 How much research is enough? When should you spend the money and time to get an answer?
Research is a wonderful thing. It can tell you if you have the best package. It can tell you if your target audience is correct or not. It can tell you if your product is preferred or needs improvement. With research you can tell if your advertising is being recalled and if it is persuasive or not. Research can help you determine the optimal price for your product and if one direct mail campaign generates more response than another. Research can tell you what parts of your service or product your customers value most and how your offerings compare to those of your competitors.
I am a big believer in research and believe in the old saying that if you can’t measure it you can’t improve it. Many of the leading Lean and Six sigma initiatives are really research based. Constant research leads to continuous improvement. Given enough time and money you could research everything and get some very wonderful information to help you run your business. The problem is research is often expensive and time consuming. In fast moving markets you often have to make decisions before you can research every detail.
In situations where you have an ongoing process or repeat similar programs over time constantly testing new options is a great way to improve your product or service offerings and pricing. The practice of constant testing also leads to better management skills and improvements that you might not have otherwise considered. You should not worry about minor variations unless there are major dollars at stake. The thought process of coming up with perceptibly different test variations even if you don’t do the research can often stretch the way you think about your business and generate unique solutions, promotions and product enhancements that otherwise never would have seen the light of day.
To decide if a research project is appropriate and worth the cost ask yourself the following questions:
- If you had the answer to your research question what would you do with it?
- Will the answer help you make a better product?
- Will the answer save you money on advertising or get a better response to your sales efforts?
- Will the answer help you position your product better versus your competition?
- How long will it take to conduct the research?
- Will the answers you get still be relevant when the research is completed or will the market conditions have changed?
- Will the answer help you become more efficient or make more money?
Not all research will yield positive results so the research dollars spent testing ideas that don’t payout need to be more than paid for by those that do. In general you probably should not spend the money researching something unless you can expect to get at least four to five times your research investment back from the decisions that the research results will help you make. For example if you spend two thousand dollars conducting a test of a different catalog order form and discover that one of the test versions can increase your order response by .02% making you $10,000 more in profit you have just received a five to one return on your investment. This was money well spent if in the same test you had two other options that either lowered your response or increased it by lesser amounts. Sometimes you don’t get the results you were looking for but the research may keep you from doing something that might have cost you many times more than the cost of the research, in which case it was still money well spent.
Remember that research is just a tool to help guide management decisions. If you try to research everything you will never make a decision. Since markets and competition are constantly changing you can often expect even the best research to yield at best perhaps three quarters of the information you really need. The rest you will have use your judgment for and continue to learn from your decisions and continue to research and repeat the process.
About the Author – Scott Francis is President of Topline Development LLC a Strategic Marketing Consulting Group that provides helps companies determine how they can make the most amount of money with the least amount of resources. To learn more about Topline Development LLC visit their web site at www.ToplineDevelopment.com or contact Scott directly at scott@toplinedevelopment.com. |
