2016-12-26

How do you find out what your customers think about you? For most people, the obvious answer is “market research”. It’s the go-to method most businesses use to find out what their consumers think about them or their new product ideas – and they spend a lot of money obtaining these customer insights. And why not? Of course you can find out what people think just by asking them, right?

But here’s the problem – market research assumes that people know what they want. As much as we like to believe our decisions are based on rational, logical grounds, what really guides our decision-making is our unconscious mind. According to Harvard marketing professor Gerald Zaltman, up to 95 per cent of our decision to purchase happens subconsciously. Which is why most market research findings are unreliable. How can consumers be expected to explain their thought processes behind a purchase that was made entirely beyond their awareness?

WHY MARKET RESEARCH IS UNRELIABLE

In Consumer.ology – The Truth about Consumers and the Psychology of Shopping, consumer behaviour expert Philip Graves states:

“Traditional marketing theory preoccupies itself with meeting customers’ needs, but market research can only identify those needs of which customers are conscious.”

He argues that market research, which is a conscious process, is ultimately flawed because the real driver of consumer behaviour is the unconscious mind.

Graves explains that what someone thinks they want and what they say they want (because it seems logical and reasonable to their conscious mind), often conflicts with their unconscious mind when it comes down to it in the real world. He uses Google as an example to demonstrate this conflict between the conscious and the unconscious mind.

Most people, when asked, will say they want more choice. Which is exactly what Google found when they asked people how many search results they wanted to see on each page. A rational question, to which people responded in a rational way. Of course the logical answer is more choice. But when, based on the research, Google tripled the number of search results provided, traffic declined. It turns out, in the real world, people didn’t want more search results at all.



The famous Henry Ford quote above (although there is some debate over whether or not he actually ever said this) is often used to support the argument that it is a mistake to ask people what they want. Apple knows this: “We do no market research,” Steve Jobs told Fortune Magazine in 2008.

“We did iTunes because we all love music… the reason that they (the team) worked so hard is because we all wanted one (a music library)… I mean, the first few hundred customers were us.”

Had Apple conducted market research into the iTunes concept (or any of their products), the collective opinion the research formed could well have shaped Apple’s opinion and final decision. Would we have the Apple products we arguably can’t live without today had they asked us what we wanted every time they thought of a new product?  Even without the use of market research, Apple has always created innovative products that resonate with consumers.

THE CONFLICT BETWEEN THE CONSCIOUS AND THE UNCONSCIOUS MIND

Our unconscious mind is continually screening and filtering a tremendous amount of information, much of which is never brought to our conscious attention. But our behaviour is influenced by this information, even though we are not aware of it.

What we see, hear, smell and feel influences our behaviour to a huge degree, as demonstrated by the following examples:

45% more was spent on slot machines in a casino after a scent was released into that particular area

People at a nightclub stayed and danced longer when the venue was scented with peppermint, orange and seawater

84% of people preferred a pair of brand new Nike running shoes in a floral scented room compared to an identical pair in a non-scented room

People spent significantly more money in a restaurant when classical music was playing compared to when pop music or no music was played

People in a wine shop purchased significantly more French and German wines when French and German background music was played

Had you asked any one of those people why they made the decisions they did, not one of them could have told you that it was the smell or sound of their surroundings that had influenced them.

The fact is, people are rarely able to account for their decisions.



Image Caption: Freud used the iceberg analogy to demonstrate the level at which the unconscious mind rules behaviour… something most companies conducting market research would do well to remember.

There are so many different factors and variables that go into a purchase decision that it is impossible to take what someone says in a customer survey or a focus group seriously. People think, feel and behave differently depending on the environment they are in and who is there at the time. They will give a different response to a question depending on how it is being asked and where it is being asked, and tend to agree with the majority of a group, even if this contradicts what they really think. Graves says:

“Unconsciously processed elements exist in every consumer experience. We don’t buy products in white-walled, sterile laboratories devoid of smells or visual content.”

And that is one of the biggest problems with market research. It removes consumers from the environment in which those decisions would be made in the real world. Which means the answers they give are based on decisions being made out of context. And by placing people in a certain environment in order to conduct the research, the act of market research itself influences the responses that people provide.

Ultimately, market research manufactures a response.

5 BRANDS WHO LOST MILLIONS BECAUSE OF MARKET RESEARCH

There are numerous examples in Consumer.ology demonstrating how asking customers what they think has spelled disaster for some brands who failed to understand the importance of the unconscious decision-making process. Here are some of the most significant:

Coca-Cola – New Coke

The story of the epic failure of New Coke is infamous. Back in the 1950s, Coke was outselling Pepsi by five to one, but by the 1980s it controlled just 24 per cent of the market share. This was largely a result of Pepsi’s marketing campaign which positioned itself as a young person’s drink, labelling Coke the cola of an older generation.

But the very public ‘Pepsi Challenge’ (blind taste tests showing that more people preferred Pepsi to Coke) was the last straw for Coca-Cola. They spent $4 million researching and developing a new, sweeter formula in an attempt to take back its market share from Pepsi. New Coke beat Pepsi again and again in thousands of taste tests, and Coca-Cola was so confident of its new formula that it ended production of old Coke entirely, replacing it with New Coke. You can watch one of the original TV advertisements for New Coke below.

Original 1985 Advertisements for New Coke

New Coke went to market in 1985. It was a resounding failure. The resulting public backlash led to New Coke being pulled and within three months, old Coke, now rebranded as Coca-Cola Classic was back on the shelves.

Huge public backlash forced Coca-Cola to pull New Coke from the market within just three months.

The New Coke formula was tested on 200,000 people with resoundingly positive results before the new formula was launched. So how could the market research have been so spectacularly wrong?

Coca-Cola assumed that taste preference was the only factor that

went into customers’ purchase decisions – they failed to consider the influence of habit, nostalgia and brand loyalty

People were not aware of the ‘consequences’ of choosing New Coke – had they known that by choosing New Coke, old Coke would be pulled entirely, responses would most likely have been very different

Donald Keough, former president of Coca-Cola, put it this way:

“The simple fact is that all of the time and money and skill poured into consumer research on a new Coca-Cola could not measure or reveal the depth and abiding emotional attachment to original Coca-Cola felt by so many people.”

By removing the brand from the equation during taste tests and failing to consider customer feeling towards the Coca-Cola brand itself, Coca-Cola was relying on a rational model of consumer behaviour. A mistake that has gone down in history as one of the most embarrassing brand flubs of all time.

Read Coca-Cola’s version of the infamous New Coke story here

McDonald’s – Arch Deluxe Burger

In 1996, in an attempt to attract a more adult section of the market, McDonald’s launched their Arch Deluxe burger. Marketed as “The Burger with the Grown-Up Taste”, its advertising campaign showed various children shunning the ‘sophisticated’ burger. But the new product turned out to be a huge flop and was soon withdrawn.

Yet extensive market research had shown very positive results, with the new burger rated highly for taste, freshness and satisfaction. So what happened?

McDonald’s had lost touch with what it was that attracted their customers to them in the first place:

People go to McDonald’s for convenience, not sophistication

People aren’t interested in culinary luxury when eating at McDonald’s

They also failed to take context into account when conducting the market research. Because despite the product performing well during market research at McDonald’s HQ, in reality, in the heavily child-focused context of a real McDonald’s restaurant it was a very different story. As Graves points out:

“Devoid of the context in which it will eventually be sold, consumers can’t respond authentically to a product.”

The Burger with the Grown-Up Taste” – the ‘sophisticated’ Arch Deluxe

In what is now regarded as one of the most embarrassing failures in McDonald’s history, McDonald’s reportedly spent over $200 million on researching, producing and marketing the Arch Deluxe. A costly way to discover that market research doesn’t always give you the right answers.

Mattel – Earring Magic Ken

Demonstrating that asking your target market what they want can spectacularly backfire – especially when your customers are five-year-old girls – is Mattel, who back in 1993 introduced its new version of Ken based entirely on feedback from young girls who said they wanted Ken to look ‘cooler’…

The radical new look saw Ken sporting a lavender mesh top with matching leather sleeveless jacket, two-tone frosted blonde hair, a left-side earring and a silver ring around his neck that was immediately dubbed a ‘cock ring’. ‘Gay Ken’ caused a media storm and provoked huge criticism from parents who weren’t happy to buy the doll for their children.

Mattel itself responded with, “Ken and Barbie both reflect mainstream society. They reflect what little girls see in their world – what they see their dads, brothers and uncles wearing they want Ken to wear.”

That was mistake number one – Mattel had failed to understand where the girls’ concept of ‘cool’ was really coming from. As one journalist put it:

“What the little girls were seeing, and telling Mattel was cool, wasn’t what their relations were wearing – unless they had hip-queer relatives – but the homoerotic fashions and imagery they were seeing on MTV, what they saw Madonna’s dancers wearing in her concerts and films and, as it happens, what gay rights activists were wearing to demos and raves.”

Mistake number two was Mattel’s failure to realise that the dolls must appeal to both the target market – young girls – as well as the people who were going to be purchasing the product – their parents.

Earring Magic was discontinued – but not before proving a huge hit in the gay community – and is now a collector’s item.

Peugeot – 1007

At the 2002 Paris Motor Show, Peugeot unveiled its ‘Sesame’ concept car. Public reaction to the car and its innovative twin sliding doors – designed to allow easy access in and out of the car in narrow streets and tight parking spots – was very positive, leading the company to build and launch the model.

The Peugeot 1007 officially launched in 2004 but consumers weren’t interested. As one independent marketing consultant told Automotive News Europe: “People don’t buy doors, even sliding ones.” By 2009 the 1007 had been killed off and it has been estimated that the car’s total loss was 1.9 billion euros, making it one of Europe’s biggest ever car flops.

People don’t buy doors, even sliding ones.” The Peugeot 1007 made an estimated total loss of 1.9 billion euros thanks to misleading customer research.

So what made the 1007 such a commercial failure when public reaction to the concept car was so positive?

Graves believes that in this case, the environment in which the concept car was unveiled had a significant influence on the positive reactions of the audience:

“Whether the reaction was attributable to the novelty of the car’s sliding doors, something Peugeot or another manufacturer at the time was doing to generate excitement around its stand at the show, or the general buzz of the motor show is impossible to identify at this distance. However, the poor sales since the model was launched suggest that the positive reaction people thought was attributable to the new small car was misattributed excitement from something else going on at the same time.”

The mood created around a product plays a huge role in the appeal that product is perceived to have. It’s a common marketing tactic; associating a product with a celebrity, staging an exciting event around it, or making people feel as though they are getting a great bargain. These things can all “make the less rational part of our mind perceive something in a way it otherwise wouldn’t”. Something Peugeot evidently wasn’t aware of.

Sony Ericsson – W600

When Sony Ericsson wanted to assess the appeal of its new W600 handset among American consumers, it turned to focus groups. The results of the market research were to be used to forecast likely demand for the product and would determine whether one of their main carrier networks decided to take the product or not.

The results came in, and it wasn’t good news for the W600. People hated it. Nonetheless, the carrier eventually decided to take the phone, and sales for the first quarter were forecast at a pitiful 5,000 units.

What they actually sold in that first quarter was 10,000 handsets.

Here’s how one Sony Ericsson employee described it:

“The amount of back orders and supply chain havoc this caused was a nightmare. Our final forecast would indicate around 75,000 pcs would have been sold if we’d been able to meet demand.”

So what went wrong with the focus groups?

One of the big problems with focus groups is that people tend to change their views to fit with the majority – even if that means contradicting their own true opinion. In addition, Christopher Nass, professor of communication at Stanford University, says that we are more likely to give more weight to criticism than praise because we tend to see people who say negative things as being more intelligent than those who are positive.

In Hey, Whipple, Squeeze This – The Classic Guide to Creating Great Ads, Luke Sullivan also points out that:

“Testing, by its very nature, looks for what is wrong with an idea, not what is right. Look hard enough for something wrong and sure enough you’ll find it.”

Psychologists have long known the concept of negativity bias. Most people will emphasise the negative aspects of something over the positive. According to Roy F. Baumeister, a professor of social psychology at Florida State University, “Research over and over again shows this is a basic and wide-ranging principle of psychology. It’s in human nature, and there are even signs of it in animals.”

Ask people in a focus group to review a new product, and they are more likely to express negative opinions than positive. In the Sony Ericsson focus group, it would only have taken a few people to give negative opinions about the phone before others followed, causing a negative consensus to prevail. This will probably have produced the overall distorted view that the researchers then used to base their final decision on.

3 BRANDS WHO IGNORED THE MARKET RESEARCH AND WON OUT BIG TIME

So far, we’ve seen five big brands find out the hard way why market research can’t be relied on to produce reliable results. The following three brands avoided disaster by ignoring the market research.

Porsche – The Cayenne

Headline from Fortune Magazine, 2001 (read the full article here)

Back in 2002 people were horrified when Porsche launched the controversial Cayenne SUV. Porsche purists were enraged, accusing Porsche of selling out, and analysts predicted that such a destructive blow to the company’s image would lead to their swift demise. The iconic sports brand was stepping way out of its traditional niche by making a ‘blasphemous’ SUV. As one report put it:

“People are used to Porsche as a thoroughbred luxury sports car brand. It cannot be ruled out that current Porsche customers perceive the extension of the product portfolio to be a loss of brand identity. This might result in negative spillover effects on the sports car segment, causing brand dilution.”

Yet within a year, the ‘love it or hate it’ Cayenne was outselling every other Porsche model and by 2013 Porsche had sold over 42,000 Cayennes

Had Porsche sought customer opinions of the new car design before making the model, the response would have been clear – do not build this car. But Porsche has never asked their customers for their opinions. As Graves puts it, “Porsche recognises that it is for the company to determine if something is right.”

Without this approach, the Porsche Cayenne might never have been made and would not now be the company’s best-selling model.

“It’s a disgrace to the Porsche nameplate,” said one Porsche enthusiast of the best-selling Porsche Cayenne.

Absolut – The Swedish Vodka

Vodka may now be the most popular liquor in the United States but back in the 1970s people weren’t interested in a new, unknown, Swedish vodka. New York liquor importer Carillion conducted market research to gauge consumer interest before deciding whether or not to go ahead with importing a Swedish vodka called Absolut, spending over $80,000 in the process.

The results were as clear as the vodka itself. People didn’t like the gimmicky name, they didn’t like the fact that the bottle had no paper label, and some people didn’t even know where Sweden was. If the results of the market research were to be believed, the brand would be an Absolut (pun intended) flop.

Some of the award-winning Absolut advertisements that ran throughout the 1980s until the early 2000s.

But the president of Carillion was, understandably, not enthusiastic about throwing the $80,000 spent on the market research down the drain, so in an attempt to “recoup what they had spent”, they went ahead with the launch anyway.

The gamble paid off. Absolut was a hit and today, helped by its multi award-winning, iconic advertising campaigns, over 70 million litres of Absolut are imported into the US every year, making it the number one selling imported vodka in the US.

Red Bull – The Energy Drink

“Disgusting” was the verdict on Red Bull in initial taste tests. Discovered in Thailand by Austrian businessman, Dietrich Mateschitz, where factory workers were using it to help them stay awake during their shifts, Red Bull performed dismally in market research taste tests. Graves describes,

“The market researchers concluded that no other product had ever performed so poorly in consumer testing: the look, taste, and mouth-feel were regarded as “disgusting” and the idea that it “stimulates mind and body” didn’t persuade anyone that the taste was worth tolerating.”

Even Mateschitz’s friends told him it wouldn’t work. Despite what the market research and his friends said, Mateschitz pressed ahead. Three years of regulatory testing ensued before the authorities would allow the product to be sold. Yet, even after clearing this hurdle, Mateschitz had trouble finding a bottler to produce the drink – everyone he spoke to told him Red Bull would be a dead cert failure.

Red Bull’s successful ‘buzz’ marketing strategy

Red Bull finally launched in Austria in 1987. Mateschitz had spent his life savings on getting it there. But it was a slow burn for many years. By 1990, Red Bull was in the black. Undeterred, Mateschitz expanded into Europe and ditched pricy advertising for an extraordinary buzz marketing strategy aimed at students. Red Bull was finally beginning to fly. In 1997 it entered the American market, replicated the hugely successful buzz strategy, and Red Bull mixed with vodka or Jager quickly became one of the hottest drinks in the US.

By 2006 more than three billion cans had been sold and Red Bull is now a powerful global brand that dominates the energy drink market.

The market research said there was no market for Red Bull. But Mateschitz said:

“If we don’t create the market, it doesn’t exist.”

Click here to read the entire, amazing story behind Red Bull

STUDY WHAT PEOPLE DO NOT WHAT THEY SAY

While there are conscious and rational elements that go into most decisions, and it can be useful to know what people think, too many brands make the mistake of basing important decisions entirely around the results of customer research. As well as the examples shown here, there are countless other companies that have found out the hard way that this can be a very costly mistake.

Forcing people to consider something rationally in a survey or focus group that in the real world would be decided on at an unconscious level that they are not even aware of is bound to yield misleading results. People don’t know what they want until they see it in the real world. The key to understanding what people want is to understand how the unconscious mind works, and by studying what people actually do, not what they say. Although even then, winning isn’t guaranteed. Marketing is not an exact science.

As Graves says, “Launching a new product is very much like buying a present for someone. The better you know the person, the more likely you are to buy something they really appreciate, but there is always the possibility that you will miss the mark.”

This article has been based on the book Consumer.ology by Philip Graves. If you are interested in learning more about consumer psychology and want more accounts of market research-driven failures such as Lynx, Heinz, and the Millennium Dome, I highly recommend you read it.

The post Customers Don’t Know What They Want – Why Market Research is Unreliable appeared first on MoreNiche.

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