CHAPTER | TWENTY-SIX
If You Conduct Marketing Research, Conduct It Right
Marketing research is taught in every business school. There are thousands of marketing research firms in every big city, and an awful lot of them in small towns, too. So everyone knows that you must do marketing research. However, Drucker uncovered a startling fact. Much of this research is wasted, misinterpreted, or misused, and probably shouldn't even be attempted. His advice was: Better not to do it at all than to do it wrong!
As has been mentioned in earlier chapters, IBM, for years the leading manufacturer of huge corporate computers, researched the market for personal computers long before Steve Jobs and Steve Wozniak came along. IBM was neither a novice nor a patsy, by anyone's mea-surement. They did a thorough job and their marketing research cost a bundle. After much work, numbers crunching, and analysis, the IBM researchers concluded, with little margin for error, that if IBM invested the millions necessary to develop a personal computer for home use, the total number that could be sold would amount to no more than 1,000 units a year. So overwhelming and so convincing were the marketing researchers that they were able to dissuade management from this terrible waste of time, money, and resources. IBM dropped the whole personal computer idea.
This left the way open for Jobs and Wozniak, of course, who had done no marketing research at all. Yet they founded a billion-dollar industry that changed the world. Steve Jobs later said, “A lot of times people don't know what they want until you show it to them.” The Wright Brothers would have agreed. They had a terrible time marketing their airplane to the U.S. Army. It took years, even after they made their first flight in 1903.
Drucker had said it many times before: “One cannot do market research for something genuinely new. One cannot do market research for something that is not yet on the market.”1 He argued that there was always risk with something new, that it was always a gamble, but that this risk could be reduced or minimized. He considered marketing research as conducted by most of us as the wrong prescription for doing this, however.
Reducing Risk with Reality Testing
How can you reduce the risk if you don't do marketing research? One way to lower the risk in this gamble is “the test of reality.”2 In other words, get something out into the market and see what happens. Yes, in a way this is some sort of test marketing. However, it needn't be expensive or dependent on sophisticated numbers crunching.
Dr. Richard Buskirk, who headed up the entrepreneurship program at the University of Southern California for a number of years, said much the same thing: “I tell my students not to waste time and money on marketing research. Get out there in the marketplace and start trying to sell your product. You'll find out soon enough whether you're going to be successful.” I suspect Drucker would have classified Dr. Buskirk's approach as “reality testing,” though perhaps limited to projects requiring only a small investment.
When Lee Iacocca thought about reintroducing a convertible into a market that had seen few convertibles over the preceding generation, he called a meeting of his design and production staff at Chrysler. He told them, “Cut the top off one of our standard sedans,” and he gave his staff a day to get the job done. The next day, the team met with Iacocca to present the plans and drawings using a current model, but with new tooling to incorporate a feature that would fold the top into the trunk. The plans included cost estimates and approval points. They had worked all night to get this done in only twenty-four hours, and they were pretty proud of their accomplishment. “No,” cried Iacocca. “You don't understand. I want you to cut the top off of one of our cars and have it ready for me this afternoon.”
According to corporate legend, if Iacocca did any quantitative analysis in this research, it was that he counted how many people waved as he drove this ad hoc “convertible” around town.3 This, Drucker would agree, was “reality testing” at its finest.
Along the same lines would be the introduction of a limited amount of product into the market or into a limited geographical area. Drucker's argument was that too much effort in marketing research is expended on complicated questions that are meaningless when, as Steve Jobs said—words to the effect—it's difficult to fully explain a product that doesn't exist. I am reminded of an early advertisement for thermometers that were to be inserted in the ear to measure body temperature. The ad read: “What do you think they thought when patients were told where they were to insert the original thermometer for home measurement of temperature?” In any case, it's not the marketer who defines a new product or service, it's always the customer.
Even a Product's Use Is Defined by Its Customers
DuPont introduced the product Kevlar in the early 1970s. This is a super-cloth whose fibers have five times the tensile strength of steel. The marketers thought it would make an excellent substitute for the steel reinforcement in heavy-duty tires. It did, but it made even better fragmentation-protective body armor. When impregnated for rigidity to protect against blunt trauma, it also was excellent for the protective helmets worn by ground combatants. Those helmets are used by U.S. troops today, and they provide much more protection than the old “steel pots” worn by soldiers to protect the head during World War II and in Korea and Vietnam.
Drucker warned that marketers who are introducing new products or services should start with the assumption that people might find other uses never imagined when the products were designed and introduced. I recall that, as a West Point cadet, the most effective way to get a quick shine on shoes was with 5-Day Deodorant Pads. And this offbeat use wasn't confined to West Point. A professor of nutrition at the University of California, Davis, recently recounted his ROTC days at UCLA: “I learned quickly how to use 5-Day Deodorant Pads for that mirror finish on my shoes that was required for passing inspection.”4
I don't know whether anyone from the company manufacturing those deodorant pads ever tried to exploit this additional market. They might have even gotten a little upset had they known of this use—but our shoes must have smelled pretty good. The point is that this kind of thing happens. Drucker related once how German chemist Alfred Einhorn, the inventor of the anesthetic drug Novocain, went all around Germany in the early 1900s trying to convince dentists not to use his product (see also Chapter 29). That's because it was intended for use by medical doctors, not dentists. We all know how that turned out.
What You Need to Know About Customers
Marketers are on the right track, according to Drucker, when they seek to learn who their customers and potential customers are, what they buy, where they are, what they read or watch on television, and so on. However, he found that few marketers ask perhaps the most important question of all: What do customers and potential customers value?5 He stressed this, again and again. It doesn't matter what the marketer thinks is important or what is or is not a competitive advantage. Rather, it's what the customer thinks is an advantage of the product or service.
What does the customer value? What the marketer defines as quality and how the customer defines quality may be entirely different. This is why it's important to do some research outside your regular channels, looking at companies and products that are not your direct competition.
Indirect Competition Shouldn't Be Neglected
Indirect competition is a claimant on your potential customers’ disposable dollars for what they value. Sufferers who take pills to cure headaches want fast, effective, long-lasting relief. So, too, marketers compete head-to-head on this basis and boast about these qualities in their drug products to “cure” headaches. However, vitamin supplements are growing by leaps and bounds as a treatment for headaches, as are other competitive methods, from acupuncture to meditation. What customers really want is to avoid the pain, and therefore something that does this well is what they really value. If a method is effective in preventing or curing headaches, people will use it, no matter what it may be.
Until I was fourteen years old, I suffered from terrible headaches. Then one day I heard on the radio that any headache could be stopped cold without drugs of any kind. The year was 1951, and my father hadn't yet agreed that we needed a television. (Yes, I'm that old.) This could be done simply by pressing gently and simultaneously at the mid-forehead and at the base of the skull in the neck. Suffering with a bad headache even as I listened, I immediately applied this advice. Guess what? My headache vanished, and I haven't had one since. Before you rush to try this cure, however, I should tell you that, though I tried it dozens of times later, with many other people, it never worked again with anyone else—with this one exception.
I was on a flight from Washington, D.C., to Los Angeles. My assigned seat was next to a boy of about ten or eleven, who was in some agony and had a wet washcloth on his head and was emitting sounds of discomfort. Before I could ask what was wrong, a stewardess rushed up with a replacement washcloth. She explained that the boy had a severe headache, but because he was traveling alone and was underage, she wasn't permitted to give him any form of headache medication. The stewardess mumbled some words of encouragement to the sufferer and rushed off.
I told him that I didn't know whether the technique I had used successfully years before would work, but he was welcome to try it if he wished. I explained what to do. He did what I told him and an immediate smile appeared on his face. “Thanks, it's completely gone,” he said as he removed the washcloth. About that time, the stewardess came up with another wet washcloth. She started to make some sympathetic remarks, but he told her, “It's okay. I don't need anything now. He fixed it for me.” He pointed toward me. The stewardess immediately launched into a tirade, threatening me with arrest and stating that it was against the law to give even minor headache pills without the parents’ permission. I explained what had happened and the boy backed up my story, but you could see by the look on her face that she didn't believe a word either of us said.
In any case, Drucker recommended that marketing researchers be most concerned about indirect competition. And if that method of headache cure could be made to work more reliably, the makers of headache pills would really have something to worry about.
Peter Drucker advised doing marketing research, but doing it in the right way and focusing on doing the important, relevant issues—not the less important, minor aspects of the market or market matters. We don't do marketing research for statistics; we do it to give us real insight. Shall we introduce a new personal computer or a drugless headache cure? Do a reality test.