Managing Company Risk through Applied Market Research Techniques

by Jeff Hilton, Integrated Marketing Group, 2005

The market for healthy lifestyle products and ingredients is evolving at a rapid pace. Overall attitudes and purchase behaviors are increasingly similar between the mainstream mass-market shopper, the core health food shopper, and the crossover customer we talk about so frequently in our boardrooms and conference calls. The cost to introduce a new finished product or ingredient including packaging, advertising, media and public relations increases daily. Better business and marketing decisions based upon improved market knowledge is like money in your pocket. So smart marketers are all about reducing “risk” in their activities to avoid missteps and improve their chances of success in the marketplace.

First and foremost, the goal of market research is to reduce risk. Manufacturers and suppliers who strive to keep their finger on the pulse of the marketplace will have a much higher probability of success compared to those who continue to operate under ancient and outdated assumptions. So it becomes critical to assess how you are staying in touch with this changing customer or consumer, depending upon your market orientation. What sort of data do you currently have access to, and where are the information “holes” you need to fill? And most important, what tools do you utilize to track shifting marketplace attitudes, usage patterns and buying habits? Or, for consideration, is marketing research only helpful to finished goods manufacturers, or is there valid and potentially insightful research to be done by B-to-B companies as well.

Let’s first take a closer look at the research process. There are both quantitative and qualitative techniques for primary data gathering. 

Quantitative research is used when a company wants to obtain a statistically representative sample that can be projected to a larger population. Typical quantitative research techniques include phone surveys, Internet questionnaires or mail-in surveys. 

Qualitative research is used with smaller groups of participants in a more in-depth setting when a company is looking for more detailed comments, ideas and impressions. One excellent way to listen to the consumer is through a traditional qualitative technique commonly known as focus groups. Most of you are probably familiar with this research approach so, after a quick review, let's focus on ways to improve your usage of this valuable tool.

Purpose and Use of Focus Groups
Focus groups consist of recruiting a small (10-12 participants) group of consumers in a room wired for sound and equipped with a separate viewing room. A hired third-party moderator leads discussion along a pre-determined path to solicit opinions and thoughts regarding a variety of subjects. Clients can view the proceedings privately. Focus group research has several distinct advantages:

• Allows for discussion, exchange and ideation among participants (vs. isolated one-on-one interviews)
• Provides actual consumer language and perspectives
• You can evaluate not only what was said, but how it was said by observing facial expressions, body language and overall behavior
• Ideal setting for discussions of brand awareness, buying behavior, product usage and general attitudes
• Suited for assessment of creative materials such as new product concepts, advertising or package design
• Illuminates process of how consumers think about and evaluate products and services

How to Maximize Your Focus Group Investment

Define clear objectives. Clients/companies invariably try and do too much in a two-hour focus group session. Often times the moderator is unable to adequately cover the discussion guide and important material is dropped. Focus on the most critical objectives. Prioritize the information you are seeking so that the moderator knows your expectations. 

Properly screen participants. Decide up-front who you want to talk with. The more detailed the screening criteria, the more expensive the recruiting fees. So determine what criteria are most important to the project. Can men and women be combined in the group? Should all age ranges be together or should you divide them up? Reduce the number of variables, and make sure you conduct at least two groups for any one variable (gender/age break/product usage etc.).

Hire a great moderator. This (and recruiting) is where you want to spend the money. If the moderator does not have strong skills, the participants will detect it and either clam up or trample him/her. I once saw a timid moderator totally overwhelmed by a roomful of 8-year-old children. It was not pretty. This is also the person who will write the final report and recommendations to management, so get references and interview moderator candidates thoroughly.

Prepare a solid discussion guide. The moderator has primary responsibility for this task, but everyone should have input. The discussion guide is the moderator’s “road map” if you will, and outlines questions to be asked and exercises that the respondents will participate in.  Make sure that each section is timed out to keep the group moving, and the flow of the group discussion is logical and natural.

Remember that focus groups are qualitative. That means they are not statistically significant or projectable to the population at large. They provide "directional guidance". The data received from groups is often misused, primarily because groups are more easily executed and cheaper than extensive quantitative research. Don't try to turn them into a quantitative vehicle by counting responses and extrapolating to a larger universe. Ideally, focus groups are a preliminary step to a second more quantitative research phase.

Keep any bias out of the room. Everyone has a vested interest in the outcome of a focus group research project, including the company sponsoring the research, their agency or consultant, the moderator and even the facility. It’s easy to lead a group of respondents in a certain direction to give certain types of responses. Work actively to prevent this from happening. Carefully review the discussion guide for any bias in the way questions are worded. Make sure the moderator is independent from the company paying for the research. And always remember that these respondents are being paid to attend and share their opinions, so they are inclined to want to please the research sponsor. That can be dangerous if questions are not phrased in an objective manner.

Pay attention to what you learned. The consumer may not say what you want to hear. They may dump all over the project you have spent the last six months on. They may insult your strategic thinking. So what. That's why we do research. Be prepared to accept or at least acknowledge the feedback provided through qualitative research. It doesn't mean that everyone feels that way, but it should suggest that the issue is worth further consideration and evaluation.

Qualitative research often leads to quantitative research. Once a company has qualitative feedback on the impressions and attitudes of the customer, the next step may be to validate those findings by conducting quantitative research to test their hypotheses with a project able sample. This type of research may take many forms, but the most efficient and effective surveys are generally administered by phone, mail or on the Web. There are also many ways to maximize your investment in quantitative research, but that will have to be the subject of a future article.

How can market research help a company manage risk? I can think of a company I know, which will remain nameless, that discovered through advance research that their proposed new package design was boring, lifeless and totally unappealing to their target audience.  The new revised packaging they subsequently introduced into the market was very successful in terms of both sell-in and sell-through. I can think of another company that tested a new print advertising campaign with consumers in advance only to find that consumers found the ad to be offensive. After a retooling of the campaign, consumers raved about the ads and voted with their wallets to validate the new approach. I could go on. The point here is that if you are going to spend tens and hundreds of thousands of dollars supporting a product, any way you can reduce your risk of failure is a godsend. Good research can’t eliminate risk, but it can certainly help a company manage risk and put it in perspective.

What is the role of market research for an ingredient supplier? One of the greatest challenges ingredient suppliers face is getting co-branding partners on board to assist with the promotion and education required to properly introduce a brand into the trade and consumer markets. We are currently working with a company out of Australia called BioLogic Health Solutions. They manufacture finished goods in Australia, but are offering their branded ingredients for sale here in the U.S. market for dietary supplements. One of those ingredients is UroLogic, a proprietary botanical blend for occasional urinary incontinence.  As part of our co-branding strategy, we determined with BioLogic that in order to sell this brand to manufacturers and eventually retailers, we would need to have evidence of the magnitude of the U.S. market opportunity. With their approval, we conducted a series of focus groups in multiple markets with target consumers and natural products retailers. This qualitative work provided incredible insights into the market for urinary incontinence products here in the U.S. It also provided potential marketing language, and documented consumer enthusiasm for and acceptance of a natural solution. My observation here is that this research data is proving invaluable as they approach potential co-branding partners because it helps to validate the market potential and demonstrate the purchase intent of target consumers. There is no question BioLogic’s research investment will be paid back many times over in future licensing fees and increased orders. 

In summary, keeping your finger on the pulse of a changing market is not easy, but it is vital to your success. Stay in contact with your customer. Hear what they have to say. Then act on it. Listening to the customer, more than any one thing, will help you to be a step ahead of the competition, and reduce your business risk.

Jeff Hilton is president of Integrated Marketing Group. He can be contacted at (801) 538-0777, or visit www.imgbranding.com.