Market research is (often) worthless. Here’s why.
Ian Lurie Dec 13 2010
This post is by Bruce Lee, marketer and marketing writer.
Here’s the short version: Knowing that someone has disposable income doesnʼt tell you what they want to spend it on.
I used to work for a (retail) company that had fairly deep pockets. Occasionally, we would reach into those pockets to buy market research.
Our database was scrupulously maintained, and could tell us basic stuff about our customers, such as name, address and complete purchase history. The market research companies we hired promised to expand on that data and provide rich demographic information about the folks in our database.
You can guess the next step. In strict adherence to the “birds of a feather flock together” model of marketing, the research company would then offer to sell us information (names and addresses, mostly) of people who were just like our best customers, with one distinguishing characteristic: they had not yet made a purchase from us.
Makes sense right? And especially tempting since, like nearly all retail businesses, we spent such a seemingly inordinate amount on trying to attract new customers.
Just one little problem: It didnʼt work.
For our tests, we came up with a very attractive offer and sent it out to three groups: Past customers; people who had a similar profile to our customers but had never purchased from us; and an equal number of randomly-selected households. All were within the same geographical area. Hereʼs how it shook out:
The results were the same in three different trials, using three different profiling techniques.
I have mixed feelings about this. All thinking people should.
As a marketer, I was of course disappointed by the results. Everyone in business is always looking for the straightest and truest path to new customers. Intuitively, we are attracted to the concept that past behavior can reliably predict future behavior, and, to a degree, this is true. In our case, for example, we could reliably predict that people who were previous customers had a much higher likelihood of buying from us again, compared to folks who had never before made a purchase from us.
I’ll say it again, with feeling: Knowing that someone has disposable income doesnʼt tell you what they want to spend it on.
What we couldnʼt seem to find, however, was an accurate profile of those individuals who, while not having yet shopped with us, still had a higher predisposition to do so.
The reality is that people are not that predictable regarding at least some activities in which they have never previously participated. In our case, just because someone had a profile that was in many ways very similar to that of our best customers, didnʼt mean he had any higher likelihood of buying high-end electronics.
Which, if you think about it, makes perfect sense in light of our everyday experience. Just because someone has disposable income doesnʼt tell you what they want to spend it on. Skiing is a relatively expensive activity. Yet we all know wealthy people who wouldnʼt dream of going to the slopes and poor students who somehow manipulate their budgets to indulge their hobby. Itʼs the same with all sorts of non-commodity goods and services: wine, boats, concerts, travel…even relatively inexpensive activities such as movies or attending sporting events.
So, while as a marketer, Iʼm faced with a remaining challenge, as a member of the human race, Iʼm delighted that each of us is ultimately unpredictable – similar in many ways – but unique.
Ian Lurie is CEO and founder of Portent Inc. He's recorded training for Lynda.com, writes regularly for the Portent Blog and has been published on AllThingsD, Forbes.com and TechCrunch. Ian speaks at conferences around the world, including SearchLove, MozCon, SIC and ad:Tech. Follow him on Twitter at portentint.He also just published a book about strategy for services businesses: One Trick Ponies Get Shot, available on Kindle. Read More
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