Special Report: Market Research: More complete and definitive answers available

Mike Nestler is president of the Professional Marketing Research Society (pmrs) and a partner at Commins Wingrove, a Toronto-based research consultancy.A few weeks ago, I was able to provide some extraordinarily useful advice to a client.We had done a concept test...

Mike Nestler is president of the Professional Marketing Research Society (pmrs) and a partner at Commins Wingrove, a Toronto-based research consultancy.

A few weeks ago, I was able to provide some extraordinarily useful advice to a client.

We had done a concept test on a number of ways to extend an existing brand name into new, related product categories.

I was able to demonstrate that one of the concepts, which looked unremarkable if one examined the concept scores alone, was actually a very strong business proposition.

The reason it was deceptively strong was that it was an extension into a category where the average retail price was about four times that of the category in which the base brand was competing.

Margins, as a percentage of retail price in the two categories were similar, which meant that the product in the higher priced category would generate a much higher absolute profit per unit.

The concept test showed mediocre ‘top two box’ concept scores because not all consumers were interested in buying in the higher priced category.

However, because I ran the results through an early stage volumetric forecasting model, I was able to demonstrate clearly that the depressed purchase intent scores were more than compensated for by the much higher retail price.

The reason I wanted to share this experience is that it exemplifies, in a small way, a fundamental change in the world of marketing research that is taking place around us.

The marketing research of days gone by would have simply looked at the concept scores versus established norms and rejected the proposition.

I’ll come back to the specifics of what was new in this case, but in general, marketing research is becoming much more willing and able to provide marketing clients with more complete and definitive answers to marketing questions.

In the past, research has tended to provide its answers in small pieces directed at very specific elements of the marketing process.

The enormous number of success factors in a marketing initiative made the analytical challenge of trying to understand any individual element overwhelming and the task of trying to predict the outcome of an entire marketing program impossible.

So, responsible researchers limited the scope of their recommendations and marketers accepted what learning they could obtain and braved the uncertain waters of business progress armed with a few facts and a healthy amount of judgment, hoping for the best.

While marketers accepted this state of affairs, they were never quite satisfied with it.

Hence, the demand for marketing research approaches that could provide more complete insights into the results a marketing initiative was likely to produce.

This has driven a constantly evolving research marketplace populated by eager entrepreneurs promising new, more definitive insights to prospective marketing clients.

New research techniques are not news, however.

My ‘in’ basket is clogged with material about this new technique or that new service and the mail keeps on arriving year-in and year-out.

There has never been a dearth of new angles, new spins on old techniques, new technologies, and claims to new and unique knowledge of the consumer psyche.

What has come together to provide something truly new in the past several years is something of a higher order than individual approaches to asking questions and analyzing results.

Marketing researchers are reaching a new plateau in being able to provide marketers with definitive and broadscale answers on how consumers are likely to behave in response to a given marketing initiative.

This new level of knowledge has been produced by developments on a number of individual fronts:

- Large clients and research companies have assembled and analyzed large databases of testing history and marketplace business results to identify the research measures that truly predict consumer reaction in the marketplace.

- Computer technology has facilitated analysis of these and other extremely large data sets.

- Scanners in stores and scanner-equipped household panels have tremendously increased the precision of the process of measuring the effectiveness of marketing initiatives, by being able to provide, for example, a reading of the increase in sales produced by an advertising campaign within days of its launch.

- Widespread development of sophisticated analytical skills and experience has allowed researchers to build sophisticated marketing impact models.

These and other developments are changing the faces of many of the major sub-disciplines within marketing research.

To go back to the example of my concept test, the really new aspect of the project is that the volumetric forecast – the crucial piece of analysis that transformed a mediocre idea into a profitable winner – cost only a few thousand dollars and took only a day or so to obtain from the supplier.

The ability to predict the rough volume of an idea, when it is available so quickly for so little money, changes the way we make marketing decisions.

This kind of service is the result of several of the above factors.

The proliferation of forecasting skills and experience combined with the accumulation of databases of concept test results paired with their marketplace outcomes, has led to more competition in the forecasting marketplace.

This had led to much less expensive and more timely forecasts.

Already, some clients are putting forecasting models on their office personal computers so that they will be able to make calls on the merits of new products, not on the basis of vague general concept test norms, but using accurate volume and profit forecast data.

The following trends are apparent throughout the marketing research industry:

- In assessing advertising effectiveness, the leading worldwide testing services are moving from providing their recommendations based on testing norms, to predicting the impact of advertising on marketplace sales.

- Market measurement has moved from audit-based store movement measurement, where the time period between audits was too long to measure the impact of any marketing variable in a meaningful way, through store scanner-based measurement to home scanner-based measurement.

This latest development has given rise to a new school of thought on the effects of advertising; that is, that the effects of many campaigns are felt within a few days of launch.

- Customer satisfaction has evolved into a decentralized, bottom-up organzational process where the smallest operating units of the organization are provided with their own unit’s results and empowered to make changes to improve customer relationships.

- The field of quantitative strategic analysis, which was once populated by arcane maps and equations, is rapidly being populated by user-friendly, pc-based models which not only render accurate pictures of the key elements of market structure and segmentation, but also allow the user to construct strategic ‘what if’ scenarios around brand positioning and category strategy.

- The evaluation of the market potential of new ideas, as in my example, is moving from the old approach of vague, normative, early stage evaluations coupled with large-scale, expensive, later stage volumetric studies to more flexible and inexpensive reviews of the total business potential of an idea at the earliest stages of development.

Similar developments are apparent in other fields as well.

It is a good thing that researchers are able to offer such a range of new and more powerful tools at this point, because marketers have much less latitude to fail in today’s marketplace.

This means that marketers should welcome these new approaches.

It will also mean, however, that the marketers will greet the new ways of doing research with higher expectations.

Promises of comprehensive understanding from the researcher will be met with demands on the client’s part for accuracy and accountability.

That will be the greatest new challenge for marketing research in the years to come.