Operationalizing Research

I just finished a project interviewing some of our leading Vocollect customers who have implemented voice in a workflow other than selection. (For those of you who don't know the distribution center space, selection or "picking" is the most labor-intensive operation in the DC with the most product touchpoints and therefore the most common place to implement voice-directed picking.) The next task: operationalizing these results with the salesforce.

I suddenly realized at the end of the project that I didn't know enough about what our salespeople are doing on sales calls today, so I spent some time on the phone with the team members. I learned some important things that will help me create a sales tool that the salesperson might actually use. In the process, I also collected some best practices that I can consolidate and share along with my market research.

In my experience, marketing departments all too often create products, programs or promotions without enough input from sales. I recently described this to my friend Prakash, one of our product managers, as "projectile vomiting over a wall." After a short while, the salesperson is more likely to put up an umbrella to avoid the vomit rather than putting up a bucket to try to catch your marketing spew. Just getting input from the sales guy does not mean you have to listen to everything he says, but you might get a better result in the implementation.

Market research and customer intelligence both improve the effectiveness of the sales team but only if sales actually believes and uses the information.

No More Holiday Bonus

What does 99.6% accuracy mean in distribution centers? To the casual observer, it would mean that on average, 1 of 250 orders have errors. In market research, however, we have to look at the sample frame, or the source of the data compared with the total census of all instances. In this case, the sample frame is often customers (or other ship locations downstream of the DC) who complained or otherwise adjusted the order when it arrived.

Customers who did not complain could have been of three types: 1) customers who did not notice or otherwise care about the error; 2) customers who got the right amount of product, or 3) customers who got too much product and kept the overshipment for themselves. There might be lots of reasons for customers to keep over-shipments, including the cost of sending them back, the desire to make up for lost profits elsewhere, or even good old-fashioned five-finger discount (aka shrink). Nevertheless, the fact that these customers don't complain means that actual error rates are likely upwards of 1 in 250.

Hence the story my lead generation guy tells about a checking in on a customer who implemented Vocollect(R) Voice: his DC's downstream customers were very pleased with the improved accuracy, but they asked the DC manager, "What happened to all the extra stuff you used to send us?" The answer: the DC didn't mean to send it in the first place.

Improving accuracy means decreasing largesse for the downstream parts of the supply chain. In this case, that's a holiday bonus that isn't good for business.

Steve Jobs Revisited

Okay, I might have to take back some my earlier post on Steve Jobs. Although he is still reportedly a poor people manager, this story about Apple's legendary customer service does change my view. Look in particular at the very end of the article.  Are you listening, Andrew Mason?

Global Accounts

One of the first things I promised my new boss that I would do at Vocollect would be to try to increase our "share of wallet." Even for B2B customers, share of wallet is a critical concept: how much of the total potential spend do you have? We sell primarily to the distribution center (DC), so if we have a customer with four DCs and we have Vocollect(R) Voice in one DC, we have 25% market share.

Ask yourself which is easier: expanding from one happy DC into the other three or introducing a completely new customers to the concept of the voice-directed distribution center? Based on the obvious answer to this question, we have started to look for places that we have business in one geography and get referrals to other parts of that company in another geography. It's a lot easier to say to an American distribution center manager, "We work with your DC in France" than it is to say, "Let me explain a technology you may have never heard of before or don't understand and try to convince you why it applies to you."

The concept of improving share of wallet by looking beyond your region can apply to many B2B companies. Do you sell only in one country but have a customer with overseas branches? Do you do business with a customer who is trying to expand in a new region? Does your product or service work with only minor adjustments (including minor channel changes) in a market with the same language? Each of these situations present opportunities to expand your business that may cost you a lot less than finding new customers.

By the way, expanding share of wallet also makes it a lot harder for your competitors... a fact that many companies ought to consider in this age of value-conscious business shoppers.

The Value of Market Research

My old market research professor Anand Bodapati at UCLA Anderson School of Management used to spend a lot of time warning against doing market research without understanding the goals of the project and the business decision that the research will help to answer. This emphasis counts as one of the reasons that I consider my time in Professor Bodapati's class some of the best spent hours of my academic career.

When should a company do market research? The answer to this question ought to depend on the value of the research versus the potential profitability. Many business schools teach a traditional method of evaluating this value based on Bayes' Rule, a technique that has some support and lots of criticism, some of the criticism going back thirty years or more.

What's a marketing manager to do? I say, apply a few rules of thumb if you don't have time to do the full analysis: Do market research when...

1. ...the outcome of your business decision is truly in doubt. This rule implies avoiding market research both when the outcome is almost certain success and when the outcome is almost certain failure. See more on the "expected value of perfect information" for the reasoning behind this rule.
2. ...the magnitude of expenditure (or the cost of failure) is at least several times that of the market research (I often use a 10x multiple). This guesstimate ensures that you spend money where you can expect the greatest return from learning. The method also preserves focus on the projects that are most important, a critical factor when you need to communicate results to the wider organization. Wide communication of market research results is, in my opinion, too often shortchanged in large companies.
3. ...you have the possibility of really upsetting your customers by messing up. See my recent post for more on this one.
4. ...senior executives, salespeople, or other individuals with a lot of influence start making questionable statements that could contradict reality in strategically important ways.

And why am I thinking about this topic today? My boss reminded me about #2 today...proving that even the best of Data Geeks sometimes forget their own rules in the excitement of gaining new customer intelligence.

Check the Facts

Vice President Joe Biden recently got in trouble with the conservative media for claiming that cities like Camden, New Jersey and Flint, Michigan would see a rise in robberies, rapes and other violent crimes because they have had to cut police forces in half due to budget woes. Of course, Biden was arguing for Obama's new jobs bill, but I immediately thought of the more interesting data question.

The problem with determining the relationship between police force size and crime rates is "simultaneity bias." This term refers to the two events you wish to study tending to happen at the same time regardless of causality. In this case, governments tend to increase the police force when they notice a rise in crime or even in anticipation of this rise. Therefore, it is hard to see which comes first, the chicken (crime rates) or the egg (police force size).

One can overcome this problem by looking for individual events in which one factor changed for exogenous reasons--reasons outside the normal timing. There is an excellent summary of some of this research here:

http://www.majorcitieschiefs.org/pdf/news/more_policing_does_matter.pdf

The upshot is that cutting or raising the police force does have both an apparent short-term and an apparent long-term effect on crime. Nevertheless, the range of response varies significantly in the available research, some suggesting that a 50% drop in police force could mean only in the range of 10-15% rise in crime.

In a business context, simultaneity bias comes up quite a lot when looking in the rear-view mirror of one's business. For example, an increase in size of sales force is often accompanied by increase in marketing spend. This simultaneity confounds examining the effects of each investment. That is why I often recommend running experiments changing only one variable, or changing different variables in different territories or regions, before making such investments throughout the company.

Too bad Joe didn't find a source for his facts before he met the press. I hope he finds my blog.

When Did You Last Click Through To An Internet Ad?

Rule one for advertising: break through the clutter. That applies to B2B companies, too. Their buyers are humans, just like everyday consumers.

Rule two: differentiate from competitors by demonstrating why your solution works better. Yes, this matters for B2B companies as well as B2C brands. Perhaps even more.

That's why this terrific Verizon ad works so well. It might be the only B2B advertisement online that I have clicked on for the past year.

Netflix Did the Wrong Thing

The flood of articles alternately condemning the stupidity of Qwikster and praising the Netflix reversal missed the point entirely. Comparing Qwikster to New Coke would be like comparing eBay to garage sales circa 1985. Reed Hastings had an entirely different set of tools with which to make decisions than The Coca-Cola Company did twenty-five years ago. And he missed them. Entirely.

The first tool is online research. Netflix has some 25 million subscribers in the U.S. and Canada, which means that the marketing team could have used an Internet omnibus panel survey to complete their market research in about a week and still expect to get in the range of 300 responses (20 million estimated U.S. subscribers divided by 112 million households times 2000 respondents per panel fielding).  They would have spent perhaps $8000 for a short set of questions.

Ones I would have asked:

1. Do you currently subscribe to Netflix?
2. Do you get your movies or shows from Netflix by mail, by downloading or streaming movies from the Internet, or both?
3. If Netflix were to separate the DVDs-by-mail Website and service from the download/streaming Website and service, how much would you like or dislike this change?
4. If Netflix were to separate the DVDs-by-mail Website and service from the download/streaming Website and service, would you:
1. Subscribe to the DVDs-by-mail service
2. Subscribe to the download/streaming service
3. Subscribe to both
4. Cancel your subscription to Netflix

I'm guessing by the flood of criticism and defections that this research would have easily identified this idea as a big, fat loser.

The second tool is online media monitoring. Many of the Honomichl 50 offer this kind of analysis, such as Synovate's BlogBase. It would have been pretty straightforward to comb the Web for information on why people like Netflix these days as opposed to why they hate it. And Netflix would have found (duh) that a major reason people like the service is the one Website for both mailed DVDs and streaming.

The third tool is customer advisory panels. Many new and exciting vendors (I'll mention CrowdScience and Vovici as just two) allow discrete and relatively unobtrusive research into a company's own customer base, often the best source on which to try these ideas. It helps to have an active website with lots of customers visiting this site for this approach to be extremely successful...

Hello, Reed! You have a website Use it!

Thank you, Advertising Age, for pointing out how critical it is to listen to your customer and for reminding us why tech companies don't listen very often.  R.I.P. Steve Jobs indeed.

R.I.P. Steve Jobs (But Not Your Management Style)

I surprised myself by my strong reaction to Steve Jobs's passing. Maybe having had an Apple II as my first computer prompted the youthful nostalgia. Poking around in the Google News archives, I found this old article about Mr. Jobs returning to Apple:

http://news.cnet.com/2100-1001-256947.html

The author reflects the ambivalence about the management style of someone who was, by many accounts, a royal a******. Nevertheless, the Stanford graduation address shows a different side of Mr. Jobs:

http://www.ted.com/talks/steve_jobs_how_to_live_before_you_die.html

The TED video is worth watching in its entirety to remind each of us what passion really means. For me, it means being good to other people (unlike Steve), remaining passionate about bringing science to marketing (maybe like Steve), and trying to live a life I want rather than the life I think someone like me ought to have (definitely like Steve).

Ask the Customer, #@%$!#*%!

I am continually amazed by how many decisions get made at major companies without asking the customer. Part of being a data geek is realizing A) the limitations of qualitative research, and B) the more severe limitations of making decisions in a complete vaccuum from customer input.

Years ago, we were simplifying the instructions on a retail display to help customers use the display to select exterior stain colors. The head of sales wanted one set of instructions and the head of marketing wanted another. The product manager wanted a third. Using Harris Interactive's omnibus panel (a twice per week survey of 2000 people), we answered the question in about a week and a half for $6,000.  We also found out one or two other critical things for the money.

The research showed clearly that the product manager's language was preferred. Given that this was going to be a $280,000 modification to the display, I would say less than 3% of the cost was a justified investment.

Of course, in this case the head of sales overruled everyone and had his way anyway. Proving that asking the customer is important, but communicating the results effectively is paramount... and working with smart people is critical. A lesson I learned well that day.

So this week I'll be starting a project to ask a small group of our customers about a new project that Product Management is considering. I'll be careful to communicate the insights AND the limitations of the data. And I will be happy having any information at all rather than some pigheaded sales guy's gut feeling.

Of Squirrels and Baseball

Two great notes from this week:

1. A good (if "light") analysis posted by Adam Rosenberg in Online Media Daily about Web analytics and Moneyball.  The highlights: A) statistical analysis works well for baseball, a zero sum game, but even better for websites because all players within a market can win with better ROI, retention, relevance, sales, and so forth. B) data complexity increases exponentially and the landscape of the Web itself changes rapidly, causing difficulties in recreating the same analyses over time.

2. We got an ad for "LeafGuard" in the ValPak coupons. It had a picture of a squirrel in the gutter with the caption "My thoughts are in the gutter!" and the fine print, "Nice one, squirrel." We noticed it. The number one metric for whether your advertising is going to move the needle on awareness and purchase intent is whether the ad gets noticed. Differentiation (whether the ad makes you remember why to buy the particular brand) is second. All other considerations pale in comparative importance, so kudos to the LeafGuard people for an excellent execution.

You Know Your Marketing Is Good When...

Yesterday, I was running in the gym at work. I generally hate running indoors. I get bored, and I haven't yet found earphones that stay in while I run while retaining comfort and non-sweatiness. Consequently, I turned on the TV.

We don't have much in the way of daytime TV at work, so Montel was one of my best options. They had a segment about LifeLock, an identity theft prevention company. An ad came on after the segment, not surprisingly for LifeLock. Then another segment about LifeLock, with a different executive from the company. It was only after that segment, when I was beginning to get suspicious, that I realized it was a paid advertorial, AKA infomercial.

In the meantime, I learned a whole bunch about protecting yourself against identity theft, and I began to remember my accountant saying something about getting identity theft protection. Realizing it was an advertisement made me think about advertising's value to the customer.

This value is particular important in business-to-business marketing.  Some of the all-time best B2B advertising I have seen provided excellent insights to which I have returned time and time again, such as the simple but elegant paper from Sawtooth Software on choosing a conjoint methodology. The next time you start to create a whitepaper or seminar series, I say to stick to the LifeLock standard: would someone spend time on this information just for the value you are providing?

New Product Benefits Exposed!

I work for Vocollect, Inc., a subsidiary of Intermec Corporation.  Today, I'm excited about finding real evidence of a customer benefit we have had for years but never promoted. Why have we never promoted this benefit to customers?  Simply, until last year we never asked them what they cared about in purchasing a new technology solution. Market research revealed what problems are highest on the list of concerns in managing a warehouse. Therefore, we never asked ourselves whether our product provided any benefits in this area, preferring to focus our marketing on cost reductions and productivity increases. We missed millions of dollars in benefits to our own product because we did not understand the customer's concerns.

Data Geekitude is fundamentally about finding out what matters to your customers and your business so that you can re-orient your efforts towards those critical areas. Asking customers what matters to them is the first step.

"Cell Phone" Pricing

Think about your cell phone plan for a moment.  Do you have a fixed-price, all-you-can-eat type of plan, or do you have separate and confusing charges for every different type of call (international, domestic, in network, out of network, standing on your head) and service (text, data, text-to-data, data-to-text, video, videos with text, blah blah blah)?  Do you get warm, fuzzy feelings about your phone company when that bill is super confusing?

I am constantly astounded as to why business-to-business companies think that their pricing should be more confusing than their cell phone plans.  There is a reason consumers flocked to the Verizon flat-fee plans: they are easy to understand. Businesses selling to businesses should remember that their customers are, ultimately, human beings.  The more confusing we make our pricing, and the harder we make it to work with us, the less likely that those humans will want to do business with us in the future.

"But my company is the industry leader!" I hear you say. "Our customers will still work with us because we have the best products and services!"  And may I retort, "Do you really want to give your customer a reason to entertain 30 minutes with that new start-up because you are an unpleasant company with whom to do business?"  Why give the start-up competitors an opening?

This problem confounds me as I work through a new partner pricing program currently. I just hope our customers won't be more confused than I am already.

Random Marketing Thoughts Nobody Reads

Welcome to my new place where I plan to record random thoughts from my reading, work, and observations.  Perhaps nobody will read, but I may benefit from my own navel gazing anyway.

The Corporate Executive Board has just published their "Executive Guidance 2011" on "Overcoming the Insight Deficit." It's unfortunately a bit light on data, but as a data geek I particularly appreciated the exhortation to focus on training people to use data and to turn it into actionable innovation rather than simply on gathering the data itself.  Something for all of us market research types to think about before delivering our massive tomes of customer spew back to the executive team.