Guaranteed Advantage

Market researcher Bob Ladner has gained an edge over his competitors by offering a money-back guarantee.

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The year 1980 was bad for the auto industry, bad for the Democratic party, and bad for Bob Ladner. Ladner, founder and president of a Florida-based consumer market research firm for the financial and high-technology industries, had been struggling for five years to keep his business alive. Things had brightened temporarily in 1979, when he was finally able to move his business, Behavioral Science Research, to vastly expanded facilities in Coral Gables. But less than 12 months later, BSR was near death.

"In 1980, I spent thousands of dollars traveling up and down the major markets pitching my company," recalls Ladner, "and I was turned down more times for what I regard as sheer cowardice. People said we're too far away; people said they've never done business with us before; people said they don't know our credentials. It was the same old garbage excuses for using the same old tried-and-true larger companies."

After a while, Ladner got pretty good at responding to these objections. He would point out that a number of major research firms were in "some little jerk-water town" in Ohio or Nebraska, so why shouldn't he run his 10-person firm out of south Florida? He would remind recalcitrants that WATS lines and overnight delivery services have made this country a mighty small place in which to do business. He would even offer to pay his own travel expenses if necessary.

Still, the risk of trying a new supplier was too great for most companies to consider gambling thousands of dollars and precious hours on iffy prospects. They preferred to stick with the well-known names. It was then that Ladner realized the true challenge he faced. "What I had to do," he explains, "was come up with something that would make it impossible for someone to turn me down."

Ladner wanted to position his firm in such a way that BSR would emerge above competitors from the moment of his first sales contact straight through the bidding process. He needed a marketing hook that could snare skeptics and conservatives who were uncomfortable with chancy investments of time and money -- and that covered just about every major research buyer in the country.

It was in the middle of another hard sell the next year that Ladner stumbled on his nearly irresistible marketing tool. "Around the middle of 1981, I got involved with a guy in New York whom I was trying to pitch," remembers Ladner. "Every time he raised an objection, I would answer it. I was real good at countering objections and trying to press the sale. Finally, I said to him, 'What in the blip do you want? A guarantee?' And he said, 'If you could offer it, it would make a difference. But nobody does that.' I just sat there with egg on my face, and then I said, 'Well, I can't either.' "

But that incident got Ladner thinking. A one-time only, introductory guarantee on work for new clients would certainly eliminate their fear of losing a large chunk of the company's research budget on an untried supplier. The problem was turning this extraordinary idea into a practical solution. Not only would it be hard to convince prospective clients of the sincerity of such a claim, but it would also leave his company vulnerable to corporate miscreants eager to find warranty loopholes that could provide them with free research. Too much of that would bury BSR forever.

It took nearly two years of intermittent research and refinement, but late last year, Ladner unveiled the selling device that he jokingly characterizes as "an offer they can't refuse." He began offering clients a 100% guarantee that promises BSR's work will be on time and on spec, or clients get their money back -- all of it. No glitches, no waiting, no joke.

The need for a marketing hook was no longer a matter of life and death for Ladner's firm. BSR's sales had improved in the last few years even without the guarantee. But Ladner was determined to bring his marketing brainchild to life. In January 1983, he hired a marketing services agency in New York City to help him find an insurance company willing to underwrite his warranty. If he could buy a policy like that, the extra backing would lend credibility to his promise, and it would protect his firm from the financial strain of possible claims.

Meanwhile, galvanized by the sheer novelty of the concept, Ladner held a focus group with 10 executives from major research buyers in the Northeast to test the offer's allure.

"The first response was absolute incredulity," says Ladner. "They shot it down -- they said nobody could do it. They kept giving me reasons why. So finally I said, 'Forget this business of 100% guarantees. Just tell me what pisses you off about research suppliers.' They then talked to me about the failure to deliver on time; the failure to have research that addressed the questions at issue; the failure of questionnaires to be comprehensive. So I took all these objections and I built them into the guarantee."

By the time summer came around, Ladner was ready to roll out a direct-mail campaign to get new business, complete with an introductory money-back pitch for first-time jobs. He had enough confidence in his staff to believe they could meet the high standards of the guarantee. With an insurance policy as a financial cushion, the whole thing looked practically risk-free.

But his marketing services agency had not yet found an insurer willing to underwrite BSR's guarantee. Frustrated by what he perceived as foot-dragging, Ladner dismissed the company, and started his own search for an amenable insurer. After two months and some false alarms, he finally found an obscure broker in New Jersey who would agree to underwrite the policy at premiums BSR could afford. Ladner was ecstatic.

In late July, Ladner decided to test-run his guarantee by mailing some 600 brochures to prospective clients with the following conclusion: ". . . we're honest enough to make this guarantee: The work we do will be on time, on spec, and better than you asked for. Or it costs you nothing."

In early September, Raymond F. Donnelly Jr., then director of marketing for City National Bank of Miami, contacted Ladner about a possible market survey to measure and define the bank's positioning in the consumer arena. City National had not used a research firm in 45 years, but recent deregulation of the financial industry had them worried about the competition. Donnelly had heard of BSR through other banking industry sources, but was unaware of the firm's new guarantee to first-time clients. He invited Ladner to draw up a proposal and enter his bid on the survey along with several other research hopefuls. If BSR won the contract, City National would be the first client to qualify for Ladner's money-back contract.

Donnelly recalls being impressed with Ladner's thoroughness during the proposal stage, although he was wary of trying him out on such a big project. "We had so many objectives, and Bob was very helpful in narrowing them down to what I wanted to find out. But I said to him, 'How do I know you're going to deliver what you are promising?' It was a heavy expenditure on the bank's part, because it was a benchmark awareness study. We were talking about 400 interviews, and the cross section [of high net-worth consumers] that we were interested in penetrating was difficult to get a hold of."

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