Forget focus groups and mail surveys; with constantly changing markets and ever-increasing competition, companies are finding new ways to determine what customers really want.
Anything worth knowing about your customers, traditional market research can't tell you anymore
When Peter Shamir returned to New York City, in 1995, he slipped back into a lifestyle long forgotten. For the previous 25 years Shamir had lived in Jerusalem, where, in spite of political tumult, brutal wars, and chronic terrorism, life's pace seemed manageable--even serene. "Jerusalem is still a small city, very different from what I was entering," says Shamir. In Manhattan, everything was a blur: the cabs, the meals, the phone conversations. Each day Shamir was pummeled with raw insight into how Americans live. But he was more concerned with how they shop.
Shamir, age 47, had journeyed to the States as a scout for Sky Is The Ltd., a four-person Israeli-based start-up that distributes a wafer-thin cracker called Bible Bread. The company owners, Zack Shavin, Moshe Shuster, and Shuster's brother, Danny Yasoor, had dispatched Shamir, their vice-president of marketing, to launch Galilee Splendor Inc., a U.S.-based subsidiary that would sell the product throughout North America. But the Israeli contingent lacked critical knowledge: the group hadn't a clue about why the average American grabbed one cracker versus another. Shamir came to the States searching for answers.
For those who rank food shopping a notch above root-canal work, a season in hell might seem more appealing than Shamir's life in the United States. During his first six months he schlepped from family-owned convenience stores in Harlem to Von's supermarkets in Los Angeles. He met with dozens of distributors and brokers and peddled the product as he bobbed in and out of food stores in Detroit, Atlanta, and Nashville--to name just a few of his stops.
For the most part, Shamir was following a well-trodden path into American food stores. But the company needed more than just solid distributors to become successful. Driven by his own craving to understand the American consumer, Shamir would often cruise the cracker aisles to observe unknowing consumers. That casual research provided pertinent feedback.
"The average consumer took about 10 seconds to find the cracker they wanted," says Shamir. "Bible Bread would clearly not get noticed in the cracker aisle of one of the big markets." But gourmet, health-food, and kosher stores seemed to be a better match. Even the deli section of the larger markets held more promise. At least there, consumers were more likely to linger in search of new products. "We already knew we had a good cracker," says Shamir, "but the research let us know where to put it."
Since that time, Bible Bread has popped up in specialty and gourmet stores in 30 states. The number of stores has jumped by 50% in the past year, and U.S. revenues are projected to reach $1 million by the end of 1998. Although Galilee Splendor now has a better grip on its typical cracker customer, research efforts haven't slowed. Shamir, now based in Miami, continues to quietly stalk shoppers and gauge their reaction to Bible Bread.
But Galilee Splendor is a rare bird among small companies in its attitude toward market research. Most just assume that a market exists for their product or service. As Kathleen Seiders, assistant professor of marketing and entrepreneurship at Babson College, in Wellesley, Mass., puts it, "Entrepreneurs think they have divine intuition, which is fine if you're part of the audience you are trying to reach. But when you move outside that market, your gut instinct can let you down."
Shamir knew better than to trust his instincts alone when he arrived in the States. And by following his curiosity about shoppers, he unwittingly caught the latest wave in market research: a trend that shuns survey statistics in favor of passive observation of consumers and open-ended questioning. Increasingly, corporate behemoths and top-notch market-research firms have become disenchanted with traditional research methods and have opted for more creative avenues into consumer thinking. Experts may charge heavily for the cutting-edge services, but many of the new methods can be easily adapted by companies with even the tightest of budgets.
Consumer behavior has long been a preoccupation for corporate America. But in spite of the millions of dollars poured into the traditional survey-based approach, untold numbers of new products die on the vine each year. The ever-widening chasm between survey results and reality has emboldened marketers to question the old-style methods. One problem with surveys is that respondents can be less than forthright. They fudge replies to avoid seeming foolish or ignorant. Some experts claim that consumers don't always recognize the need for product improvement. "Consumers will sometimes create what we call 'work-arounds' to compensate for a product's deficiencies," says Dorothy Leonard, professor of business administration at the Harvard Business School. "Those consumers often aren't even aware that they want something better."
More to the point for small-company owners, surveys and focus groups are tremendously costly and time-consuming. A single focus group can run as high as $20,000, and it can take months--even a year--to collect data and crunch numbers from a massive survey. "By the time you 'know the market,' the market has already changed," says Raymond R. Burke, a market-research expert and a professor of business at the Kelley School of Business at Indiana University. "We are in the midst of watching a real shift away from survey-based research."
The shift is toward a vastly different breed of innovative--and sometimes outlandish--approaches that seek to unveil the consumer's hidden thoughts. Today's methods borrow liberally from anthropology, cognitive psychology, and--through role-playing--even the performing arts. Rather than invite consumers into artificial testing situations, marketers now charge out into the field to observe and examine consumers at work, in stores, and even at home. And then they analyze their observations.
Taken at their highest level, those methods demand the skills of a thoroughly trained professional marketer. But company owners can appropriate many of the new techniques to uncover an enormous amount of market information on the cheap. Best of all, unlike survey-based studies, that research doesn't require massive numbers of people. The object is to uncover an array of ideas that might help you improve your product. "You don't necessarily care if 20% feel one way and 80% think another," says consumer-behavior specialist Roger D. Blackwell, a professor of marketing at Ohio State University, in Columbus, Ohio. "You want a range of views."
But don't expect your discoveries to dictate your company's direction. Rather, that sort of research should gently guide product-development and marketing efforts. Oh, there's another catch: to gain a new perspective on your product or service, you must cast aside your own biases--and your divine intuition--about your product or service. If the consumer is to teach you anything, you must be open to the lesson. "Entrepreneurs often mistakenly try to 'fix' the consumer's faulty point of view," explains Blackwell. "But that's not research, that's selling."
For Shamir, it was a breeze. Having been away so long, he couldn't assume much about the American shopper. And that's precisely how the curious entrepreneur must approach market research: detach yourself from the intimate knowledge you have of your product or service. Although it might sound like heresy, try to forget what makes your product irresistible.
Of course, that's far easier to say than do, as Julia Knight, founder of Growing Healthy Inc., a Minneapolis maker of frozen baby food, discovered. Knight had worked as a vice-president of marketing for Minnetonka, a fragrance and cosmetics designer in Minneapolis. When she held her baby-food package in her hands, she couldn't help recalling the hours of toil spent on the most minute design elements. "As a marketer you can spend hours on something that consumers barely even see," she says. "The hardest thing is to become an innocent consumer again."
When Knight began her foray into frozen baby food, in 1989, she was a newly married 31-year-old. To capture the consumer's perspective, Knight would dress in a blue-jeans shirt and leg warmers (it was Minnesota, after all) and then roll through the aisles of local supermarkets. "The dress was critical because you feel much different in casual clothes than if you're wearing high heels and carrying a clipboard," says Knight. "I was literally trying to shake off my marketing self."
But initially, her in-store vigilance led to frustration--even agony. "It's painful to watch consumers pick up your product and then not buy it," warns Knight. It wasn't always easy for her to listen to dissenting consumers. The tendency was to explain to each customer why her baby food should be a best-seller. But she soon learned that "you can't convince customers one at a time to buy your product."
Instead, she immersed herself further in the role of the consumer. Not yet a parent herself, Knight enlisted friends who would go with her on shopping runs, taking their children along. With kids in tow, she began to see why so many parents dread the supermarket: one child screams while the other lurches for the chocolate bars. The research also revealed a potentially fatal flaw: kids don't like the frozen-food section; it's too cold, and parents are under pressure to move speedily through the icy aisles. So Knight sought a warmer climate for her product. She lobbied supermarket managers to place cutaway freezers in the baby-food section.
By 1996, when Growing Healthy was sold, the company had climbed to $2.8 million in revenues. But it had been a constant struggle, and one that reaffirmed the breach between the customer's words and their actions. Now it all makes sense to Knight. "What mother, especially in front of other mothers, would really tell you that she spent more on cat food than on baby food?" she asks. But her observations had shown her otherwise.
Lurking behind shoppers is one way to get the skinny on the habits of the average Joe. Another is to watch potential customers actually use your product. That's why many companies pay a high price for behind-the-glass focus groups. The trouble is, consumers rarely act in real life the way they do in a "laboratory" setting.
So some clever entrepreneurs have replaced focus groups with small gatherings in more lifelike surroundings. There they combine anthropological observation with the sort of open-ended questioning you might hear in a therapist's office. The bonus is that real-world focus groups often don't cost much. In fact, if you're smart, they may just earn you some extra cash.
In 1991, Brendan Boyle and Fern Mandelbaum created Skyline Products Inc. to invent and license new children's toys. The twosome knew little about toys and even less about children. Boyle had been a product designer for David Kelley Design, in Palo Alto, Calif., developing items such as water bottles and other sports accessories, while Mandelbaum prospered as a marketing guru for Giro, makers of bike helmets. To get a boost up the learning curve, the two cleared a path straight to their target audience and created a focus play group.
Silicon Valley's harried parents are all too willing to enroll their children in Skyline's six-week play-group sessions. Six to eight kids get an hour with the latest games and toys on the market, and Mom or Dad gets an hour off. The groups typically meet at local parks or schools; Boyle and Mandelbaum appear as the Santas of summer, carrying a slew of toys.
Boyle admits that as an adult, it can be pretty easy to lose touch with a child's perspective. "You learn so much just by getting down on the ground with the kids," he says. "You can really forget how small their hands are or how much bigger your wingspan is."
Throughout the hour, the two owners probe the children, asking why certain toys are more appealing than others. "We're searching for a range of opinions," says Boyle. "Many kids will give that to you. They'll say, 'This sucks,' or 'This is awesome." On the other hand, some children hide their true likes and dislikes with strangers but reveal all in the car ride home. That's why Mandelbaum and Boyle frequently follow up with parents.
The parents themselves provide a trove of information. Just watching their facial expressions as their child gallops around with a newfangled toy can indicate whether they'd be likely to buy, says Boyle. Occasionally, Mandelbaum gathers parents into informal groups for brief grilling sessions. There, once again, the striking contrast between the consumers' words and actions becomes apparent. "We ask them in the beginning if color matters, and they all say a resounding no," recalls Mandelbaum. "Then at the end, when we give them something for Johnny or Suzie, they all clamor for the purple one or the blue one."
Sometimes the information has a direct impact on product development. Boyle might discover that a prototype is simply too unwieldy for small children or is not particularly enticing. But more often the information provides only hints into a child's sensibility. "You never know where the next blockbuster will come from," says Mandelbaum. "There's no formula, but if you work with the kids long enough, you start to develop a kid sense."
The focus play groups have another distinct advantage over traditional focus groups: payment. Whereas most companies must offer focus-group participants some incentive, Boyle and Mandelbaum reverse the charges. The play group is a valuable service for which parents pay $30 per child. "In the beginning it was actually a line of revenue on our P&L," says Mandelbaum.
The play groups have had a positive effect. In an industry in which designers come as fast as they go, Skyline has licensed 70 products and grown to eight employees. The company expects revenues of $5.7 million over the next two years. Today the duo isn't as dependent on the play-group cash to make payroll. Last January the $50-million product-development company IDEO, based in Palo Alto, acquired Skyline as an independent subsidiary.
For other entrepreneurs, though, the action can't be caught in a passing glimpse. When the shopping is hectic and consumers are in and out of a store in minutes, critical experiences can be lost forever. Here's where a video camera has value beyond your child's birthday party.
Consider Judy George, the CEO and founder of Domain Stores, a fast-growing $50-million chain of 23 furniture stores headquartered in Norwood, Mass. George has been a presence in her local stores for more than 10 years. But on the bustling floors, she can overlook the subtle nuances of the shoppers' experience. "People know me here, and I can get very easily distracted," she says.
Although she had previously operated video cameras in the stores on her own, George recently hired Grid II, a market-research firm based in New York City, to place one camera in her Short Hills, N.J., location for just six hours. The Short Hills location attracted picky customers, and it was far afield from George's home turf in Massachusetts, where customers were bound to know her. Later, in the privacy of her home, George pored over the tape. And suddenly, she saw something that more than 10 years of experience had not revealed: people shop for furniture in twos. Of the 1,034 customers who entered the store, 954 came in pairs.
Upon further examination, George recognized that many male customers were visibly ill at ease amid fluffed pillows and floral duvets. "The typical customer needs to be in the store for at least nine minutes to feel comfortable enough to buy," says George. "But if the spouse or boyfriend pulls her away too soon, we lose out on the sale." In the coming months, George will retrofit her 23 stores with entertainment centers where sports fans can watch live events via cable. Now, however, she might face a new problem: who would take her spouse or significant other to a place where he can watch the very thing she's been trying all afternoon to pry him away from?
But in-store observation offers only half the story. For the rest of the picture, entrepreneurs must be willing to take the cameras into the kitchens, the living rooms, and even the bedrooms and bathrooms of their potential customers. But you've gotta have the guts to enter.
When Kelly Franznick asks end users of his product if he can place a tripod-mounted video camera in their homes, they raise their eyebrows. "Customers typically agree once they learn about my purpose," says Franznick, who is the user-research manager for Lexant, a Seattle-based start-up with projected 1998 revenues of $5 million. The company sells health information, such as stress-management and smoking-cessation tips, to large employers and insurance corporations. The companies then pass the information along to their employees or agents. Lexant offers the product, called DoHealth, via the World Wide Web, in print, or by telephone counseling.
Franznick's in-home footage shows him not just how customers use the product but also how they live. In a recent study of customers using the DoHealth Web site, Franznick placed video cameras in the computer areas of five homes. With just a small number of participants and only about 36 hours' worth of taping in each house, Franznick began to answer a number of nagging research questions: What time of day did people access DoHealth? What other computer activities were completed before or after users accessed the on-line service? What else was happening in the room when they were on-line? What pulled them away from the computer?
And perhaps most important, the tape uncovered problems that might have otherwise gone unnoticed. For example, Franznick saw that on-line users became frustrated when they couldn't click from the bottom of the page to move forward or backward within the site, but he also saw that they had invented their own solutions, or work-arounds, for the problem. They simply scrolled to the top of the page and then clicked onward. "That's the sort of thing that might never have been revealed in a survey," says Franznick. It wasn't a tough problem to solve. Lexant's Web master simply added electronic links to the bottom of the page.
That was just one of several ideas the videos revealed. Franznick has developed a method for moving from idea to reality: After he's identified patterns among users from viewing the videos, he sketches out potential solutions or new products. The Web-site study yielded more than 25 penciled drawings. Franznick then presents the roughs to the designers and developers, who quickly estimate the costs in time, money, and resources. The objective is to pick the ideas that will give the greatest bang for the buck.
Even if you gain entry into the consumer's home, you still might find that you're cordoned off from touchy subjects. When Lexant began to develop an on-line area to address weight-management issues, Franznick quickly recognized that the company had stumbled into one of those sensitive zones. "It's very hard to get people to talk about their weight," says Franznick. "You need to use methods that allow them to reveal what they want on their own terms."
So Franznick mailed logbooks and disposable cameras to 30 potential customers from the Chicago and Seattle areas. They were asked to snap photos whenever they became "conscious of a weight-management issue." They were also told to scribble down a caption for the photo in the logbook.
The study lasted just five weeks. In the end, it revealed some intensely personal moments. All of the photos and captions were first sorted according to similar themes and ideas. "Here's where you start to see patterns," says Franznick. For example, a couple of participants took photos of the bathroom mirror still fogged over from the morning shower. One caption read, "This is the mirror where 'I size myself up' every day." There were a few photos of bridal magazines with comments such as, "Someday, after I lose weight, I'll get married." The information gathered from the study will help Lexant design the new Web site, and many of the issues raised will become on-line discussion topics.
Not all market-research opportunities must be so contrived. Life often provides windows to view a consumer's lifestyle, if you're alert to the possibilities. Blackwell suggests that attending real estate open houses in your town may give you ideas for products or services. "Look for problems that don't have solutions and for innovative consumer-made solutions," says Blackwell. "Here's where you might find ideas to commercialize or ways to improve an existing product."
Long before Bible Bread made the voyage to the United States, Zack Shavin and his crew had seized an opportunity to expose Americans to their product. Shavin moonlights as a tour guide in Jerusalem, and he tested the cracker, the packaging, and various slogans on the herds of Americans who make the pilgrimage to the Holy Land each year. "By the time we went to America, we were quite sure that our product and message would be accepted," says co-owner Moshe Shuster. He says that the company resisted more formalized focus groups because they were too costly and too risky. "We could have spent everything just to find out that people didn't like the product," says Shuster, "and then we would have been sunk."
The lesson for other bootstrappers is straightforward. Explore natural settings. Observe. Listen. Really listen. Put aside biases. Analyze. Those are the ingredients of the new market research that blue-chip companies and market-research firms are leaning toward. The beauty, of course, is that unlike market surveys or fancy focus groups, these new methods are quick and can be adapted by any company.
Joshua Macht is an associate editor at Inc.
Have you seen a game like Quake?" Raymond R. Burke, professor of business administration at Indiana University, asks, referring to the video game that features eye-popping graphics of a quake-devastated city. "My idea is to harness that same 3-D horsepower for 3-D market research."
Today, Burke's lab in Bloomington, Ind., with its 20-inch touch-screen monitors and $20,000 PC workstations, is creating a virtual world to determine exactly how products catch a consumer's eye in a store. Computer graphics simulate the feeling of walking past shelves of soap and shampoo, just as a video game might simulate a violent encounter with a kickboxer. And this virtual world is similarly interactive--consumers can pick items off the shelves to examine them more closely and can indicate which items they would buy if this were real-life shopping.
Burke believes that virtual reality is less contrived than a focus group because it offers shoppers product choices in a natural, "cluttered" environment. Companies using his program can instantly change variables like packaging or price and get immediate feedback. Burke's software tracks, records, and tabulates a shopper's moves and hesitations. Not every product can be tested this way, however. Burke doesn't test clothing, for example, because the shopper can't feel the fabric or try on the items.
Burke's technique has already attracted big-name clients like Goodyear Tire and General Mills, but he believes that virtual market research will prove itself increasingly relevant to small companies. "As the price of computers comes down and as 3-D graphics become easier to do on the low end," he says, "we'll see these types of simulations used much more frequently." --Mike Hofman
Why The New Market Research?
We asked Roger D. Blackwell to help make sense of the impact that accelerating product cycles has had on market research. In his role as professor of marketing at Ohio State University and as an independent consultant to companies such as Victoria's Secret and J.C. Penney, Blackwell spends his time studying consumer behavior and the retail sector.
INC. : Why is it more important than ever for companies to speed up their market research?
BLACKWELL: Fierce competition. There are too many companies chasing too few consumers, and the survivors are getting better and better at providing what consumers want. In the past, many companies faced competition from great, average, and bad companies. But the bad and the average are being eliminated rapidly, and we are left with only top-notch companies that are more likely to strive to have what the consumer wants. That puts pressure on all the surviving corporations, whatever their size, to conduct precise and speedy market research so they can offer products that match consumers' desires sooner than the competition.
Product cycles have shortened in part because new products and product improvements have come from countrywide chains. A good idea in one part of the country quickly rolls out across the landscape. Local companies no longer have the luxury of waiting years before their competitors come up with better ideas. Now new products that have been tested elsewhere--including in other countries--quickly become competitive with local products. Honda, for example, has cut conception-to-production time from years to a matter of months. Technological advances in product design and development also have greatly sped up the pace of new-product offerings.
INC. : Does consumer opinion change more rapidly today?
BLACKWELL: For sure. Information now travels so quickly that consumers learn about new products and competitive improvements almost immediately. If Intel has a problem with a new chip, the information flies over the Internet in nanoseconds.
INC. : Does information that flies around so quickly force the company owner to make faster decisions?
BLACKWELL: It increases the penalty for making wrong decisions. In the past, you might have corrected a problem long before very many people knew about it. But that era is history. Today there's real pressure to have dead-on market research. You've got to get it right because the whole world will know instantly if you've got it wrong. And they may never forgive you for a major mistake. --J.M.
David Feld, founder of Today's Man, a $204-million retailer based in Moorestown, N.J., guessed that many men equated buying clothes with going to the dentist, but he didn't know why. Feld paid for focus groups and phone surveys to uncover the truth. But he never met a focus group he trusted.
Finally, Feld's advertising agency recommended he talk to a company of professional hypnotists based in New York. Feld was skeptical, but he was desperate and curious enough to commission a study focused on why men feel uncomfortable in clothing stores. "The results really shook us up," Feld reports. The comments the men made under hypnosis had the ring of authenticity he had been searching for.
Hypnotized men revealed that they often hated the way their clothes fit but didn't know how to complain. "One guy told us that the last time he bought a suit, it didn't fit right--but he didn't say anything," Feld says. "He then told the hypnotist how insecure and dopey he felt when he wore that suit." Further, some of the groggy men admitted to a sense of powerlessness--they felt ganged up on by both their wives and pushy salespeople. "We had never gotten that answer before," Feld says.
Feld changed his business based on the responses. "We show the tapes of the hypnosis as part of our training," he says. "We now understand how important it is to become an advocate for men--to create more of a comfort zone in our stores and to get rid of that dentist's office feeling."
Two years after the study was conducted, Feld concedes, "I don't know that I totally believe in hypnosis to begin with. But I tell you, those people were out of it. They were in another world." A world, it seems, where people want their pants to fit. --M.H.
From Mind to Market: Reinventing the Retail Supply Chain, by Roger D. Blackwell (HarperBusiness, 800-242-7737, 1997, $25). Blackwell's treatise can be scattered at times, covering everything from market research to logistics. But chapters three through five offer a good introduction to the new thinking in market research.
Do-It-Yourself Marketing Research, by George Edward Breen and Albert B. Blankenship (McGraw-Hill, 1989), is out of print but worth a trip to your library. It is a classic for those just beginning their market-research efforts, but it's concerned mostly with surveys and focus groups. You'll find little on the latest techniques.
"The Science of Shopping," by Malcolm Gladwell (The New Yorker, November 4, 1996). If you've ever wondered why fast-food restaurants are on the left and gift shops are on the right as you walk toward the gate in a newly constructed airport, track down a copy of this article for the answer. Gladwell profiles Paco Underhill, a man who devotes his life to studying shoppers. Underhill is the man responsible for the "butt-brush" theory, which Gladwell sums up: "Touch--or brush or bump or jostle--a woman on the behind when she has stopped to look at an item, and she will bolt."
Rocking the Ages, by J. Walker Smith and Ann Clurman (HarperBusiness, 800-242-7737, 1997, $15). Demographics aren't enough, according to Smith and Clurman. The authors claim that you must understand the values of the generation you're targeting if you want to have the right product for the right age group. Members of each generation--defined by the authors as matures, boomers, and X-ers--behave differently in different stages of their lives. The worst mistake a marketer can make is to assume one generation is just like the next.
In "Spark Innovation Through Empathic Design" (Harvard Business Review, November-December 1997), Harvard Business School's Dorothy Leonard, professor of business administration, and Jeffrey F. Rayport, associate professor of business administration, examine the latest techniques in product innovation and market research. Leonard's 1995 book, Wellsprings of Knowledge, has just been released in paperback (Harvard Business School Press, 800-262-7429, 1998, $16.95).
ON-LINE RESOURCES: There are lots of market-research resources on-line, but most of them aren't very good. You might try EASI Demographic Reports, from Easy Analytic Software, for numbers and facts. The Small Business Advisor provides a few reports on marketing and market research. And if you want to chat with others, check out this newsgroup: misc.business.marketing.moderated.