Edsel. By and large, market research is invaluable because the price of failure is getting higher every day.”

Analysts must work hard to maintain a neutral attitude toward research results, said Neidorf.

“One rule is not to be surprised by anything, and the other is to be very careful in thinking your own personal beliefs are the beliefs of the entire population,” he said. “That’s one of the toughest skills to maintain.”

A new client approaching a marketing firm for the first time should be upfront about the money available to spend on research, said Neidorf.

“If clients err, it’s usually on the side of money they don’t have,” he said. “Don’t feel funny about telling us you only have a little money because there are many things you can do. A good advertising agency is your marketing partner and needs to know these things to do the best job possible for you.”

On the flipside, “Clients often get so hooked on research and think they’re getting so much information that sometimes there comes a point where they’re overspending,” said Neidorf. “We don’t want that to happen either.”

Contact MBJ contributing writer Lynne W. Jeter at mbj@thewritingdesk.com.


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