Marketing Research Can Even Tell Us When NOT to Act

Companies seek several different benefits from marketing research: determining the best ways to communicate with their customers, identifying opportunities in the marketplace, discovering problems, setting benchmarks, and tracking progress. Companies often overlook – or don’t want to accept – another benefit of marketing research: particularly the benefit that tells them not to pursue a particular pricing, promotion, or market entry strategy.

Frequently, companies are under pressure to develop profitable products and services that give them an edge over the competition. When companies develop new products, it’s not uncommon for their product developers, sales force, and other employees to “fall in love” with them long before any research confirms whether those products are actually viable. Or, a top executive may be so eager to go into a perceived underserved territory, that he or she wants the research to prove the territory can provide sustainable revenues and market share. When executives feel this strongly about their products or strategies, they do not want the market research to tell them otherwise.

Yet, marketing research can also be used to minimize the risk of an undertaking. If the findings tell executives at an American company not to enter the Canadian market, then the marketing research effort has saved the company potentially millions of dollars. But the benefit of risk minimization is a “negative benefit.” It is human nature for people to ask themselves “what if?” when they don’t embark on something they wanted to do. Unlike when a course of action is taken, we cannot know how unreceptive target markets are, how unprofitable a market is, or how competitive it is, since the action wasn’t pursued. And this is why companies fear marketing research telling them not to act.

Another reason companies don’t actively seek the research benefit of risk minimization is because it may imply that their product concept was flawed or wrong in some way. But just because marketing research tells a company not to pursue a particular course of action, it doesn’t mean the product, pricing, promotion, or distribution strategy was flawed. It just means that that particular market or target segment is not receptive to it, or has no need for it, or might not be large enough to be profitable. In fact, the marketing research may suggest alternative courses of action.

Finally, companies worry that if they spend money on marketing research and the findings prove they shouldn’t take the desired course of action, then the money spent to commission the research is wasted. But that’s not necessarily the case. If there is considerable uncertainty about a market, then doing the research can help companies learn more about the market. If the company spends $5,000 to do marketing research, and the results suggest the company might lose $50,000, then the company lost less money than if it had charged ahead with unaided judgment. In this case, the $5,000 was an investment to purchase more certainty before making a decision.

When companies receive marketing research results that tell them not to take certain actions, they should view the investment in marketing research the way they would car or fire insurance premiums. Typically one purchases insurance in the hopes that he or she never needs it. Marketing research, done properly and in an unbiased fashion, insures against executives making bad marketing decisions.

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