Henry Ford once commented that had he asked customers what they wanted, they would have said “a faster horse.” As Ford knew well, market research can have many pitfalls.
However, market research is an integral part of any business. From the conceptualization stage of a new venture, to a vast expansion effort by a Fortune 500 company, a business is always better off for adhering to the old adage “know thy customer and thy market.” For more mature companies, such research most often plays a role in the process of innovation. Gauging market sentiments helps to identify opportunities to service new customers, better serve existing ones, or revise current business strategies.
So often, though, we see huge corporations spend small fortunes on market research, only to launch new products that fail with epic proportions (remember Crystal Pepsi?). How can it be that after going through highly standardized practices for these investigations that companies come back so far from the mark?
One school of thought suggests that it is not the tools of market research, but rather their misuse, that can send a company down the wrong track. Talking to the wrong customers and asking the wrong questions can be exacerbated by having the wrong members of your team interpret the data. On top of that, there are times where even when presented with the proper research, improper decisions are made. As any or all of these factors can corrupt your research efforts, the process begins to look more and more daunting, with few reassurances that the right decisions and strategies will appear.
In order to combat the problems that result from faulty execution of market research, it is important to take a step back and examine what the goals are of traditional market research. The first, most common experience companies have with market research is typically during their initial business planning efforts. While sometimes for these young firms market research is involved with product or business conceptualization, oftentimes it is more of an after-thought, serving the purposes of a pre-existing business model. That means that many companies can become accustomed to the inappropriate practice of using market research as a justification for what they already intended to do, rather than a tool which can guide their foundational efforts. Once a company develops this bad habit of using market research to show them what they want to see, they are forever trapped in a loop of misusing market research tools, and going about the process the wrong way.
To properly execute on market research, the most important thing you can do is to open your ears. First, this means not engaging your most demanding customers in the process. Yes, you want to do your best to keep this category of client satisfied, but true innovation will result from learning more about your worst customers, or the one’s that don’t exist yet. Looking outside of the box (or in this case, past the evangelist pool) will help you to see the forest for the trees. Next, with Henry Ford's adage in mind, avoid asking questions that directly ask what your existing customers want. This might seem counter-intuitive at times. However, focusing on creative solutions to a market need will help anchor your research, and the conclusions you will pursue.
Earlier this month, Walt Disney Co. made an interesting decision regarding their theme park pricing strategy. Faced with slowing sales growth at home in the US, the company decided to raise the price of one-day admission at its largest resort by more than five percent.
While the five percent hike for children and 5.6 percent hike for adults at Walt Disney World only resulted in increases of approximately four dollars, the decision was a controversial one that lead to business pundits both supporting and chastizing the company.
When your company is faced with the effects of a recession, like slowing growth or decreasing sales, what is the real best course of action?
Like with most things in business: It depends.
A good rule of thumb however, is that unless your company is renowned for its low pricing, you're safe to raise your prices. That doesn't mean you can start charging $16 dollars more for your cheeseburgers, but it does mean you have some flexibility. Making an honest assessment of how pricing impacts your clientele will position you to make necessary adjustments.
For Disney, the assessment could have looked as simple as this:
The number of people who will take vacations this seasons will undoubtedly drop a bit when there is so much widespread emphasis on pinching pennies. That said, for those families that do take the initiative to hop a flight, rent a car, and/or put every one up in a hotel for a few nights, the difference between $71 and $75 dollars for admission will not be the straw that breaks the camel's back.
While price is an important factor in purchasing decisions, the vast majority of people don't buy based on price alone. They buy based on value. However, a larger percentage of consumers will buy based on price alone, in the absence of any other value indicators. The key is to effectively communicate your value.
When you start to feel the squeeze of a slowing quarter, don't be afraid to go against the initial instinct that many have to drop prices right away. Sometimes, boosting your price can be just the tool you need to get you over the hump and get back to making money.
Growthink is happy to announce our upcoming work with Safari Air, the world's first carbon-neutral luxury private airline. As a strategic advisor to the airline, Growthink will assist with business development, growth strategy and marketing initiatives.
Safari Air is an exciting fusion of luxury service and eco-friendly philosophy. Through an innovative pay per seat model, clients will have premium access to Honolulu, New York City, Puerto Vallarta, and Cabos San Lucas. Flights will possess everything from concierge service and MacBook laptops to an unlimited selection of Netflix movies. With a keen eye on luxury, Safari Air has still found a way to incorporate a green mindset and has made a unique commitment to operate without a carbon footprint.
Safari Air joins the growing roster of Growthink's engagements in the alternative energy and carbon mitigation space. We're glad to welcome Safari Air to our exciting list of clients!
As individuals and businesses alike struggle to deal with a wayward economy, one of the first things we can do is look outward for tools and techniques to help weather the worst of the storm. Fast Company founder Bill Taylor recently examined three companies that seem impervious to market fluctuations and the economic turmoil faced by their respective competitors, and the lessons we can draw from their successes.
Honda, Netflix, and Southwest Airlines are the companies that make up last quarter's victorious triumvirate. While Detroit automakers have been suffering from staggering losses here at home, Honda has reported $1.7 billion in profits. Netflix has reached a subscriber base of 8.4 million households. And as airlines continue to flounder, Southwest Airlines showed a 15% increase over last year, hitting just over 17 years of consecutively profitable quarters.
What are the common threads between these companies that keep them flying high while others scrape by or shutter their doors?
1. Connect with Your Customers
Forging a relationship that goes deeper than the nuts and bolts of the product or service your company provides is a crucial component of success, especially when financial outlooks across the board are bleak. Relationships rooted in identity and emotion help a company tip from useful to essential.
2. Go Big or Go Home:
It used to be really easy for companies to aim for the middle. By being decent at a variety of things, they could hit the widest part of a market's bell curve. While that was a sound technique in the past, it is no longer the case. It is now integral to corporate success to be the best at something. A company must, with no exceptions, determine what they are the best at and execute on it. As Taylor states, "Southwest has always managed to combine low fares with great service--anything else is a distraction." By being the most affordable, having the greatest customer service, or providing the most exclusive product, a company can distinguish itself in the mind of the customer.
3. Be Yourself, Even When Things are Changing:
This rule might be "easier said than done" for many companies, but it holds true. To succeed, a company must stand by what they believe in. While it is important to test and tweak strategies, the overarching approach must be a steadfast attachment to your plan, and the value proposition you've developed in the aforementioned stage of defining your businesses' strengths. While many large companies like Ford appear to be in constant "react" mode, rushing to adapt in light of market conditions, companies like Honda reap the rewards of embracing their long term strategies. Finding consistency in your business will give success an opportunity to find you.
For the growing business, the implementation of carefully targeted, high-quality marketing initiatives can make all the difference. The world of marketing, however, consists of a broad amalgamation of techniques and sub-disciplines that should, ideally, work harmoniously to convey what people need to know about your business. How does a company ensure that they’ve maximized the variety of options that marketing can provide?
Guerilla Marketing guru Jay Conrad Levinson recently wrote his thoughts on the most frequent mistakes companies make with their marketing initiatives. Through a list of 11 missteps, the problems are effectively boiled down to three main misconceptions:
1) The heart of marketing lies in the superficial, the “whiz-bang”, or the punch-line.
2) A business only needs one marketing mechanism at a time.
3) If the marketing is good enough, the results will be quick and earth-shattering.
The first of these errors takes hold when marketing executives lose site of their main purpose, which is to motivate people. Distracted from the primary mission, they might aim for a clever or humorous marketing stratagem. This is a trap. While humor or cleverness can successfully engage a potential client or customer, chances are those elements will overshadow the product or service you’ve set out to promote. Similarly, too much emphasis on entertaining your audience can eclipse your product or service as well. The job at hand is to make the truth fascinating – not to entertain for the sake of entertaining.
The second common mistake, especially in the case of many small businesses, is under-executing-- implementing only a pinch of the marketing ingredients at your disposal. Marketing areas such as direct mail, telemarketing, brochures, or phonebook advertisements, when executed properly, can provide a fantastic ROI for the growing company. Any of these elements alone, however, is just a drop in the bucket and can prevent you from reaching the full breadth of your target audience. Diversifying your marketing initiatives isn’t an extravagance – it’s a necessity.
The last, and arguably the biggest, misconception is that marketing is a “panacea” for the business; one that results in customers breaking down your doors moments after the launch of a campaign. It is true that strong marketing efforts will (and should!) correlate to increased profits, but it’s seldom overnight, and it’s wrong to expect miracles. As will many other aspects of growing a business, patience is a virtue.
So if these are the misconceptions, what is a true picture of marketing? As stated by Levinson, "Marketing is an opportunity for you to earn profits with your business, a chance to cooperate with other businesses in your community or your industry and a process of building lasting relationships."
Imagine you are at a job interview. Right before the interviewer offers you a position he states, "Unfortunately, I cannot tell you the details of our project. You will have the opportunity to make mistakes and struggle, but eventually we may do something that we'll remember the rest of our lives." Would you eagerly jump at this project or would you stand up and walk out?
This was the real life scenario created by Scott Forstall, the senior vice president of Apple, who assembled the iPhone development team. He called in a handful of stand-out Apple employees from various departments in the company to speak with him, and only those who quickly leaped at the opportunity were offered positions. Forstall's approach to recruitment was based on the belief that the new project’s success would be dependent on individuals who were more attached to challenging themselves and pushing boundaries than the ego gratification that came from shining where they already were. In a recent New York Times article, such individuals were described as possessing a “growth mind-set.”
This classification was derived from the research of Carol Dweck, a Stanford psychologist and author of “Mindset: The New Psychology of Success.” She has carefully studied the ways in which people approach life, and research suggests two main groups: those like the aforementioned Apple employees who believe their own abilities can grow and change, and those who believe that talents and intelligence are intrinsic and unchanging (referred to as a “fixed mind-set”.)
These simple classifications can have a remarkable impact on all aspects of one’s life and likelihood to succeed. In her work, Dweck has found that a growth mind-set almost always trumps a fixed mind-set, due in part to the fact that many with a fixed mind-set are overly invested in the reputation of their talents, resulting in a fear of making mistakes and an attachment to looking smart. Dweck has said that those with a growth mind-set, “are the ones who really push, stretch, confront their own mistakes and learn from them.”
Case studies on many top executives from the ranks of General Electric, IBM, Xerox, and others show that a growth mind-set can not only lead to personal successes, but can revolutionize a work-force as well.
Which mind-set do you lead with?
Before the ink has dried on newspapers reporting the impending close of 600 Starbucks locations nationwide, news has surfaced that clothing retailer Steve & Barry's is preparing to file for bankruptcy. For many years, both the coffee giant and the clothing chain have been two of the most-discussed, high-growth companies. So what has gone wrong?
In the case of Starbucks, the general consensus among the business blogosphere is that the company, eager to appease investors, embarked on a path of overly-ambitious expansion. Shifting their focus away from the customer and toward the bottom line, Starbucks abandoned their thorough location-finding talents to map out several hundred new stores.
A new Starbucks cafe can have a tremendous impact on a local real estate market. The arrival of the white-green-and-brick facade in a neighborhood represents a "stamp-of-approval" for the neighborhood, and has nearly become synonymous with modern gentrification. This being the case, landlords began to make attractive deals with new storefronts, sometimes offering several months in free rent to a Starbucks willing to open its doors on their property.
Rushing quickly to fill these locations with baristas and customers alike, Starbucks began to take advantage of such real-estate perks. It appears such perks started to motivate location selections more than the high-quality demographic research the company is known for, as over 70% of the proposed store closings will be locations opened within the last two years.
As the markets suffer uneasy fluctuations, it also becomes difficult for landlords to continue such “sweetening” efforts for the coffee juggernaut, as well as for other large retailers.
Another such company is Steve & Barry’s. Though the retailer has experienced annual sales over $1 billion and solid performance in their newest stores, it still suffers from small margins due to their discounted pricing strategies. Their rapid expansion became dependent upon such real estate perks, which have all but frozen in the current market.
There are numerous ways out of the frying pan for Steve & Barry’s, including possible acquisitions. And Starbucks is only predicted to take a short-term media and investor relations hit from the news of the store closings. But still, the question remains: Is it possible to grow too fast? And when is aggressive expansion a bad idea?
Expansion is a bad idea when it is more opportunistic than strategic. That’s not to say that companies shouldn’t take advantage of opportunities they spot, as that would be counter to the nature of entrepreneurial business growth. What it does mean, however, is that they should approach any expansion with a careful and well-mapped out plan. Once the business has documented their vision, it should ask if it is pursuing growth in the best interest of the company, or whether it is growth only for the sake of growing.
Both Starbucks and Steve & Barry’s took advantage of market conditions to fuel expansions that were ultimately unsustainable.
From the entrepreneur’s perspective, growing “too fast” would seem like a great problem to have. But if the growth is more opportunitistic than strategic, it can be unsustainable and carry unforeseen risk.
Has your business experience rapid growth?
What were the pitfalls, if any, that you encountered in the process?