Back to basics: What is the role of market research in a corporation?

As the basic text book in my first market research course said, the role of market research is to reduce the risk of decision making.  Corporations exist to make products or services which make money/profits.  In order to be competitive they need to be smart, make good decisions, and keep their costs down.  To keep up with changes in the environment, they need to take risks.  A strong Market Research department will help ensure better decision making by providing more information, thus reducing the risk of decision making.  It can help you with all the decisions that need to be made in marketing a product – what to market (“product”), who to market it to (“target audience”), what to say (“product positioning”), where to market it (“place” or distribution), what the price should be and how to market it (“marketing plan”).  Without the right market research, companies can make lots of mistakes.  (See my post on new Coke for an example.) So market research can and should be a competitive edge.  Great market research should lead to better sales – corporate market researchers aren’t sales people but because they make everyone smarter, the company should sell more.

That’s the argument for conducting market research on behalf of a company, but what does the market research department do if they aren’t actually doing the research?  A common “project based” way to think about them is as purchasing managers who specialize in marketing research.   But that understates the value of their role and – in essence- identifies them with “what” they do, not “how” they do it.  That places a lot of importance on doing things more cheaply and doesn’t open up the possibility for doing things better or for adding value to what they do.   That is the essence of my theme – that in order for market research to achieve its potential in helping the corporation achieve maximum potential, Market research needs go beyond purchasing market research and become experts in adding value.  To reiterate my theme – “You are not your project, you are the value you add, you are what you do with your project.”

Market Research as a sandwich

An analogy will help me explain what I mean.   I like to think of market research as a sandwich composed of bread and filling.   I developed this analogy when I moved from a corporate market research job to a supplier and then back again.  The role of the corporate market researcher is the bread and the content of the project is the filling.  Just like in market research, both the bread and the filling can vary – a lot!  The corporate market researcher can add lots of value (like a very flavorful onion bagel) or just be an order taker or carrier of messages from the marketing team (like squishy wonder bread).  The project type can be primary research or secondary, quantitative or qualitative or ethnographic, just like the sandwich filling can made of meat, fish or vegetables.  The bread is responsible for the interface with the person holding and eating the sandwich, which is the role of the corporate market researcher to the corporation.  And the bread is in between the corporation and the filling (i.e., the market research supplier.) But the analogy breaks down because if the bread (corporate market researcher) is doing his job well, he or she is determining the filling type and contents.  As we know, the bread in the sandwich doesn’t pick the filling.

When I thought of this analogy, I realized that I liked being the bread! I liked the interface with the brand team, knowing the brand issues, determining the type of research that was done and influencing the actions that were taken.  I didn’t like being the filling at all, not knowing how the research was used and having no influence on how it was used.  This was brought home to me when I worked on follow-ups on a major project I had sold to the Merck Vaccine division.   I was selling research at the supplier I worked at  and this was my first sale ever – I can talk about it because it turned in to a publication so you can read about the project in a medical journal.   This project created a segmentation of parental attitudes towards vaccinating their children.  I then developed a list of implications of how to apply the findings, with recommendations on which products in their product line would be most appropriate for which segments, how you would go about find them, what types of research you would do.  These were all the kinds of things I would done as an internal corporate market researcher in an earlier job.  But there was no response – I never heard another word from them about how they were applying it. (Of course, they could have done work with someone else, I have not way of knowing, this is not a criticism of them.)    It was very frustrating to me that I wasn’t involved and didn’t know.  That frustration led me back to working inside a corporation.  I wanted to be the one identifying and recommending applications of my work, and I wanted to see how it influenced the business.

Not all corporate market researchers are as into the influencing and application of market research as I was. Over my many years in market research I have seen several patterns – this is not about a particular company at all.  Some market research analysts act as a carrier of messages from the brand team (sort of like being squishy Wonder bread without much character), which can be a very unfulfilling job, with little control of your work.  When corporate market researchers end up as order takers, they feel jerked around and end up resentful.  It can lead to major job dissatisfaction, turn over, and people leaving the field of market research.  It also short-changes the company, the MR department isn’t doing the best for the company, and not maximizing its potential if this happens.

Falling into the trap of being an order taker

People may inadvertently fall into “order taking” trap a number of ways.

  1. Being too busy so that you don’t go to meetings.   It may seem that you are so busy that you don’t have time to go to all the meetings you are asked to.  You may have so much to do that you resent going to brand team meetings, which seem like a waste of time because so little of it is about your work.   Time management systems often recommend that you can increase your productivity if you reduce time in meetings.  But I would argue the opposite-  that if corporate market researchers want to add value they absolutely should go to every meeting the brand team invites them to and they should ask to attend any other one they can inveigle an invitation to.   Why?  Because that is where they learn information that they need in order to do their job well and where they can use the information they have learned to influence decision making.  The point of power for corporate market researchers happens in that meeting. It is where you can apply knowledge of the brand and brand strategy to the market research – and if corporate market researchers aren’t at the table, they won’t know the strategy well enough and they won’t be able to influence decisions.  Over the years I have heard complaints from people about how their work gets ignored – duh!  It’s because you aren’t there at the meetings to ensure it doesn’t get ignored. Or because you weren’t there to understand the issues fully enough so that the research you designed fully meets the needs.  You have lost your point of power.
  2. Environment or what you perceive as the environment- It could be the environment that pushes us into that role – either because that’s the way it’s always been done in that company or that brand team seems to demand it.  I have seen this happen over and over again.  Interestingly, even brand teams that seem to demand order takers may not be satisfied when that is what they get.  They may want someone to push back and challenge them, even if they don’t seem to encourage it.  That’s exactly what happened to someone I will call Tim (just an example, not a real person). Tim was working with a brand team who was very demanding.  He was careful to solicit as much information about what they wanted as he could and focused on giving them exactly what they said they wanted.  But even though the brand team could articulate what they wanted, what they really wanted was to be told was what to do.  They ended up being very dissatisfied with Tim’s performance.  Tim was being squishy Wonder bread and they (underneath it all) wanted a crusty baguette.
  3. Focus on budgets and projects- Another way you may fall into this trap is to focus on your budgets and your projects and not on the impact that your projects and your “value adds” have on the corporation.   You may do this because that is what you have always done or it may be what is demanded of you. You may not see other alternatives.  While it may seem like a smart thing to do, since resume writers recommend including how much budget you control, it is dangerous.  The danger is that when you focus on projects and budgets you run the risk of being perceived as purchasing managers, and on how you can reduce costs of doing the same things and not on the value provided.  Don’t get me wrong! Reducing costs is important, but it shouldn’t be the be all and end all of the role of the corporate market researcher.  Again, you need to focus on adding value.  This isn’t about a company particularly, it is about a mind set that I’ve seen across my career.

A word on reducing costs: Don’t over spend for a low value decision

Just like every other department in the corporation, market research costs are under pressure.  Staffs and budgets are being cut and people are being asked to do more with less.    Automation and outsourcing are providing two ways for market research departments to cut costs and staff.

But there is another way to look at costs- projects need to be sized appropriately for the value of the decision that they will affect.  Corporate Market Researchers may already think they do this intuitively, but recent research reported by Daniel Kahneman in his best selling book Thinking Fast and Slow shows that even statisticians rely on rules of thumb and don’t use the correct formulas to estimate sample size.  Even as they make better decisions, companies shouldn’t over spend- the amount spent on reducing the risk of a decision shouldn’t be more than the expected value of the benefit that they will receive.  Low risk decisions shouldn’t be evaluated in high cost ways.   The basic equation to think about is:

Cost of research < (value of a good decision) – (value of a bad decision)

If you want to be more sophisticated equation, you can use the expected probability of the various outcomes to create even more precision – a true Baysian analysis.

But even completing the first equation in the real world is tough – no one actually knows how much more a good decision is worth than a bad decision because nothing has been done yet so you don’t know the outcomes of either one, and you certainly won’t do both.  However, even if you can’t quantify the two points, it can give you an order of magnitude for reasonableness for the cost of research about a topic.  For example, a major ad campaign to launch a new product is worth spending a lot on, while the 4th or 5th ad in a series that has been running for a while isn’t.


2 responses to “Back to basics: What is the role of market research in a corporation?

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s