The myth of the rational customer – don’t overthink it!

What if something you thought you knew to be true, turned out to be exactly the opposite? What if an approach you imagined was working for you was actually working against you?

Imagine if it were true, for example, that almost nobody buys a product or service anymore simply because they need it, or because its price is the right price? That, even in an economic downturn, they have to want it as much as need it before they buy?

It’s a difficult concept to grasp because, at the end of the day, it’s not about rational thought. That notion is a wake-up call for products and brands who have built their businesses on pure reason.

Ask Gerald Zaltman, a Harvard scholar who suggests in his seminal book How Customers Think that only 5% of consumer purchasing behavior is based on rational thought processes, suggesting that 95% is due to subconscious motivation. I know it’s a hard statistic to swallow, but consider this: what if he’s only even half right?

Full article

Filed under: Marketing, Uncategorized , Consumers, Market Research, Psychology, Retail, Spending

Changes to the wine distribution channels

The US winery market continues to enjoy good times with a shipped product value of $12.5 billion in 2007. This figured translated into a retail value of $25.43 billion and when added to the value of 2007 imported wine of $4.57 billion, the US represents a $30 billion total wine market.

Small wineries are increasingly selling in the direct to consumer market as changing legislation has shifted the traditional channel for alcoholic beverage distribution. Wine Business reports the following 2007 breakout for channel sales of wine: sales to the trade 57%, sales to direct to consumer 38%, and export 5%.

To sell direct to consumers, wineries are turning to tasting rooms and wine clubs. However, revenues from tasting rooms are closely linked to winery size. Mid-size wineries which produce between 5,000 and 49,000 cases annually expected to report revenues of 35% (Western) and 60% (non-Western) from these rooms in 2008. Large wineries which produce 50,000+ cases annually project tasting room revenue of 20% (Western) and 40% (non-Western) in 2008.

Filed under: Marketing, Uncategorized , Consumers, Marketing, Sales, Wine

The growth of Walmart

This is a tremendous use of technology and mapping software: http://projects.flowingdata.com/walmart/

Filed under: Information, Innovation, Uncategorized , Technology

Open Source Market Research

An oxymoron, non? Actually, people have tried to monetize this concept, but I’m not talking about reselling old, sometimes public domain, market research reports or traditional syndicated research. Moreover, when I think of open source, monetization is not top of mind. In fact, I’m not even thinking of giving people access to actual market research reports. What I am considering is this: is it possible to construct a type of searchable database containing non-proprietary outputs (and ideally meta-outputs; more on that later) from actual industry quantitative and qualitative research?

Let’s say, for example, that your company has a new product, Liquid X. Your industrial design people (or more likely some ambitious brand manager) wants to put Liquid X into an “upside down” container that stands on its cap. You’ve seen this done many times with toothpaste, ketchup, shampoo, etc, but your company has never done it. What are the basic parameters and constraints that affect usability? How best to handle copy? Should the new upside down packaging cannibalize the existing line?

Now imagine that you are in charge of doing the market research for Liquid X, except that you can log onto a site that will let you search for pieces of market research that someone else has already conducted on upside down packaging. You might be able to see right away that height is a limiting factor, for example, or that there is a particular consumer segment who just won’t buy anything upside down-ish. You would not be looking at full market reports – only discrete bits of them that you can use to jump start your research, to narrow the parameters of what you need do research and save you time and money. Naturally, you might be able to find some of this information through traditional syndicated research, but that process is itself often difficult and time consuming. I’m imagining a Google-like, or perhaps Del.icio.us-like front end serving up extensible results.

There are, of course, a couple of big problems with the idea of Open Source Market Research: how would it actually work and how could you participate without giving away your competitive or trade secrets?

The first problem is actually more difficult than the second one. Thinking about open source and this system, something wikipedia-esque is top of mind. But obviously, that would require far, far too much work on the part of those who could contribute; they would have to scrub or anonymize their own data and possibly edit the format itself (e.g., extract bullets from PowerPoint slides). Perhaps a better idea would be some kind of industry or foundation operated site (perhaps also supported in part by ad revenue) to whom you could submit reports. This organization would scrub and anonymize the data, index and tag it, and provide the search engine front end. In this scenario, you might have to find a way to incentivize companies to part with their dearly bought research, perhaps by offering ads or referrals. Naturally, the hope is the inherent benefits of open source will be enough to sway doubtful IP holders.

The other – surprisingly simple – problem is competition. Simple, but with one big caveat: whomever is anonymizing and scrubbing must be trusted beyond reproach and some research might be too topical or too sensitive to share for a period of time, no matter how well anonymized and scrubbed. Competition, in general, wouldn’t be an issue with such a system, as the results are analogous to Lego building bricks rather than to someone’s fully built model. Moreover, as everyone has access to the same building bricks, competitive advantage lies in how you assemble them, not in “possessing” the bricks. This is, essentially, the ethos of the open source movement

Less abstractly, except in the case of highly proprietary processes or data, you can argue that increasing overall awareness of different types and outputs of market research will increase demand for market research.  A system like this one would effectively grow the pot for everyone involved in MR.

Finally, one far-off but potentially interesting benefit from open source market research would be in allowing average Joe or Jane market researchers to construct their own MR meta studies a la the healthcare industry to gauge the effectiveness of their own MR initiatives and processes.

Filed under: Information, Marketing, Uncategorized , Market Research, Open Source

Goliath Enlists David (But Doesn’t Eat Him)

The Relationship between Fortune 500 Companies and Small Consultants Evolves

Can big companies and small consultants work together in ways that are positive for both parties… and ultimately the consumer?

Small, fast-on-their-feet consulting firms bring a host of benefits to the table beyond simply monetary ones.

These small firms are born out of a perceived market need. They are close to their customers, and respond to clients needs with an efficiency and speed that larger firms simply can’t do. Small entrepreneurial organizations are not beholden to the “usual” way of doing things, and make their own rules, spurring innovation. This makes them enticing targets for acquisition by their larger clients.

But, like a greasy cheeseburger that tasted wonderful going down, sometimes these acquisitions cause heartburn and regret later.

Beginning in the 1970’s, large firms began to look to small, entrepreneurial consultants for unique advice, design capabilities, products, and/or talents. More often than not, what started out as a partnership of non-equals ended with the absorption of the smaller company by the Fortune 500.

An example: From its birth in the late 80s, a small, entrepreneurial software company was doing groundbreaking work as a third-party vendor to several Fortune 500s. One of the companies became concerned that the small company’s work was available to the highest bidder and purchased the little company and its talent pool, thereby ensuring that only they had the cool new ideas and technologies.

But, the executives at the Fortune 500 soon became uncomfortable with the processes by which this new group worked — processes radically different from their own. They had no experience with software life-cycles, yet they increased their oversight year after year, saddling the software team with rules, procedures, and managers whose task it was to bring the “rogue” group into confluence with the core business of the mother company. As a result, the company-within-a-company was, at length, unable to do anything groundbreaking. Viewed as a failure, it was “downsized”, its staff laid off, and its work outsourced to — you may have guessed — a third party vendor.

This scenario has been repeated again and again by any number of large corporations and small independents. Lamentably, these mergers most often failed, sucking the vitality out of the resources absorbed from the smaller firm, and resulting in their loss. Often the larger company suffered damage as well, in the form of unmet customer requirements, missed opportunities, and squandered investment.

Why does this happen? Largely it’s a function of the differences between the ways small, entrepreneurial firms and large corporate entities are run.

Large entities often become victims of their own hierarchy — the top execs no longer dabble in the creative process of research and design, nor do they court new ideas from within their own company. Ideas generated at lower levels of the hierarchy rarely work their way up through successive levels of management and “group-think” that occurs when underlings are afraid of offending those higher up with “radical” ideas.

A small firm, on the other hand, has a flatter management structure, and the company’s executives are involved with gathering customer requirements, designing means of meeting them, implementing them, and engaging in a continuing dialogue with the customer as they are rolled out.

In the newly emerging model, David and Goliath work together as separate partners. This allows David to maintain his autonomy and quickness, while Goliath doesn’t have to pay for the overhead inherent in design and development — staff salaries, software and hardware, and the like.

Filed under: Uncategorized , Consulting, Partnerships

In the series: We want one of these….

Filed under: Uncategorized , Cars

Elderly Care Needs Better Market Research

After my last post, I got to thinking about other industries/trends that may defy any economic downturn. Elderly care is perhaps one of them. Much has been written of late about the Boomers retiring, and I won’t rehash that except to say that -having first-hand experience with our current middle class elderly care system – I don’t think the Boomers are going to be happy with it.

So what might future elderly care look like? Current trends revolve around the resort model Hyatt and other major players have taken. Some elderly but still able folks are returning to city cores in order to be within walking distance to culture, food and public transportation. I’m wondering if anyone has considered studying how to match up current real estate “opportunities” with managed care facilities. I would imagine that many Boomers in the US might prefer something more along the lines of a bed and breakfast rather than the large suburban hotel model that dominates now. No matter how luxurious a retirement “center” is, I suspect your stereotypical Boomer might begin to find it, well, boring.

But I wonder how many seniors in the US would refuse to even consider the advantages of retiring to an urban center because of how our culture frames the expectations of retirement – and of what living in an urban core is like. Perhaps qualitative studies designed to probe how people feel about non-conventional retirement and care facilities might uncover untapped new business ideas that use the existing infrastructures of city cores as their foundation.

Filed under: Uncategorized

Do It Yourself

If we are indeed headed for a recession, which industries or segments are going to be the most resilient? What new or unusual market research opportunities might arise? One trend that will almost certainly continue and deepen is the do-it-yourself (“DIY”) aesthetic. The recent housing bubble brought DIY to the fore for homeowners (and earned companies like Home Depot and Ace Hardware a lot of money). Moreover, the DIY trend has itself become, well, trendy, with events like Make Faire, the renewed interest in gourmet cooking at home and online mashups. Many small businesses have already made a partial leap into DIY with SaaS allowing users to “roll their own” phone and CRM systems and PayPal enabling small scale transactions. Some small businesses are even doing their own market research!

Although the DIY trend seems to be part of our changing zeitgeist, consumers eager to save money and squeeze more from what they already have are likely to drive the change. I doubt we’ll see the level of ingenuity on display at blogs like the excellent Afrigadget, but some of these extreme DIY examples point to some interesting possibilities for businesses. For example:

• Are consumers buying more or less of your product based on its modifiability or durability? (e.g., Honda Civic “tuners”)
• Are consumers re-purposing your products for other, unanticipated uses? (e.g. using the game controller from the Wii to construct an interactive whiteboard)
• Does it matter whether or not you have a reputation as a “hack” friendly company (e.g., the Roomba)

So, how do you measure and qualify whether and how consumers are reusing, re-purposing or otherwise relating to your brand in a DIY context? You might address this question with traditional MR methods like surveys and focus groups, but perhaps those approaches yield more actionable data after you’ve identified what consumers are actually doing. Maybe a more interesting approach would be to gather together several companies who have an interest in the topic and initiate a sort of neo-syndicated ethnography project to collect data on what consumers are actually doing when they re-purpose or reuse products in novel ways. After a bit of more traditional MR, business could fine-tune their messaging – perhaps not too overtly – to emphasize how their brand is DIY friendly.

Filed under: Marketing, Uncategorized , DIY, ethnography, trends