Real Research Versus the "Microwave Kind"

Bob Kaden

It's Just Impossible to Know!

Well, Graham...therein lies the crux of the problem. How do you quantitatively prove the payback on marketing research is like asking how much more you would have made if you went with decision A rather than decision B? Or how much less would you have lost if you went with decision C rather than decision D?

There are no financial models that I know of that will develop a "rock-solid" financial case for research. Frankly, research hasn't reached the point of respect where it would be given that kind of credit anyway.

While I have written about setting up test markets or test/control situations where research driven decision making is pitted against decision making based on best assumptions, I know of no specific cases. Honestly, I wish someone somewhere would help me on this subject.

What I do know is that bad research of the "Microwave" kind is worse than no research at all and that I've seen many times--and is a good subject for an article or blog.

What I also know is that in cash strapped times the premium on making smarter decisions is more important than ever. Investing in something only to find out it isn't working and then changing it is the M.O. that we researchers are constantly fighting. And it is a very costly way to do business.

To me, it's far better to invest in an insurance policy with the pay-off of doing it right the first time. The means taking the time and spending the money on a well conducted piece of research.

Bob Kaden

Bob Kaden

Not 1% or 2% for Big Companies

Graham:

My 1% to 2% reference was meant for small and mid-sized companies which I mentioned in the blog and which I think addresses the size of most customerthink.com companies. The $4,000,0000 sales figure was a meant as a minimum and was to suggest that $40,000 to $80,000 was necessary to conduct one or more valid research studies. I clearly should have capped that reference...and will do so here.

In my experience, at sales level of $50,000,000 spending 1% or $500,0000 a year on research has proved to be a workable number and appropriate to cover not only attitude research issues but database and other "secondary" types of information issues that companies that size need to understand their position in the market. This is particularly true for companies enjoying a good rate of growth.

As sales levels grow higher the percentage needed to support an effective research budget will certainly decrease. At half a billion in sales for example, .5% would generate $2,500,0000 for marketing research spending and would be a figure that would strongly address most any strategic, tactical or database research issues a company that size might face.

Companies with sales in the billions certainly need not allocate 1% of sales to support an adequate research function. If, though, you look deeply at the research budgets of giants such as P & G, Kraft and General Foods, you'd see they spend many hundreds of millions of dollars researching their brands and their research budgets (given how they might define their research function) can indeed reach 1% of sales.

I was trying to define a minimum research figure for customerthink.com size companies, not for Vodaphone size companies. Thank you for raising a valid concern and allowing me to clarify here.

Bob

P.S. If you get me an audience with Frank Rövekamp, Vodafone's Global CMO to pitch research, you can certainly be a fly on wall. Although it would take me time to understand the company and it's goals, you'd be amazed how compelling and rational a $600 million research expenditure might be for a $60 billion company.