If Henry Ford asked customers what they wanted, they would have said a faster horse and other myths

Henry Ford supposedly said that if he listened to his customers he would have made faster horses.  There are a few things wrong with this quote.  It doesn’t appear to historically accurate.  OK, perhaps the quote is educational. . . . . well, not so much.  Let’s assume for a minute that one of the things customers said is, “I want a faster horse.”  Fair enough.  A competent market researcher would simplify that comment to, “Faster.”  What else might a pre-automobile customer have said?

“I spent too much time taking car of the horse even when I’m not traveling.”  Which could be said as, “No maintenance when not in use.”

“I don’t like getting wet when riding.” Which could also be, “Covered/enclosed compartment for traveler.”

“It takes too long to get the saddle and gear on the horse when I want to go somewhere.”  Which could be restated as, “No pre-travel time.”

The marketer now has a list of requirements:

“Faster.”; “No maintenance when not in use.”; “Covered/enclosed compartment for traveler.”; “No pre-travel time.”

Steve Jobs is said to not have listened to customers because he said, “It’s really hard to design products by focus groups because sometimes people don’t know what they want until you show it to them.”  Designing by focus groups is incredibly difficult but with a focus group Apple could have understood that before the nano that customers had limited music selection because of carrying all the tapes, it was difficult to carry a big selection and mixing music from different albums was a chore.  That would give the product developers a list of requirements to innovate toward.

Implicit vs. explicit research methods

Implicit methods generally what happened but generally don’t tell you why it happened.  This is good for showing trends or interrelated behaviors.  Explicit methods ask the customer why they acted as they did.  They attempt to understand the customer motivation to understand how the customer would act in a similar situation in the future.

Examples of implicit research methods include analyzing sales and profit numbers, web analytics, customer observations and some types of surveys.  Examples of explicit methods include focus groups, customer service, employees, social media and online communities.

Understanding your customer requires a combination of both methods.  Implicit quantitative analysis tells you exactly what happened.  By comparing different markets, regions, test groups or time periods you will be able to truly understand what outcomes result when changing certain of your inputs.  Unfortunately, you won’t understand why the outcome happened that way.  That limits your ability to transfer that knowledge to slightly dissimilar scenarios.  By laying explicit information over the implicit data, you will have an understanding of why the customer responded the way they did.  That will empower you to better aim your marketing in the a greater variety of scenarios in the future.

Competitive Analysis

A useful tool in understanding your business is in understanding your competitors.  More importantly, you must understand how your customers perceive you vs. how they perceive you competitors.  This can be done by evaluating which characteristics consumers value in your type of product and service for both you and your competitors.

I’m going to take a quick tangent and remind you about customer segmentation.  Different segments of customers will value different things.  For example, my commuter car is comfortable and safe but all I care is that it gets me where I’m going as inexpensively as possible since I put on a significant number of miles each week.  While reliability is important, I am more concerned about price and mileage.  I have at least 140,000 miles on it and will probably double that before I think about replacing it.  A friend of mine was driving back from a later event with her three small children in her car.  The car broke down completely unexpectedly.  This was back before everyone had a smartphone.  She was stuck in the middle of nowhere with her kids for a long time before someone pulled over and offered to call AAA for her.  Even then, she was nervous about the stranger in the middle of no where.  She values reliability over everything else.  There was no way that she was going to be in that situation again….. ever.  She has purchased a new car every three years, regardless of how well she may love her current one.  She also won’t consider an entry price point car because she perceives them as less reliable.  Two different segments.  Me, ok I’m cheap.  My friend, Ms. Reliable.

Back to competitive analysis.  Start by compiling a list of different functions, features and attributes about your product and your competitors’ products.  Keep in mind that you want to understand the consumer perception of the products.  For example, if product quality is a key differentiator and you could put your product up against a dozen competitors in a third party lab and prove without a hesitation that your product’s quality is superior but the consumers have a perception that the competitors are of higher quality than you, you lose that comparison.  Common attributes include performance, price, quality, convenience, reliability, etc.  Don’t forget that even if you are providing a product, the delivery process is part of the consumers’ perception.  Therefore, you may need to include things like knowledge sales associates, return policy, hours of operation, etc.

A survey works well for creating what some call an importance-performance analysis.  For each attribute for each product you want to test, you need to have the respondent provide two points of data.  First, how does this specific product deliver against the attribute.  For example, on a 7 point scale rate how product A satisfies each of the following attributes: price, delivery, reliability, quality, etc.  Additionally, you need to know how important each of those attributes are to the customer.  Back to the car’s, I would rank price as more important than reliability while my friend would be the reverse.  In this case, I suggest force ranking the attributes.  That is, if you have six attributes you are measuring, have the respondent rank them in importance.  Importance of feature can be an excellent method for segmenting your customers.

Once you graph the result, you can see which areas you are superior and inferior to your competitors AND you can tell how important each of those areas are.  Good rule of thumb, the more important the attribute, the more you want to be better than your competitor.  The less important the attribute, the less it matters.

Market Research and the role of the Marketing Manager

The Marketing Manager focuses the business on getting the right goods and services to the right people at the right place and time with the right price through the right combination of promotional activities.

In other words, the four P’s of marketing: Product, place, price and promotion.  If the Marketing Manager has absolute knowledge, aligning the company’s P’s with the customer’s needs is a very easy task.  Unfortunately, the four P’s are filled with uncertainty.  Uncertainty is why companies fail.

This is where marketing research comes in.  Through marketing research the Marketing Manager gains insights on the customer’s unsatisfied needs, when and where the customer will need the product or service, what the customer is willing to pay and the how the customer should be contacted.

Marketing research is all about understanding the customer.  Even researching competitors is about understanding how they are relating to their customers . . . . . and perhaps how you can steal their customers away.

Marketing research simply reduces the uncertainty inherent in the Marketing Manager’s role.  While it is impossible to completely remove uncertainty even improving decisions by as little as 10% can have a significant impact on the company’s profitability.  Imagine pricing your product at $60 instead of $50 with minimal loss in unit sales because you were able to better understand what your consumer was willing to pay.

The market is constantly changing.  Customers gain and lose interest.  Competitors move into and out the market.  Technology requires adjusts the customers needs.  This means the marketing research is a necessity at all times.  The Marketing Manager must continually gather new information and test old knowledge.

How big is the market?

The second question is, “how big is the market?”  If you have done the steps in determining if there is a market, you will already but a long way towards understanding how big the market is.  There are three directions one can take to understand the market size and I recommend doing at least two of them if market size is a potential issue for you.

The first method is simply researching existing data on the size of a market.  There are many public and private sources that estimate market size.  Be careful to not over estimate YOUR market size based on the overall market size.  For example, one company I spoke with made high end tile light switch plates.  Their market is not the entire light switch category, which is dominated by $1 and $2 dollar plastic plates.  Their portion of the market is just the high end switches.  You can slice a larger market estimate into more manageable estimates by combining these larger markets with one of the following methods.

The second method is determining consumer demand.  This can be done through a variety of means, although surveys and focus groups are the most common.  Here you are looking for the % of your target demographic/psychographic would be interested in purchasing your product within the next year.  Be sure to discount the results of either method as customers who are not expected to actually open their wallet are more interested in everything.  Extend the amount of people (discounted of course) by the amount they would purchase on an annual basis.

The third method is estimating competitor size.  Use all the information you gathered in determining if their is a market and extend by level of investment your competitors appear to put into your concept.