Posts Tagged 'New Products'

Jeff Bezos is right about market research

In an annual shareholder letter, Amazon’s Jeff Bezos recently stated that market research isn’t helpful. That created some backlash among researchers, who reacted defensively to the comment.

For context, below is the text of Bezos’ comment:

No customer was asking for Echo. This was definitely us wandering. Market research doesn’t help. If you had gone to a customer in 2013 and said “Would you like a black, always-on cylinder in your kitchen about the size of a Pringles can that you can talk to and ask questions, that also turns on your lights and plays music?” I guarantee you they’d have looked at you strangely and said “No, thank you.”

This comment is reflective of someone who understands the role market research can play for new products as well as its limitations.

We have been saying for years that market research does a poor job of predicting the success of truly breakthrough products. What was the demand for television sets in the 1920’s and 1930’s before there was even content to broadcast or a way to broadcast it? Just a decade ago, did consumers know they wanted a smartphone they would carry around with them all day and constantly monitor? Henry Ford once said that if he had asked customers what they wanted they would have wanted faster horses and not cars.

In 2014, we wrote a post (Writing a Good Questionnaire is Just Like Brian Surgery) that touched on this issue. In short, consumer research works best when the consumer has a clear frame-of-reference from which to draw. New product studies on line extensions or easily understandable and relatable new ideas tend to be accurate. When the new product idea is harder to understand or is outside the consumer’s frame-of-reference research isn’t as predictive.

Research can sometimes provide the necessary frame-of-reference. We put a lot of effort to be sure that concept descriptions are understandable. We often go beyond words to do this and produce short videos instead of traditional concept statements. But even then, if the new product being tested is truly revolutionary the research will probably predict demand inaccurately. The good news is few new product ideas are actually breakthroughs – they are usually refinements on existing ideas.

Failure to provide a frame-of-reference or realize that one doesn’t exist leads to costly research errors. Because this error is not quantifiable (like a sample error) it gets little attention.

The mistake people are making when reacting to Bezos’ comment is they are viewing it as an indictment of market research in general. It is not. Research still works quite well for most new product forecasting studies. For new products, companies are often investing millions or tens of millions in development, production, and marketing. It usually makes sense to invest in market research to be confident these investments will pay off and to optimize the product.

It is just important to recognize that there are cases where respondents don’t have a good frame-of-reference and the research won’t accurately predict demand. Truly innovative ideas are where this is most likely to happen.

I’ve learned recently that this anti-research mentality pervades the companies in Silicon Valley. Rather than use a traditional marketing approach of identifying a need and then developing a product to fulfill the need, tech firms often concern themselves first with the technology. They develop a technology and then look for a market for it. This is a risky strategy and likely fails more than it succeeds, but the successes, like the Amazon Echo, can be massive.

I own an Amazon Echo. I bought it shortly after it was launched having little idea what it was or what it could do. Even now I am still not quite sure what it is capable of doing. It probably has a lot of potential that I can’t even conceive of. I think it is still the type of product that might not be improved much by market research, even today, when it has been on the market for years.


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