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Asia Business Development – Asia Business Consulting » Innovation – Lifeline of the Market Research Industry
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SpirE-Journal 2011 Q1

Innovation – Lifeline of the Market Research Industry

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Innovation – Lifeline of the Market Research Industry

The traditional market research industry has come to be seen in many quarters as being primarily useful for risk mitigation – confirming and tweaking big decisions and making tactical, small decisions. Its role in helping companies to innovate is marginal to non-existent. However the industry has evolved new tools to cope with creeping commoditization and competitive pressures. These hold out the prospect of facilitating breakthrough thinking among clients, rather than more of the same.

Market Research is the systematic, objective collection and analysis of data about purchasing behaviour. It always incorporates some form of data collection, be it secondary research (often referred to as desk research) or primary research which is collected direct from respondents.

In the early days of contemporary market research (the 50‟s through the 80‟s), the statisticians who put together research projects were a “white-coated bunch.” They took research very seriously, and saw it as a science. As a result, they invented and deployed wonderful research tools and theories. But to make them work, they needed huge sample sizes, huge computers and huge budgets. By the 90‟s, this approach (and the big budgets needed) was under pressure as clients struggled to do more with less.

Focus Group Discussions (FGDs) began to grab more attention from clients, and large scale projects with proprietary tools lost share to “quanlitative” research. This led to substantial growth in the volume of FGDs conducted, due to their advantages in terms of cost and the ability to allow the client to observe and influence the process easily. However many research professionals from agencies and clients alike came to question the replacement of quantitative research by FGDs as the latter can generate conclusions that are not representative of the broad majority of customers.

And more pertinently, some questioned the role of market research in effecting marketing breakthroughs. Over the past two decades, a number of prominent business leaders have publicly derided the value of traditional research as being useful only for confirming marketing options rather than formulating the options themselves.
“Rather than helping innovation departments create, test and refine new product ideas that actually have a chance of succeeding, our industry has often simply relied on basic pass/fail systems that add no additional insight into a particular consumer problem,” said Mike Rodenburgh, SVP of the Consumer Goods Practice at Vision Critical.

As emerging markets began to assume a larger share of global purchasing and, with the recovery from the financial crisis of 2008-09, as Growth became the big overriding priority, the key challenge has become generating new, breakthrough ideas for market expansion in unfamiliar territory.

A strategic framework for Market research in Business Expansion

There are two broad ways that market research can help clients to make breakthrough market expansion decisions. It can identify unmet needs and tease out opportunities in existing, mature categories. Or it can identify new territories for customer solutions – new products, new paths to market, under-served geographies and segments. How well does traditional market research do this?

Does traditional market research kill innovation?

A famous criticism of traditional market research is that it cannot see beyond the current paradigm. As market research asks respondents to answer questions about themselves and their buying behavior, it cannot rise above the conventional and market research is seen as being unable to sense breakthrough ideas which consumers cannot conceptualize but which they would welcome if confronted with. This view has been strengthened by the growing realization among marketing professionals that consumer behavior may be a function of habit, reflexive actions and unconscious drives that are then post-rationalized – or in other words, rather than conscious intention coming before action, it is often actions that come first and conscious rationalization of those actions later.

It is true that some research programs may face this limitation. However the key objective of many programs is indeed confirmatory – to act as a check against “marketing disasters.” It is unwise to expect out-of-box thinking from a research program designed to confirm and tweak already-formulated options.

The onus is increasingly on research agencies to do a better job of understanding what the client‟s objectives are. If the client seeks innovative ideas and the research is carried out with a sub-par understanding of the client‟s real objectives, the “innovation‟ piece of the outcome may get compromised. Ways in which this can be manifested are:

Talking to the wrong customers:

Market researchers often question existing customers, overlooking the fact that the chances of uncovering innovation opportunities is much higher if they talk to “strangers‟ or “butterflies‟ i.e. people who aren‟t brand loyal.

Asking the wrong questions:

An average customer‟s purchasing decision is often driven by emotions rather than rational judgment. Hence, it is difficult for them to spontaneously articulate and identify a need they have that could lead to a new product idea.

Having the wrong people interpret the data:

The decision-making unit is often presented with filtered, summarized data which may not have important signals that might have a bearing on the decision.

Making the wrong decisions based on market research data:

Managers often fall into the trap of making decisions based on untested market data or false projections.

Most market research is still about ‘asking’ – using questions to understand consumers’ needs and wants
Market Research geared to Innovation

How could research be run differently so as to spark more innovative thinking about business expansion? Spire‟s experience strongly suggests a role for primary research in generating such ideas, but structured along different lines from traditional market research. By implementing programs of what Spire has traditionally termed Market Environment Research, clients can generate options for pursuing new directions in terms of product design, segment, path to market and positioning.

Benchmarking:

Secondary and primary data (mainly via expert interviews) can be deployed to understand how similar products have evolved in other industries or other countries where the category is more mature. For example, marketers designing a loyalty program for theme parks could study similar programs in the airline and credit card industry. Some of this research could certainly be undertaken using public sources.

Expert interviews:

Tapping the ideas of experts who have studied the product in question (eg academics, R&D specialists) or who operate in the same value chain for the product (eg retailers, distributors) can yield valuable insights.

Meta-research:

Applying a holistic process of analysis and brainstorming to all of the data available to a company from internal (eg sales data) and external sources and combining that with secondary research on the entire business eco-system (spanning the role of competitors, substitutes, channels and government) can yield surprising insights about under-served portions of the market and latent opportunities for game-changing breakthroughs. On this front, Spire‟s recent experience suggests that careful analysis of social media is an extremely useful augmentation to traditional research programs.

In the United States, spending on market research has dipped for four consecutive quarters (2009)
Innovation in Market Research

The market research industry is itself undergoing change. Novel tools and techniques are taking share of total research spending away from traditional tools such as customer surveys and FGDs. This process of innovation has also been driven by economic pressures within the research industry, as clients reduce budgets for traditional research activity. It should be borne in mind that not all of these novel techniques are new. Some have a long pedigree but have been peripheral to the industry historically.

Ethnography is the branch of anthropology that involves trying to understand how people live their lives. Unlike traditional market researchers, who ask specific, highly practical questions, anthropological researchers visit consumers in their homes or offices to observe and listen in a non-directed way. A global IT company wanted to understand emerging Chinese markets – to understand IT use and knowledge among “Youth” in rural China and “Adult Migrants” in urban China. They deployed ethnographic research and came up with the concept of the “Green Campus iCafe”.

Eye tracking is the process of capturing the location and movement of the consumer‟s point of gaze. It offers insight into the cognitive processes involved in user interaction with computer interfaces, physical products, retail environments and printed material.5 The Institute for Advertising and Marketing Research, WU Wirtschaftsuniversität Wien, carried out a study whose objective was to find out how early versus late presentation of the brand in TV commercials influenced advertising effectiveness in terms of brand and ad recall. The study showed that in commercials with moderate and low complexity, continuous presentation of the brand had a positive impact on visual attention. Correlations were also found

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