On the Edge: Market Research - Hunting for Value

08.01.04
By Deborah McMurray

Harry Beckwith, in his popular 2000 book, The Invisible Touch, discusses the limits of research. He talks about the unreliability of subjects, and says, "People who know they are being studied change what they [normally] do."

He continues, "Researchers tend to find what they are looking for,"—they lose their ability to see other information. Beckwith states, "Research does not expose the truth; it blinds us to it. Seek understanding, but beware of research."

There is one belief in marketing circles that innovative, new ideas should be tested with market research before investing in them. New products, a new geographic focus, new distribution channels or new pricing structures—how will people feel about the innovation? Will they buy it? Change existing behaviors or choices to adopt it?

What about a brand new idea? Not an extension of an old one, but something that’s never been done? History has proven that research is not helpful in testing completely new ideas. Beckwith illustrates this with several examples, such as Disneyland, the personal computer and Federal Express. He suggests that the more innovative the idea, the smaller the number of people who will understand it. In research studies, when asked, "Would you buy (insert new product or service)?", most respondents say "no." And a lot of companies have listened to the researchers and abandoned the hair-brained or revolutionary idea.

What if Fred Smith had listened to his business professors who said that Federal Express would never fly—that people would never buy overnight delivery because it was too crazy an idea?

Here is another example that suggests that customers often can’t visualize revolutionary products, concepts or services. Nirmalya Kumar, in his 2004 book , Marketing as Strategy: Understanding the CEOs Agenda for Driving Growth and Innovation, uses Swatch as an example. "The Swatch models that received the highest intention-to-purchase rating in consumer research looked like traditional watches, but they ultimately garnered few sales. The more radically different Swatch models that rated the least likely to sell were subsequently the bestsellers." Kumar adds that customers didn’t clamor for Starbucks coffee or CNN prior to their introduction. And, he reminds us that David Glass, when CEO of Wal-Mart, said that Sam Walton’s idea of putting Wal-Mart discount stores in major cities would never work. And he had data to prove it.

Market research is increasingly a substantial part of marketing budgets in large law firms. Marketing professionals have lobbied for this for years, but law firm leaders have been slow to believe in research’s bottom-line value.

Perhaps surprisingly, CEOs in corporations also remain unconvinced. Kumar worries that "the imagination and attention of CEOs have shifted" away from marketing and…"marketing academics have bemoaned marketing’s declining influence in organizations."

The Conference Board conducts an annual survey of CEOs. In 2002, CEOs identified "customer loyalty and retention" as the leading management issue.. Reading Kumar’s book, it’s clear that he believes that traditional marketing "functions" are, in fact, too "functional" and not transformational enough. "Most of the traditional activities under the control of marketing, such as market research, advertising and promotions, are perhaps the least important elements in creating customer value." Hence, the natural divide between the marketing department and what keeps the CEOs awake at night.

Later in the book, Kumar distinguishes between market-driven organizations and ones that are market-driving. Market-driven companies "develop appropriate products and the desired image for their target segments based on market research." In contrast, market-driving firms lead by vision, where the "generation and development of ‘the idea’ is a combination of serendipity, inexperience and persistence." Market research is an important part of market-driven organizations, but typically not a part of market-driving ones. Market research may lead to incremental innovation, but rarely to visionary innovation and explosive success.

Law firm leaders typically don’t have high tolerance for serendipity or inexperience. But, would incremental innovation in a law firm be noticed by sophisticated clients? Perhaps not. Clients WOULD notice if a firm changed the rules of the game by reengineering the delivery of legal services or taking advantage of a new opportunity that could create new market value.

We are bound by a lot of assumptions in the legal industry—about how things should be done. And, legal marketing is no different. Maverick ideas often clash with prevailing industry intelligence. Kumar concludes that "Top management must find room and resources for radical innovation or the market leader risks being leap-frogged and deposed by upstart market-drivers."

While Beckwith concludes that "Research supports mediocre ideas and kills great ones", market research can serve as a useful tool in the law firm. For us to challenge Beckwith’s conclusion and prove market research’s value to law firm leaders, we must understand both its utility and its limitations.

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