Why market research is a sheer waste of time?

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Market research is one of the activities that most brands indulge in regularly. But more often than not it has been proven that is a waste of time.

Now most of you reading this would be finding it difficult to believe above statement, after all brands spend Crores of rupees in this activity. All business schools teach us that this is the most important activity that precedes any market launch. But just hear me out before you dismiss this statement out right.

Market research was firmly established in the early part of the 20th century as an important activity. This was further fuelled by the belief that most brands can capture the felt and latent needs and wants of its consumers. This activity is again divided into qualitative events like focus groups or interviews and quantitative techniques like questionnaires.

The net result was a result based on which the brand managers would develop the 4Ps – product, price, place and promotion for the service or product before positioning it to the consumers. But most of this activity is a sheer exercise in justifying a promotion that the brand has about the market segment and does not have enough evidence to guarantee the success of a launch.

A good case in point was the launch of new Coke. Post World War II Coke had almost 65% share of the aerated beverages market in North America. But by 1980’s it had fallen to 24%. This was mostly due to the launch of the Cola wars by then Pepsi president John Scully, who introduced a series of blind taste tests that proved that most consumers preferred Pepsi for taste if the brand name was not disclosed. The tests were even televised and by 1980 the results were causing considerable alarm in the Coco-Cola headquarters in Atlanta.

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So the CEO Robert Goizueta launched the vision of new Coke, a new formula which was field -tested and backed by market research. It had an acceptance rate of almost 70% and only 10 % of respondents felt disappointed with the new taste. But when launched on April 23, 1983 it was a disaster. Most loyal Coke drinkers formed associations to ban the new drink and Coke market share fell further.

Finally Coco-cola relented and brought the old Coke back. It cost them Billions of dollars and some very angry consumers.

The market research did them in and Coke took some time to come back to level terms.

There are countless examples like this when Market research has actually harmed the company more than it benefitted them.

On the other end of the spectrum there are companies like Apple which do not rely on market research at all. Steve Jobs in fact abhorred market research and relied on his personal knowledge and intuition. What he famously said was – The consumers do not understand what they want or what is a “great product”, they come to know it when you give it to them!

Similarly no sane market research specialist would have advised Larry Page or Sergei Brin to launch yet another search engine when Yahoo was the going great gins. Also, Mark Zuckerberg may have never launched Facebook if he relied on market research.

So how does one go about launching new products or services if one has to completely do away with market research? Well the answer is not so simple but a good place to start is the sales data.

Sales data both from competing and substitute, products and services are a great place to start to get inputs into your own product development. Many great marketers have stressed on the need to be in the field and observe the consumer buying behavior at the point of sale. The issues and concerns of the consumer form a good insight into a product development, like for example storage of songs was an important input into the iPod.

Secondly product packaging and design would form the second key component. This again cannot be ascertained from field tests of focus groups but one has to just look at the packaging of Tobacco products to understand how something so deadly can be beautifully packaged to look attractive. A good example in India is the ITC soap brand Fiama Di Wills.

Thirdly sales training to ensure that they communicate the right message which was the input from the design. This could be from the sales data, point of sales experience or the design of the product.

All these three require considerable effort and are not for every firm, but only those with the right investment in sales, marketing and design. For the rest there is always the luxury of stale market research.

Would love to hear your views on this!

  1. Dr Vikram says

    Hi Sameer

    I am glad the piece made you think.

    I don agree to a certain extent but here is my contention. Steve Jobs knew the pain points because he spent time in the field, observing the customer reactions at the Point of sales.

    To your second point I feel sales data is a better input than any MR done.

    And will I launch a brand without MR? Yes I will.

  2. Sameer Duggal says

    Congratulations doc for writing an interesting article. I, however, completely disagree with your opinion. The example you’ve quoted is a skewed one portraying what happened when MR was done in an improper manner, and without putting much thought into future strategy.

    Steve jobs, though mentioned that he relies on his intuition, but he also said that “Mr. Jobs tried to understand the problems that technology could solve for his buyer”. To really understand the problem one must have a fair idea of the market that is suffering from that problem.

    Another key aspect you missed in your article is the time line. MR has a different role to play when product is new, than when the market is saturated.

    I have a question for you. Will you ever launch a product without conducting a MR for it?

    Having raised the questions, I must greet you for writing a rather intriguing article which makes you think.

    Thanks, and looking forward to your reply.

    Regards,
    Sameer Duggal

  3. Dr Vikram says

    Hi Mandar

    I have seen your message on LinkedIn and I plan to respond to it soon. Yes i agree timing is the key. I will check out the case study and come back to you.

  4. Mandar Deodhar says

    Hi Vikram,

    You are right about cola wars episode. But there are companies who still do MR. The key factor to a good MR report is the time of execution. MR has to happen at right time, during inception of product, not after its made.
    Also if possible: please read “Kendall vetmat case study”- a classic case of MR team vs. Product team. Although various inferences can be drawn from it, it still proves that MR is required, but, at the right time. I hope you will really like this case.

    Waiting for your post!!

  5. Dr Vikram says

    Hi Abhimanyu

    Good point, but what I meant was that during a survey most respondents give their opinion on how they are thinking with respect to a particular brand or issue. But sales data gives us the proof of what they actually did.

    A good example can be that you rate Toyota very highly in the survey but when time cam to buy a vehicle you end up buying a Hyundai.

    MR can be manipulated and often the results are very skewed. On the other hand point of sales data never lies, because business is all about numbers.

  6. Abhimanyu Bakshi says

    Hi, I read the article and was intrigued by one comment where you stated that Sales Data is one of the foremost ways of getting to know the market pulse. And I am quoting you on this "Many great marketers have stressed on the need to be in the field and observe the consumer buying behavior at the point of sale".
    Referring to the above statement of yours, don't you think that this is what exactly market research gives us? I mean the questionnaire that we prepare primarily focuses on knowing the consumer's interest and preferences. I believe that a well thought of questionnaire is the best way to know about what customers are looking for.

    The examples that you gave were of products or concepts which did not even exist in the market and so for the consumer to know what they want would always be dicey in such scenarios.

    I might be completely wrong, but would love to hear your comments on this.

    Regards

    Abhimanyu.

  7. Dr Vikram says

    @Jolsna I like Jobs too and I feel that it is a bad idea to give him as an example. He was an exceptional visionary who relied heavily on intuition.

    Increasingly I am seeing MR being done for the heck of it. Also there is a lot of manipulation of the results and very skewed results. Also most of the results is based on very wrong assumptions. I believe that sales data and point of sales experience is the best place to start to give inputs to the product or service development.

    I am glad you like the piece and I look forward to your ideas as well.

  8. Jolsna says

    Hi Vikram… I could not help but drop in a comment on this. I am a market research professional and for obvious reasons I differ the opinion slightly. I agree that Market Research is flamboyantly used by companies, not understanding if the output is going to help them in anyway.

    With the coke example that you talked about. Taste, smell, experience are sensitive issues that vary from time. A single person can give you varied feedback on the same drink at different times. The approach of research should be different in such cases. Dell, Facebook and Apple definitely did not work coz of a market research conducted at the back-end. But FB, and Dell did want to tackle the pain points of the users. While Mark Zuckerberg wanted to bring the university students closer and remain connected. dell wanted to develop machines that is faster than IB and is low-cost. The pain point he addressed was 30-day money back guarantee, if the machines are not good enough. With Apple, Steve Jobs had started with the company NeXT and Pixar which did not do good to him for long 10 years.They definitely bled money with both the companies before Apple got its first break. And Apple uses a lot of Smartphone market Research conducted every year to analyze and forecast growth.

    Steve Jobs is my favorite, so I personally do not like my comments posted just before this :-). I have seen Market Research work. Personally, the Google work to questionnaires to analyzing to strategies to positioning has definitely worked wonders to many companies. A lot many advertisements that you see on television is an output of a lot of MR done backend.

    BTW, a very nice article. I am glad you brought this up.

  9. Dr Vikram says

    @ Sumeet Absolutely I agree, it is an indication but the tool to make strategic decisions..

  10. Sumeet Kad says

    In late 90’s many CEO’s of large banks succumbed to market research and concluded that internet is irrelevant in banking industry and has limited impact on future profitability. Few years later many account holders were buying product and services over net and then many banks decided to catch up. But it was too late as non-banking competitors were way ahead with their new and effective digital products. But then again there have been examples where falling products have changed their future and turned themselves into profitable entities based on market research. I would say MR is an integral part of any business but it should be used carefully and not be completely relied upon.

  11. Liyakath P Ashraf says

    is it so?

    1. Dr Vikram says

      Probably now you won’t pay so much attention to the MR and BR classes?

  12. Stocks Tips Intraday says

    Market research can bring opportunity. As a small business owner forced to shutdown because of pressures from larger big box stores, we had identified opportunity and markets to exploit. We just couldn’t do battle any longer with the larger stores with deeper pockets.
    Finding the information was easy, how to use it was the challenge.

    1. Dr Vikram says

      yes I agree it is a good tool for gap analysis but not for positioning.

  13. Facility Management in India says

    Market research is a double edged sword really. If you fail to do any market research then there’s a good chance that your product launch will fail. Everyone tends to think that there is a massive market for their product even when they have’t done any research.
    On the other hand market research can be misleading. For example, your market research could show that there is a lot of interest in your product, but that doesn’t mean that people will pay money for your product. They may have a low cost alternative already. The best market research you can do is to look at what your competitiors are doing, find out where they are advertising and at what price they are selling at. Give them a call yourself and tell them you are doing some market research!
    Once you have a lot of information on your competitors you can decide how to promote your product and at what price. You may even find something in your product that distinguishes you from your competitiors and if so, you may be able to justify your price (whether you are higher or lower than your competitors price).
    Market rearch is vital, but it needs to be done effectively!

    1. Dr Vikram says

      @ Facilities Management I think you bring up an interesting point. The price- value equation is the key. But unfortunately MR cannot help brands with that problem.

  14. Viral Thaker says

    Lovely article Doc… does put one into the thinking mode! Loved the case of Coke here. I believe that any business entity is like a living form and it has its own EQ.. Business Analysis, Market Analysis is more like studying that EQ in the form of Raw Data and trying to make sense out of it. Beauty of this part is that it makes different sense to different people, perception as we call it. This further justifies this post on Why Market Research should not be a strategy itself but one of the tools do device a strategy. Sales Data is definitely the better way to go!

    1. Dr Vikram says

      Thank you Viral. Yes I agree that MR is a useful tool but it has been over abused and manipulated to such an extent that the utility of the tool is in question. Also Point of sales is the biggest research that any firm can do but unfortunately not too much data collection is done at that point.

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