If you believe that market research is costly and often doesn’t deliver, then it may be time to re-evaluate your approach to the importance of market information or face the consequences. Cameron Cooper reports.
As Tom Potter pored over market research five years ago, the picture seemed clear New Zealanders did not care greatly for pizza.
For Potter, founder of the Eagle Boys Pizza empire, the figures were depressing as he contemplated expansion into the Shaky Isles. Generic research on the fast-food preferences of Kiwis put fish and chips clearly ahead of burger and chicken meals from outlets such as McDonald’s and KFC. Pizza came way down the list, with just 2 per cent of the population eating it compared with about 8 per cent in Australia .
Whichever way you looked at this research it was as scary as hell, Potter says now from the Brisbane headquarters of the franchise giant, which has more than 150 stores spread across Queensland , Victoria , NSW, Western Australia and the ACT. It was basically saying that Kiwis didn’t like pizza.
However, upon closer inspection and a 10-day drive through towns in New Zealand a different image emerged.
The underlying factor was that pizza was too expensive, Potter says, noting that the main outlet, Pizza Hut, was selling single pizzas for about $30. And the research didn’t talk about that.
The result? Eagle Boys entered New Zealand offering a competitive value meal for families. Pizza consumption skyrocketed, and the company achieved sales in the tens of millions of dollars.
(Between us and Pizza Hut) we took consumption from 2 per cent up to 9 per cent in five years, Potter says. And we went from zero in sales to $50 million.
Eagle Boys has since sold the New Zealand arm of the business, but the experience underlined to Potter the importance of market research and of getting it right.
He says complementing his own fact-finding missions with commissioned research offered a more complete market picture than any generic study.
The vast majority of violent costs that fall on our laps are areas that we probably should have researched better five years earlier, he says. You hate paying for the research, but you’ve got to do it.
More information, please
The research industry in Australia seems set for a growth spurt.
Business forecaster Phil Ruthven, of IBISWorld, predicts the Australian industry will record solid growth over the next few years. Speaking late last year in Melbourne at the Australian Market & Social Research Society’s (AMSRS) annual conference, Ruthven declared that by 2040 more than half of household expenditure would be spent on services. If he is right, tapping into the mindset of consumers will make or break many businesses.
Yet our per capita spending on market and social research is about $26 compared with the equivalent of $44 in Britain . To stay competitive, Ruthven believes Australia must double its spending on external business intelligence to $10 billion a year.
Greg Wayman, president of the AMSRS and managing director of NWC Research, says pressure for greater corporate and public accountability is a key driver of the industry.
Effective research, he says, provides insights that are invaluable for business strategy development; it helps companies become customer-focused, and ensures greater accountability in the wake of corporate governance reforms through vehicles such as CLERP 9 and Sarbanes-Oxley.
Wayman says most medium-sized and large organisations use research effectively, but SMEs often baulk at the cost of commissioned research.
It’s difficult to do anything meaningful for less than about $10,000, he says. So for a small or medium-sized enterprise, that’s in a basket where they start to think seriously about the return on that outlay.
The encouraging news, however, is that for $10,000 to $20,000 most basic SMEs can get pretty useful information.
Wayman adds: There is a threshold, but you don’t have to be one of the big banks or a large corporation and everything doesn’t have six figures attached to it.
Peter Harrington, a director at ANOP, a leading strategic market research consultancy, says thoughtful research provides an extra perspective for management and allows companies to maximise market opportunities.
You can get caught up in what you are doing as an executive, he says. It’s really easy to miss the consumer or end-user perspective of what the business offer is.
ANOP has more than three decades of experience in the sector and specialises in customised strategic and tracking research for corporations, industry associations and the media. Harrington says the trend for CEOs and management is to strive for a deeper understanding of consumers and their needs.
This notion of having a conversation rather than just asking consumers a question. And trying to find out why they have given a response and how that fits in with their life and aspirations.
In designing research, Harrington believes the focus should be on why.
You’d be surprised how many times research programs are launched with people saying we have to do some research so let’s just go and get it done’. You really need to ask what is it about the market that you don’t know, or what is it that you actually want to know about people’s reaction to this offer. And why is that?
Harrington says simply getting the top five responses to a basic question a popular format for generic research reveals little or nothing. It just tells you what’s happening on any given weekend.
ANOP’s approach typically involves initial focus groups to tap into the moods and minds of respondents, followed by extensive quantitative research, largely through phone-based research. The aim, Harrington says, is to deliver insights that aid the corporate decision-making process, rather than create great tomes of market research information with table after table.
Joe Lynch is the business development director in Sydney for multinational research giant Millward Brown, which handles projects for the big end of town.
Lynch admits research can seem expensive, but argues that what you put in is what you get out.
He says companies with a significant advertising budget should be prepared to invest in some form of copy-testing.
Clients have to realise that there is a price to pay for good research, he says.
The price tag for a full Millward Brown market assessment can run into hundreds of thousands of dollars or more for giant corporations or firms. Every brief is different, Lynch says, and projects can range from $30,000 to $300,000.
The key is to avoid duplication or unnecessary research. Lynch suggests many firms insist on expensive market tracking surveys when all they really require is a couple of dips into the market a year.
So you can shave off thousands And that’s an amazing situation to be in when you form a relationship with a client, to say you don’t need to be spending upwards of $300,000 to make the decisions you need to.
Millward Brown, which produces the renowned Awareness Index that measures how advertising has performed, uses a combination of proprietary software tools and traditional research methods such as focus groups, Q&As and qualitative and quantitative research to gather its data and findings.
Lynch says research companies are increasingly being recruited as an arm of a corporation’s strategy team and called in at the start of a campaign with a blank canvas.
More and more we are invited up to the table to give our point of view, he says. Research works when you have a strong relationship with the client. There’s a huge amount of trust involved.
Good research starts with the brief, he says.
It’s no longer good enough for (companies) to shoot across an email and say we’d like to do four focus groups and a brand-tracking survey. We have the right to know what the objectives are right up front because if we don’t, how are we supposed to design research?
Questions to determine include: is it the right time for such research; is existing research already available on the subject; and are there any hidden management agendas that could jeopardise the results? Honesty is crucial on both sides.
Lynch says such candour extends to telling a client that research might not be appropriate. He cites the case of Krispy Kreme, the giant US doughnut chain, which has made a successful entry into the Australian market.
With all the media hype around obesity levels, Lynch says it might have been expected that research focus groups would reject the call for sugar-laced doughnuts and I guess if we’d sat down and logically done research about that launch in Australia , it might never have happened.
Similarly, some innovative technology products might slip under the radar.
Lynch says: We’ve got to be clear about when research has its role to play.
An invaluable business tool
Sensis, the Telstra spin-off that delivers integrated search solutions through print, online, voice and wireless channels including the popular Yellow Pages, White Pages and Trading Post brands is in the novel position of being both a provider of business surveys and a significant user of external market research. Its surveys, such as the Sensis Business Index and Sensis Consumer Index, give it currency in the SME market.
Amanda Brook, the company’s general manager for marketing, says industry surveys are an important relationship-building tool with SMEs in particular.
It positions us as a company that knows its business, she says.
In developing its own product offerings, Sensis uses outsourced research extensively to measure customer satisfaction.
Sophisticated analysis of external data through information decoders is critical, a process that occurs through workshops with the outsourcers and an internal research department.
I’m less reliant on an individual working something out and more in favour of having a group of people putting their heads to the subject, Brook says.
The challenge is to convert that information into a couple of key strategic thoughts and take action on it, rather than just have reams and reams of information in a filing cabinet or in the back of a report.
Although the cost of research is often prohibitive for SMEs, Brook believes this is balanced by their in-built advantages over larger organisations.
In many cases SMEs have got good market knowledge and a much closer relationship to their customers. And I don’t think any of the formal research is a substitute for spending time with your customers and knowing what’s important to them.
Phil Ruthven’s assessment that services will eat up great wads of household expenditure is a timely message for consumer-focused businesses. Clearly, there is a market for cutting-edge research.
Just as important, however, is the delivery of any findings and consideration of their implications for the business.
Compassionate, face-to-face presentation of any research is vital, according to Joe Lynch at Millward Brown. For instance, simply condemning an advertisement that a creative team might have spent six months on is not constructive.
Millward Brown restricts all market presentations to no more than 50 slides and regards workshops as an important way to allow all parties to go over data in detail.
Two decades ago, there was sometimes pressure on research companies to come up with the right answers. The AMSRS’s Greg Wayman argues there is now less pressure from boards and CEOs to get pre-ordained findings.
It’s about how you can actually deliver any bad news in a palatable way rather than running the risk that bad news may not be delivered at all. If you kill the messenger, you also run the risk of killing a very important message.
To provide protection for companies, the AMSRS has introduced an accreditation system that recognises qualified practising market researchers. Wayman says it ensures the researcher has the appropriate analytical skills, and it underscores confidence in the industry.
At Eagle Boys Pizza, Tom Potter is now finalising plans to enter Malaysia as the first step of a greater Asian expansion strategy.
His initial on-the-ground research suggests that high-priced pizzas are killing the market. It is shades of New Zealand again. They are holding the market back, Potter says.
His plan is to open as many stores as possible, and to sell pizzas at a reasonable price. A combination of street-smarts and targeted research will determine his final strategy.
What is certain is that broad, meaningless research won’t be part of the equation.
I haven’t come across any generic industry surveys of any value, Potter says. Most of the time they are wrong or tell you what you already know.
This seeks insights through loosely structured, mainly verbal, data rather than measurements. Opinions are sought from a relatively small number of respondents, usually through interviews or group discussions.
Any research that makes numerical measurements. In most cases, this involves the statistical analysis of the answers given to a structured set of questions.
Computer-assisted telephone interviewing is conducted over the telephone rather than face-to-face and is becoming an increasingly common form of data gathering.
The phrase describes a variety of data collection techniques but mainly for qualitative research undertaken with individual respondents rather than groups.
A number of respondents gather to generate ideas through the discussion about, and reactions to, specific stimuli. Moderators are used.
Such surveys cover a number of topics, usually for different clients. The samples tend to be nationally representative, such as political opinion polls. Clients are charged by the market research agency on the basis of the questionnaire space or the number of questions required.
Source: The Market Research Society