Too often I hear marketers complaining about their market research. They tell me they've invested thousands of dollars in studies that just don't paint a clear picture of what they should do.
Here's why this happens: Data is meaningless. Analysis is meaningful. Market research is about data collection, not analysis. With apologies to my market research friends, I am not talking about statistical analysis.
Statisticians will look for patterns in the data using different statistical analysis like conjoint or regression. All good stuff. But to really understand what's happening so you can make good decisions, you need to conduct behavioral analysis. This is how our government intelligence agencies do it.
How Behavior Analysis Works
In behavior analysis, meaningful data are the behaviors or activities of individuals and organizations that either promote or discourage future behavior. For example, a "discourager" could be a new law that says lenders cannot loan money to unqualified applicants. This law would "discourage" the behavior of loaning to unqualified applicants.
In contrast, there could be a "promoter" law which says everyone, regardless of credit history or financial capabilities, is entitled to a loan and the government will guarantee it. This would "promote" the lending of money to unqualified applicants.
So you have two types of meaningful data: promoters and discouragers.
We know from our example above that laws are important data points for behavioral analysis. But those are pretty obvious. The other key data points are not so obvious and require skill and experience to identify and judge. But you can do it.
Here are the six key data points you need to analyze:
Financial - This data defines the availability of cash and credit. Without cash or credit, commerce cannot happen. It is the fuel for the economic engine.
Demand - How well is the buyer satisfied with current solutions? Is the buyer seeking better, faster, cheaper or a combination? How strong is their demand of new solutions?
Availability - How available are raw materials, labor, finished product, services, and suppliers (aka competitors)?
Social Acceptance - Is a behavior encouraged, accepted, unaccepted, or actively discouraged? The Green movement is a good example. Right now, Green, is encouraged. And equally, waste or anti-Green is unaccepted and discouraged. In contrast, smoking is actively discouraged and unacceptable.
Personal - Whether you agree or disagree, intelligence experts and law enforcement have known for centuries that people tend to consistently act to serve their personal self-interests. Examine the behavior of individuals and organizations (organizations behave like people because they're run by people). How are they acting to satisfy personal fear, pride, greed, lust, power, or envy?
Regulatory - This is from our example above. These are laws, taxes, and the level of enforcement (strong or weak) present. There may have been laws in place to discourage Enron's management from doing what they did, but the enforcement was weak and the power of their personal greed exceeded the impact of the regulatory discouragers.
The Behavioral Truths
Why should you pay attention to behavior? Why should you invest in learning and implementing the processes I've outlined above? Because it is remarkably accurate and reliable. And it's only substitute are trends. If stock is going up, we buy. If a market is growing, we want in. If something works, we keep doing it. We're always betting that current activity will continue--at least long enough for us to get something out of it.
With behavior analysis, you can go beyond trends. You can reliably predict the end of a trend (long before it appears) and the beginnings of a new trend before its on the radar screen.
Why?
Because of the fundamental behavioral truths.
1. It is costly and risky to oppose or control behavior
2. There is little cost and low risk when taking advantage of behavior
Add behavior to the fundamental forces of the universe. It is that powerful. When the six key data points we've discussed above line up to promote a specific behavior--that behavior will occur. It is the irresistible force.
Now there have been many examples of individuals and organizations that have opposed or sought to control behavior with some success. Can you say Microsoft? But they do this at great cost and they can only do it for a limited time before they lose their control and behavior wins.
By the way, once a Microsoft loses control (Can you say Vista?), they usually try to quickly make nice and deliver those things buyers always wanted but could never get. Buyers tend to resent this and migrate to competitive alternatives.
Market Research Works Well - With Behavioral Analysis
Market Research works very well and is critically important. But it is simply data collection. Use the behavioral analysis techniques above to examine the data and you will find real value.
Monday, September 29, 2008
Friday, September 26, 2008
5 Steps to Quickly Analyze a Market
Sizing up a market is less about data and much more about behavior. As a result, you don't need mountains of data--you just need a few key data points. Here are five quick steps you can use to quickly understand a market.
1. Who are the buyers and sellers?
First, describe the buyers and sellers. Who are they? (Not literally all of them, but in general.) If it's shampoo, you have large CPG's like Proctor and Gamble and Unilever who are the sellers and the consumer who are the buyers. You also have channel players such as Target, Walmart, and Krogers.
2. Identify the successful activity of buyers and sellers
In this step you want to find out if the buyers are happy with the existing products, prices, and distribution--or if they are seeking a new, better solution. Questions you want to answer include: Who is winning and why? What are they winning? Is a product winning? Is a channel player winning? Or are the buyers stable. The answers are readily available in a Google search.
3. Identify the struggles, problems and failures of buyers and sellers
Once you know who is winning, you need to examine the flip side of the coin and look at who is losing and why. Problems are like canaries in a mine. When they appear, they are indicators of change--they are especially good early warning signs of change.
4. Choose the meaningful data points
You want to pay attention to data that define the behavioral truths of business--power and money. When a company acts, they do it to gain or avoid losing power or they do it to make or avoid losing money. Don't get distracted by rheotoric. Intellectual motivations are PR spin. In the immortal words of Deep Throat: "Follow the money." Meaningful data defines how a player is winning money or power, how their money or power is threatened, or how they are losing money or power. Anything else is just noise.
5. Assess the data like a cop
A cop never believes what they're being told. They're always looking behind what's being said. Once you've got your meaningful data assembled, examine it like a cop. Don't believe a word of it. Look behind it. What's not being said? What are they protecting? How are they really trying to win more money or power?
What makes analysis difficult, is too many of us use the wrong metrics. Business is not about making things better. That's a by-product. Business is about making money. Read the quote below from the movie You've Got Mail. Tom Hanks character "Joe Fox" reveals the true nature of business.
"The Godfather is the I Ching. The Godfather is the sum of all wisdom. The Godfather is the answer to any question. And the answer to your question is 'Go to the mattresses.' You're at war. 'It's not personal, it's business. It's not personal it's business.' Recite that to yourself every time you feel you're losing your nerve. I know you worry about being brave, this is your chance. Fight. Fight to the death."
1. Who are the buyers and sellers?
First, describe the buyers and sellers. Who are they? (Not literally all of them, but in general.) If it's shampoo, you have large CPG's like Proctor and Gamble and Unilever who are the sellers and the consumer who are the buyers. You also have channel players such as Target, Walmart, and Krogers.
2. Identify the successful activity of buyers and sellers
In this step you want to find out if the buyers are happy with the existing products, prices, and distribution--or if they are seeking a new, better solution. Questions you want to answer include: Who is winning and why? What are they winning? Is a product winning? Is a channel player winning? Or are the buyers stable. The answers are readily available in a Google search.
3. Identify the struggles, problems and failures of buyers and sellers
Once you know who is winning, you need to examine the flip side of the coin and look at who is losing and why. Problems are like canaries in a mine. When they appear, they are indicators of change--they are especially good early warning signs of change.
4. Choose the meaningful data points
You want to pay attention to data that define the behavioral truths of business--power and money. When a company acts, they do it to gain or avoid losing power or they do it to make or avoid losing money. Don't get distracted by rheotoric. Intellectual motivations are PR spin. In the immortal words of Deep Throat: "Follow the money." Meaningful data defines how a player is winning money or power, how their money or power is threatened, or how they are losing money or power. Anything else is just noise.
5. Assess the data like a cop
A cop never believes what they're being told. They're always looking behind what's being said. Once you've got your meaningful data assembled, examine it like a cop. Don't believe a word of it. Look behind it. What's not being said? What are they protecting? How are they really trying to win more money or power?
What makes analysis difficult, is too many of us use the wrong metrics. Business is not about making things better. That's a by-product. Business is about making money. Read the quote below from the movie You've Got Mail. Tom Hanks character "Joe Fox" reveals the true nature of business.
"The Godfather is the I Ching. The Godfather is the sum of all wisdom. The Godfather is the answer to any question. And the answer to your question is 'Go to the mattresses.' You're at war. 'It's not personal, it's business. It's not personal it's business.' Recite that to yourself every time you feel you're losing your nerve. I know you worry about being brave, this is your chance. Fight. Fight to the death."
Thursday, September 11, 2008
Want more leads? Chase the Right Revenue.
Norm Brodsky is my hero. I’ve been reading his column in Inc. magazine for a long time. As I was explaining the differences between good revenue and bad revenue to a client recently, Norm popped into my head.
Norm has always harped on chasing the right revenue. So I visited his blog this morning and sure enough, in a recent response to a young business owner’s question, Norm wrote:
“Gross- and net-profit lines are far more important than sales. I'd greatly prefer to have $20,000 in gross profit on $50,000 in sales than to have the same gross profit on $100,000 in sales. Why? Because I'd have fewer headaches, fewer shipments, fewer people, and on and on.”
Lead generation is by far the most important priority with most business owners and marketers. The success of Hubspot confirms this. I’ve found that, too often, marketers leap into lead generation without first assessing their revenue targets. Result: high cost per lead, weak conversion rates. As Norm says, choose the right revenue first.
Simply put, choose revenue that is easy-to-win and profitable. Norm addresses the profitable part above. The easy-to-win part goes to cost-of-winning. Here’s an example: Ad agencies. (Wow, is their business model in trouble!) Their cost of sales has skyrocketed. Despite the volcanic growth in social networking and electronic communication, most agencies still rely on the face-to-face sales call and proposal presentation. Plus, the value of their business model is dropping like an obsolete satellite falling from orbit.
So, cost of sales is high and the value of their product is dropping rapidly. Conclusion: Bad revenue segment. Winning new revenue is very difficult and costly, and the revenue they win has shrinking margins.
Before you launch your lead generation program, review your revenue segments. Assess them. How difficult is it to win new revenue? How profitable is the revenue? If you’re like most mature companies, you’ll find your core business is your worst revenue target. Winning more revenue in your core segment may cost more and deliver less profit than any other option. As Norm says, more is not always better.
Norm has always harped on chasing the right revenue. So I visited his blog this morning and sure enough, in a recent response to a young business owner’s question, Norm wrote:
“Gross- and net-profit lines are far more important than sales. I'd greatly prefer to have $20,000 in gross profit on $50,000 in sales than to have the same gross profit on $100,000 in sales. Why? Because I'd have fewer headaches, fewer shipments, fewer people, and on and on.”
Lead generation is by far the most important priority with most business owners and marketers. The success of Hubspot confirms this. I’ve found that, too often, marketers leap into lead generation without first assessing their revenue targets. Result: high cost per lead, weak conversion rates. As Norm says, choose the right revenue first.
Simply put, choose revenue that is easy-to-win and profitable. Norm addresses the profitable part above. The easy-to-win part goes to cost-of-winning. Here’s an example: Ad agencies. (Wow, is their business model in trouble!) Their cost of sales has skyrocketed. Despite the volcanic growth in social networking and electronic communication, most agencies still rely on the face-to-face sales call and proposal presentation. Plus, the value of their business model is dropping like an obsolete satellite falling from orbit.
So, cost of sales is high and the value of their product is dropping rapidly. Conclusion: Bad revenue segment. Winning new revenue is very difficult and costly, and the revenue they win has shrinking margins.
Before you launch your lead generation program, review your revenue segments. Assess them. How difficult is it to win new revenue? How profitable is the revenue? If you’re like most mature companies, you’ll find your core business is your worst revenue target. Winning more revenue in your core segment may cost more and deliver less profit than any other option. As Norm says, more is not always better.
Wednesday, September 10, 2008
Dying is Easy. Customer-Centric is Hard.
British actor and director Sir Donald Wolfit reportedly spoke these last words on his death bed: "Dying is easy, comedy is hard." I was thinking of Sir Donald the other day while helping a client get past a “product-centric” moment. Customer-centric is not intuitive. Not for a marketer anyway.
There is something in your DNA that makes you a marketer vs. a brain surgeon or rocket scientist. That something keeps you “pitching”. Next time you’re at a party, scan the crowd and see if you can find the marketer. It’s easy. They’re always pitching something. A restaurant, a movie, a book, whatever. They’re always pitching.
Customer-centric behavior is the antimatter of what we know as marketing. It’s as if Robert Preston suddenly became Freud. Pitching is replaced with listening and diagnosis. The welfare of the customer is far more important than selling a widget today. Try that one out on your board next month.
My Dad was a neurosurgeon. He performed hundreds of back surgeries. He told me once about a patient who was complaining of lower back pain and wanted it fixed. My Dad told the patient that surgery may ultimately be required but that his condition wasn’t serious enough to warrant the risk. I was stunned. My Dad unsold the buyer. Why? Because the customer experience would have been poor! My Dad isn’t a marketer. He was acting in the best interests of his patient. Regardless of the sales results. That is customer-centric.
To be customer-centric, sales cannot be the mission but the outcome. Now that’s hard.
There is something in your DNA that makes you a marketer vs. a brain surgeon or rocket scientist. That something keeps you “pitching”. Next time you’re at a party, scan the crowd and see if you can find the marketer. It’s easy. They’re always pitching something. A restaurant, a movie, a book, whatever. They’re always pitching.
Customer-centric behavior is the antimatter of what we know as marketing. It’s as if Robert Preston suddenly became Freud. Pitching is replaced with listening and diagnosis. The welfare of the customer is far more important than selling a widget today. Try that one out on your board next month.
My Dad was a neurosurgeon. He performed hundreds of back surgeries. He told me once about a patient who was complaining of lower back pain and wanted it fixed. My Dad told the patient that surgery may ultimately be required but that his condition wasn’t serious enough to warrant the risk. I was stunned. My Dad unsold the buyer. Why? Because the customer experience would have been poor! My Dad isn’t a marketer. He was acting in the best interests of his patient. Regardless of the sales results. That is customer-centric.
To be customer-centric, sales cannot be the mission but the outcome. Now that’s hard.
Tuesday, September 2, 2008
Creative is a Commodity
I was having coffee with an aging agency executive. He was once again trying to make his case that his firm's creative had higher value and it justified higher fees.
I countered that whether he and I agreed or not, creative has become a commodity. "A commodity!" he shouted. "We're not a commodity!" I then explained that I could go on the Internet and find at least 3,000 firms similar to his that offered creative slightly weaker or better than his and at about the same price. In short, I explained, he was competing with more than 3,000 competitive options. If his price was too high, I had plenty of options.
Needless to say his morning was not the best.
Yesterday, I read an article in the Chicago Tribune about CrowdSpring . In short, the company is a "crowd sourcing" company that offers a competitive environment among graphic designers who compete for posted projects wityh fixed fees.
Imagine that. No hourly rates. Fixed fee. Best idea wins. Jobs posted included a lot of logo and corporate image work, from small cafes to micro-brewers.
I thought of emailing my friend and telling him about CrowdSpring. I opted against it.
I countered that whether he and I agreed or not, creative has become a commodity. "A commodity!" he shouted. "We're not a commodity!" I then explained that I could go on the Internet and find at least 3,000 firms similar to his that offered creative slightly weaker or better than his and at about the same price. In short, I explained, he was competing with more than 3,000 competitive options. If his price was too high, I had plenty of options.
Needless to say his morning was not the best.
Yesterday, I read an article in the Chicago Tribune about CrowdSpring . In short, the company is a "crowd sourcing" company that offers a competitive environment among graphic designers who compete for posted projects wityh fixed fees.
Imagine that. No hourly rates. Fixed fee. Best idea wins. Jobs posted included a lot of logo and corporate image work, from small cafes to micro-brewers.
I thought of emailing my friend and telling him about CrowdSpring. I opted against it.
Monday, September 1, 2008
The personal computer gets more personalized
MDW: See my post on Johnson Controls below and then read this article from MSNBC.
In a world of look-alike PCs, manufacturers are aiming to differentiate their computers more than ever with features such as antimicrobial keyboards (for the “Monk” in you) to facial recognition security, as well as colorful shapes and designs.
Buyers have an array of options, from all-in-one desktops that eliminate the standard rectangular, gray or silver CPU boxes, to laptops with Blu-ray players and widescreens.
http://www.msnbc.msn.com/id/26273914/
In a world of look-alike PCs, manufacturers are aiming to differentiate their computers more than ever with features such as antimicrobial keyboards (for the “Monk” in you) to facial recognition security, as well as colorful shapes and designs.
Buyers have an array of options, from all-in-one desktops that eliminate the standard rectangular, gray or silver CPU boxes, to laptops with Blu-ray players and widescreens.
http://www.msnbc.msn.com/id/26273914/
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