| Recently
I was privileged, or rather tortured, to interview senior marketing executives
of a very well known U.S. health plan. To understand why this is repeated day in
and day out in corporate conference rooms around the world, and why it is
entirely ludicrous, not to mention dangerous to your profitability and sanity, I
need to give you a little background.
I was assisting a client sharpen
its new Internet-based health improvement program. The value proposition was
compelling: the health plan - a large Health Maintenance Organization (HMO) -
could radically reduce its medical expenses plus boost its subscriber goodwill
by adopting some Internet-based health and wellness tools from my client.
But here's the rub - we're talking Internet here, so naturally we are
looking toward future customer behavior in regard to the health behavior. After
all, it's not like using the Internet to encourage people to have healthier
lifestyles, contact their doctors, get multimedia inspiration to keep with their
exercise program or plan delicious, nutritious meals is something this HMO - or
anybody - has 42 years of data on. Believe me, this is a program that anybody
who uses the Internet would love.
Love it or hate it, the response of
this HMO was, and I quote to the very best of my recollection, Your Honor: "We
are very proud of being a data-driven company. We don't do anything without
reams of data and statistical research.
"Now we are doing work in this
area ourselves. We won't be able to make a decision without extensive market
research so we can be sure that our investment in this area will pay off. We
need more history, more market research to make sure this will work."
Is
it any wonder that in the year this happened, this HMO lost money in the high 8
figures? That the CEO held onto his job (and 7-figure salary) by the skin of his
shriveled neck?
Yet ask many executives and you will find that they
believe and swear by market research. As you can see, I believe that, market
research is often an excuse for executives to drive their companies by looking
in the rearview mirror. It's a cover-your-rear behavior disguised as prudence.
Seven or eight times out of ten, when I'm called on to help a company
improve profits, increase revenues, or expand into new markets I'll be handed a
massive market research report on Day One. Often it's a telephone-sized book of
telephone interview statistics. Sometimes its transcripts or summaries of focus
group sessions. Now and then it's the result of mail-in surveys. Or it's a
massive compendium of library research or expensive "custom" reports from any of
the huge subscription research firms like Jupiter or Forrester.
Why are
they handing me these reports? It's not because they've found the answers to
their problems they were looking for. If they did, I surely wouldn't be there.
No, they are handing them to me because these $10,000, $20,000, $50,000 reports
simply haven't answered the pressing questions that are really on the minds of
the executives who commissioned the reports in the first place. You should see
the looks of resigned dissatisfaction at the time it took to get the report, the
bill they paid and the results they got. Maybe you don't have to - likely as not
you've seen the reports I'm talking about.
That's because most market
research makes these three fundamental mistakes:
- It doesn't identify in advance the specific value proposition,
pricing, market segmentation or what-have-you the client needs to test. Instead
it is usually a fishing expedition of the mind of the marketplace
- It tries to be quantitative when it should be qualitative, and qualitative
when it should be quantitative. For example, a massive telephone survey should
never be used to help generate a new strategy for a company or explore new
product options - but only to rigorously test a precisely defined pricing,
segmentation scheme or feature set.
- Worst of all, most market research investigate people's past experiences and
habits. In the most famous example, IBM rejected xerography when it was offered
because its market research asked secretaries (no "administrative assistants" in
those days) the question "how many copies do you make?" Remember these are the
days of carbon paper and mimeograph machines. Of course this means how many of
those tediously-made, and expensive, smudgy carbons and messy mimeographs have
been in the secretaries past or history.
For this HMO generating
massive data research about people's preferences and habits using Internet-based
health information to yield positive clues about what their Internet strategy
should be is like asking Alexander the Great in 350 BC to predict the outcome of
next year's World Series.
Their answer: "Well, we need to wait till
people have more experience with the Internet. Then we can perform our research,
back up our strategy with reams of facts and figures." So IBM should have waited
too, until people had more experience with xerography? They did. What happened?
You know as well as I do: IBM lost millions getting a late start in the copier
business. Our HMO friends will wait - and lose their subscriber base to
competitors who are willing to look ahead, not behind.
Whose fault is
all this? Business is about taking responsibility. In most cases the market
research firm did an excellent job of doing exactly what the CEO, president or
VP of Marketing asked them to do.
At the same time, market research
firms know in their heart of hearts that answers to some market research
questions usually breeds more questions - and more business for them. Shame on
them; shame on us.
A little example also shows why I believe that the
way most market research is used it is as addictive as cocaine. The problem is,
it dribbles out its insights. At one air freight company I worked with, a
massive telephone survey reveled that the company was viewed by its customers as
"mostly like a big bear. We can move the heavy freight but not the letters and
small packages. And we're not nimble or flexible. But eventually we get the job
done."
Now somewhere in here is some insight - insight about the current
market niche for this company - big freight. A little more hidden in all this,
but peeking out, are indications that customers turn to this company for the
jobs the other guys can't or won't handle. You can almost hear the VP of
Marketing calling for another market research study to explore these angles.
How different things would be if the VP of Marketing had called for
targeted specific market research to find out:
- The number of large freight shipments per month to be expected from each
industry this company served
- The on-time delivery requirements for each segment: next day morning, next
day noon, next day afternoon, second day, third day
- How much customers are willing to pay for certainty for time of delivery
- How much customers are willing to pay for hour-by-hour automated tracking
- The difference in price customers are willing to pay for later and later
freight pick-up times of 5:00 pm, 5:30 pm, 6:00 pm and 6:30 pm.
But then, with these specific questions answered our air freight
friends might not need to call on their favorite market research vendor for
another year or so. They would have something concrete to go on. And lots of
work to do!
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