The Future of Business
THE IMPORTANCE OF MARKET STUDIES
WOULD YOU DIVE INTO A LAKE WITHOUT KNOWING ITS DEPTH?
Certainly not! To exactly avoid such uncertainties, it is important to study the market before you enter.
Talking to clients and colleagues, we have seen some interesting cases of companies, many times large or multinational ones used to market research, which ended up self-damaging when choosing not to use this tool anymore. A certain fragrance company opted to launch a perfume without previously doing a market research to understand the market demand and how to better place this product – who the right target was, how they would like to be introduced to their product, which images would touch their feelings and provoke sensations, among others.Unfortunately, the result was not positive and product needed to be discontinued, since there was no budget left to re-place it.
During these years in the consulting market, we also encountered types of clients who do not really like listen or analyzing numbers, consequently and due to lack of guidelines, chose to invest high volumes of money in media without previously plan to which segment these media should be driven to, which the relevant means are, what their consumers really want to hear, which the differentials noticed by their target related to their products were, among other aspects. In many cases, we observe hasty actions and investment return under their expectations.
Some other sort of clients believe they know how to do their own market researches and do not need specialized agencies running this business for years. Well, we do not believe this is impossible, but they really need to invest not only in a consistent department with managers and analysts, but also build a whole structure current market research agencies have, mainly field work team and diversified suppliers for different types of studies. Once, an electronic company was used to often listen to their customers’ opinionsregarding the quality of their services through a market research firm which used to design the study, collect the data and analyze the results.Aiming on decreasing costs, that company opted for doing research by their own: they used online self-built and free tools and sent links to their consumers looking for their opinions. After some months using these “feedbacks” from these clients, they ended up noticing some of them were just the same person self-filling the same survey many times under different fake names, thus, no quality validation of those data was done. Company had already taken some decisions based on those
clients’ feedbacks, such as the change of a service layout.However, when they encountered such difficulties, they went back to the specialized market research agency and, after a correctly structured research, they concluded the majority of their consumers – and potential ones –in fact thought exactly the opposite to the previous decision taken. Sometimes, it is not enough only desiring to know, but definitely knowing how to do!
Thatiswhat some pharmaceuticalcompaniesactually do. One manufacturer launched a new drug and wanted to know the maximum price a specific market could absorb for this product, without losing competitiveness against their rivals. Based on the price practiced of around USD 4 in other countries, they imagined this same price range could work well in new market they were planning to enter. Thus, they chose to study the real possibilities of this assumption before really launching the product with the proposed price. Wisedecision! Manufacturer performed market studies and surprisingly found their product could easily be accepted at USD 6instead of USD 4!But they also recognized if they would sell it atUSD 7 or USD 8, their sales would dramatically decrease. That means, this company hit the nail on the head! They sold the product with the exact price market could afford and profited additional USD 2 millions more than formerly forecasted, just because they invested a small portion of their budget in a previous study which gave them a more realistic perspective of the target market.
Not much different from the above successful case, we have also seen happening witha mass product company. After a market research conducted to test the best package option, a beverage company increased their sales in 8% when they replaced their beverage with a new, morefriendly and more attractive package according to consumers’ eyes. In another situation, market studies could save a company reputation. We sawa case of a companyup-ranking to 35% top of mind after being for consecutive previous years only on the 5% level, all due to an image repositioning strategy based on image and consumer perceptions’ studies.
In another case, company had even lost important clients, but after a market repositioning strategy, they recovered at least 25% of old clients.They noticed they did not previously comprehend the large existing communication gap between their services offered and what their consumers really wanted. Once they used the right techniques to listen to them through a professional agency, the consumers felt free to express their real feelings and opinions about their services and could say the pain points for them. That was a win-win end: clients more satisfied and more profitable company.
Wide-ranging times companies think they need additional budget to conduct market researches and end up not priorizing this instrumentbased on the ideait is a superfluous tool. However, experiences prove exactly the opposite: investing in research from the beginning means saving money and avoiding loses or increasing gains in the future.That was what happened with a client in need of launching a product in the market but had a small office with a reduced staff, that means, they were not a large company, but they needed to know if it was worthwhileto introduce a specific vitamin in that particular country. They really needed to make it work and their jobs basically depended on the success of that product, but also was imperative for them to identify the best successful ways to communicate to that market and who the real target was. The result was not only being able to include the vitamin in the market, but for 5 consecutive years, they are already part of the permanent portfolio of 2 of the largest retails in the country.
Therefore, several times, it is just better to organize and do planning based in numbers and market studies in order to distinguish the best directions to take instead of supposing this or that decision is the right one just because it worked well one day or in another place. Guessing sometimes can work, but, most of the times, this is pure luck. Better not always counting on it!
Author: Geisa Rodrigues, AG3 Consulting diretor, Market Researchagencybased in Brazil, coveringLatinAmerica.