The difference between good market research and great market research can be significant.
But sometimes the incremental time, cost and sweat of that extra effort simply doesn’t make sense. Sometimes, “good” is just perfect.
I was reminded of this last week at the Launch Camp conference in Cambridge. The event, for entrepreneurs seeking social media wisdom, had some interesting speakers; the one from whom I learned the most was Dharmesh Shah, Chief Technology Officer and Founder of HubSpot (on Twitter as @Dharmesh).
In three years, this company has gone from start-up to 2,000+ customers, most of whom pay a monthly fee. Dharmesh shared his start-up success insights at Launch Camp and advised the attending entrepreneurs to focus on practical marketing. Selling stuff. Tracking key metrics to understand what sells stuff. And in his case, this clearly works.
He observes that many entrepreneurs get bogged down by over-analyzing their decisions—ultimately missing their window of opportunity. Key areas for such analysis paralysis? Product optimization and pricing.
ACK! Product concept testing and pricing research are two key pillars of market research practices around the world! But of course, he is correct. Especially in the context of new or rapidly evolving product categories.
Product Concept Testing
Market research offers proven methods for testing new product concepts—methods that can prioritize features or optimize feature-price combinations. And that’s great.
But I have seen companies completely miss windows of opportunity because they kept adding on less-than-critical features before they would launch. Kept conducting more and more research to inform (or justify) their decisions. Their leaders traded early market feedback for an over-engineered product. Dharmesh chastised this approach and emphasized that while market research is useful, at some point you need actual market feedback in order to inform further improvements. The ultimate feedback: will people buy it? If they buy it, will they return it?
Of course, these days, there are ways to simulate actual product releases to do this—although that is not a realistic option for all categories.
Look, if you are talking about mature consumer product categories (like toothpaste and laundry detergent), pricing research is a very defined, concrete sort of practice. But in many B2B markets, emerging markets, and new product categories, it simply isn’t perfect. Yes, do some research. Do some primary research, analyze competitive/substitute pricing, understand your target market’s overall budget, know your expected ROI. But at some point you have to take a leap with pricing. And as Dharmesh said, despite long-held tenets to the contrary, you CAN adjust your pricing down the road.
Imperfect Data is Better Than No Data
Yes, it is true—imperfect data is better than no data. And sometimes, directional data sooner is better than quantitative data later. In any case, knowing when to stop conducting market research in order to price and release new products can be tricky. Luckily for busy professionals seeking to inform product and pricing decisions, there are many options along the continuums of research speed and exactitude.
BTW, Dharmesh has a book out—I ordered my copy and can’t wait to read it: Inbound Marketing.