by Bob Walker | Sep 16, 2019 | Marketing and strategy, Marketing research
Do you run a marketing research and insights department, or does a function like this report to you? Having a solid research and insights function is worth its weight in gold – if it is staffed properly and has an adequate budget to complete key research tasks. But if your department is not running as smoothly as you feel it should, or if there have been missed hand-offs or errors, maybe it’s time for a tune-up – but first a little background.
Marketing research and insights teams exist because the world is an uncertain place, and the mitigation of risk (or alternatively, support of successful businesses) is an important business function. Marketing research and insights teams work best when they have the resources and autonomy to investigate customer behavior, explore trends, and the authority to (respectfully) challenge marketing assumptions that may be sub-optimal or simply wrong.
From an organizational standpoint, the head of research and insights should report to a business unit leader. Optimally, this is the President or CEO who is responsible for multiple functions, such as strategic planning, sales, marketing, R&D, customer service, and production (this assumes a traditional manufacturing model – but similar functions can be substituted for categories such as software development, financial services, e-commerce, etc).
The point is that the eyes and ears of the consumer/buyer need to have a direct pipeline to the stakeholder/business owner and key decision-makers. Research should not be beholden to the marketing function per se: the pressures of day-to-day marketing activities can easily usurp the willingness to listen to objective, fact-based decision-making found in great research departments. This is especially problematic in ad agency business models, where research and insights reports to an account team. One must ask: is the goal to understand the consumer and build the business, or simply solidify the client-agency relationship? The conflicts are obvious.
At the outset, let me make it clear that this is not a competition, nor an attempt to say one function is somehow “better than” another. Marketing research and marketing are integral to one another, yet each requires a different skill set. Marketing research is there to help marketing (and the company) succeed, working hand in glove, but with independence.
No one can argue that the pace of business is breakneck. It is unfortunate that business leaders and marketers are overwhelmed with day-to-day fires, absorbed by executional details, and frantically racing to meet promotional or product deadlines. The downside: this can severely limit their ability to focus on larger strategic and business issues, and overall brand health. The marketing function is often a casualty of limited bandwidth, strapped for resources to get even basic tasks completed.
On the flip side, marketing research is also under assault from multiple angles of attack, most notably in-house DIY research and untrained staff. A lack of thoughtful discussion and thinking can produce misleading results. This further diminishes the value and promise of what a research function could be. In today’s environment, an over-reliance on questionable algorithmic approaches, such as social listening and AI solutions, also misses the larger need to understand consumer behavior and how to build brands from that learning. At the same time, there seems to be less and less questioning of data sources and data quality: the assumption is that if it exists in digital form, it must be true. This is simply wrong.
The notion that a marketing research or insights team knows less about marketing principles than the marketing function is also a long-standing fallacy. Marketing research and insights experts have in-depth knowledge of consumer behavior, brand history, and category dynamics. Marketing research and insights can also leverage knowledge accumulated over time to guide better decisions, rather than to assume that no facts exist, so we’ll invent everything from scratch.
Here is a simple checklist to see whether you are really leveraging your marketing research and insights team to the max:
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How do you feed your new product funnel? What role does research play in helping you generate new ideas and opportunities for future business development?
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Do you have a planning and strategy session or process (i.e., annually) to anticipate future marketing activities? Is your marketing research and insights team invited to these meetings? If so, what role do they play? If not, why not?
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Do your plans specify various stages of product testing, such as idea screening, concept development, or positioning and communications research?
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How do you go about new product development and prototyping to align with your idea screening? Whether you are building a product from scratch or creating a wire-frame for a new e-commerce site, what process are you outlining?
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Do you have an in-house product testing or evaluation function (typically part R&D), internal or external UX or sensory testing panels, or processes in place to optimize your offering?
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Who is your target audience: what kinds of strategic research have you conducted to determine who your target audience is?
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How do you evaluate new product introductions? Simply throw them into the marketplace and hope for the best? Or do you have a comprehensive marketing research and analytics plan to assess performance?
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How do you benchmark ongoing business performance – are you simply looking at whether sales or units go up or down? What do your buyers say – and what do you do about it?
We know, questions are easy! But if you don’t start asking the questions about how your research function fits within the broader context of your overall new-product and innovation initiatives, chances are that you are going to go sideways rather than forward.
Needless to say, I believe in research. There are some things that research simply cannot answer: the products of genius, the subconscious, and the truly gifted inventor or designer. Research does not have all of the answers. But in the majority of cases, a business needs insights to run. Without the right team in place, your chances of success are significantly reduced.
If any of this intrigues you, or you would like to discuss the idea of building your research function into the powerhouse it needs to be, give us a call. We like discussing ways to make the research and insights function a truly beneficial one for companies of all sizes.
by Bob Walker | Aug 10, 2019 | Business strategy, Marketing research, NPS
In May 2019, The Wall Street Journal published a comprehensive article on the use – and misuse –of customer satisfaction programs that heavily rely on a single measure known as the “Net Promoter Score” or NPS*. Titled “The Dubious Management Fad Sweeping Corporate America”, the authors shared a review of 40,000 earnings call transcripts for 688 companies that are or were in the S&P 500 from 2003-2018. Last year (2018) the words “net promoter” or “NPS” were cited more than 150 times in conference calls by 50 S&P 500 companies. That’s four times as many mentions, and three times as many companies, from five years earlier. Last year, “net promoter score” was mentioned in 56 proxy filings. Some companies, including American Express, Best Buy, and Citigroup list NPS as a compensation metric, alongside share price and EPS. So what is really going on here?
Regrettably, the Net Promoter Score or NPS has morphed into something well beyond its scope. Originally intended to foster product and service improvement, many corporate leaders now treat NPS as a pseudo-financial metric. Management seems to believe that they must follow peer group practices, including the use of benchmarks collected by their own competitors. Misinformed stock analysts add pressure by implying that companies who do not use NPS must be out of touch with their customers.
The companies that continue to use NPS as a mantra are apparently oblivious to its corrosive effects. Much like “teaching to the test”, they ignore the fact that the measure can be manipulated. For example, a recent trip to my local Honda service center produced a text message from the Service Manager (see inset). He implored me to give him high ratings. What larger goal does this accomplish? Knowing that a survey is coming, management is unwittingly diverting his time and creating anxiety – and missing valuable insight into my service experience. And what if the initial technician who took my car had an attitude? Do I tag the Service Manager with that? A far better approach would have been to ask: “What aspects of your visit to Honda need to be changed or improved?” Or, more specifically, probe on multiple dimensions of my visit so that the employee is not associated with my evaluation of the entire experience.
Of course, the error can go in the opposite direction: companies can collect feedback that is too narrow and not actionable. Another example: I recently had to ship something, so I went to Staples and bought some bubble wrap to protect my item. Staples sent me a customer satisfaction survey asking me about my “bubble wrap experience”! Seriously?
NPS May Capture Intent, But Not Actual Behavior
Regrettably, management teams incorrectly believe that they need just one measure (NPS) to predict sales growth, profitability, and retention. This misperception also diminishes the role of insights professionals and research departments who are often closest to the customer. Many of you may recall that the NPS buzz began with Fred Reichheld’s 2003 HBR article “The One Measure You Need To Grow”. His quote: “The only path to profitable growth may lie in a company’s ability to get its loyal customers to become, in effect, its marketing department” became gospel. A “willingness to recommend” formed the basis of the NPS question, and an entire industry was born. The assumption was that a recommendation can drive both growth and retention.
This is certainly plausible — if such recommendations are ever made — but recommendations are, in fact, rare and intent is not the same as action. Other self-reported measures of behavior, such as purchase intent, have long been known to be directionally associated with in-market behavior, but the magnitude varies tremendously and is highly sample-dependent. Over the last 15 years, research has also failed to prove a clear connection with one’s willingness to recommend and profitability, growth, or retention. And the assumption that any of this can be accomplished at near-zero cost is also dubious.
Common sense must be used, and adjustments made, as companies learn more about their customers and business performance. Virtually all businesses require more than a single measure to understand customer needs. As I have previously written (“Rethinking NPS”), customer feedback is essential; it is NPS that is inadequate.
It seems that nothing will be able to stop the NPS locomotive. According to the WSJ, J.D. Power has signed an agreement with Bain & Company to become the officially recognized authority for benchmarking the “Net Promoter Score”. Much like J.D. Power’s customer satisfaction awards in automobiles and other categories, can “NPS awards” be far behind? In its next life, NPS will no doubt morph into support for advertising claims and other puffery. For devotees of W. Edwards Deming, this should feel familiar: NPS will become a slogan, and more manipulated than ever.
Have Courage: Use Measures That Matter
But what to do? If you are in leadership, focus on how internal processes can be improved, rather than (mis)placing the responsibility on individuals or your front line staff. An employee is responsible for bringing problems to leadership’s attention, but your job is to improve the process itself. Be wary of salespeople claiming to offer magical and simplistic answers to difficult problems. Look at the big picture and choose from appropriate (multiple) measures linked to customer happiness. Build your own normative database to best meet the needs of your unique business. One size does not always fit all, and it will cost money to truly understand what is going on with your customers and your business. But at least you will have measures that make sense.
At Surveys & Forecasts, LLC, we have been doing just that for 25 years.
* [1] Net promoter score or NPS is a registered trademark of Satmetrix Systems, Inc. a privately held experience management company headquartered in San Mateo, CA. Along with the Bain & Company and Fred Reichheld, Satmetrix Systems co-developed the Net Promoter Score (NPS).
by Bob Walker | Jan 5, 2019 | Marketing and strategy, Marketing research, Strategic research
I always tell my children that life is not linear. Neither is business. Things rarely go in a straight line, and companies can never sustain super-normal growth in either sales or stock price. Yet we were somehow surprised this week that Apple reported significant declines in iPhone sales. But should we have been that shocked? Apple has been making superficial changes to the iPhone now for several years. Didn’t Apple urge us to “think different”? Had they done any research to anticipate this obvious shift in consumer preference?
I continue to be amazed at the perceptual blinders that companies, or financial analysts, wear. The pattern is very familiar: management ignores any initial signs of trouble, they reassure themselves (and consumers, employees, and financial analysts) that all is well. In Apple’s case, they try to deflect by saying “look over here” (for example, by refusing to release unit sales). Denial and the refusal to believe the facts are powerful forces of inertia in every organization. Denial is a basic human instinct.
It is also the innovator’s dilemma (see Clayton Christensen): entrenched interests force managers to set aside obvious facts in favor of perpetuating the status quo. History is replete with examples. Hewlett-Packard never wanted to introduce ink-jet printers (the margins were too low). CVS, not doctors, conceptualized Minute Clinic (primary care that was “good enough”). Intel is overshooting processor power even though most consumers will never need it (although AI may change this dynamic). Chevy recently dropped the Volt, an electric car for which there was minimal underlying consumer demand. And why didn’t Sears become Amazon?
Apple is a great company and they will probably recover. A reset was needed eventually. But it raises the larger question of why companies stubbornly ignore facts about their customers, markets, and competitors? Why do managers assume that they already know everything that could potentially affect their business?
Great research is needed now more than ever.
I believe that it comes down to one basic factor: fear. But what does that really mean? Fear of having to think outside of normal patterns… a fear of disruption, which may force people to behave differently, which can be uncomfortable… a fear of having to adapt to a new way of working… a fear of a job change, or even worse – a job loss.
But you can’t anticipate or plan for what you can’t see. Don’t assume that you know everything that might affect your business. If you are in a position to recommend marketing or customer research, advocate strongly for it. Your company’s survival depends on seeing what is happening out in the real world!
I suggest a few simple rules for paying attention to what is going on in the world:
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Actively listen! Talk to as many of your customers as you can, qualitatively or quantitatively.
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Construct honest and non-biased questions to uncover real understanding, and identify the real dynamics in your market.
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Validate your findings with enough respondents to give you the confidence you’ll need to make the hard decisions. Individual or small group feedback is a great start, but always verify, verify, verify.
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When doing external (non-customer) research, work with reputable sample providers who have the expertise to manage consumer or business panels. To use a gardening analogy, the sample is the soil. If the sample is wrong, everything else is compromised.
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Have an opinion about what your research results mean and implications for the business. Get out in front of the story; add value. If you abdicate your role, others will write the story for you – and then wonder why you’re there.
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Let management question the results – but also make sure that they accept the findings. Management buy-in is essential.
Management philosopher Peter Drucker preached that all organizations have two functions: innovation and marketing. Marketing research is at the heart of both. Never stop asking questions, and do so with the frequency required for your industry.
Follow these simple guidelines and you will have an insightful, productive, and happy new year!
Let’s continue the discussion.
by Bob Walker | Nov 13, 2018 | DIY software, Marketing research
So by now many of you have heard the news: Qualtrics is being bought by Germany’s SAP for $8 billion in cash. I also received an email from Ryan and Jared Smith announcing the news.
But what exactly did SAP get for its money?
For the first nine months of 2018, Qualtrics generated $289.57 million in revenue ($386 annualized), up 40% from a year earlier. It posted a $2.3 million operating profit in the same period ($3.0 million annualized), nearly double its year-earlier operating profit (but is still paltry). The SAP price values Qualtrics at 14x forward revenue (not earnings). Based on earnings and an $8 billion price tag, Qualtrics’ PE is 2700. SAP itself has a PE of 24. The market seems to like it; SAP shares were up about 3% today. But does this make sense?
There are only so many ‘large’ customers ($100K+ in fees a year) that can continue to fuel a 40%+ growth rate. Much will depend on how much running room Qualtrics gets from SAP. The love fest will last a quarter or two, but soon the vulture capitalists will get paid, the growth curve will flatten, and the cost accountants will swarm in. Then redundant positions (in sales, marketing, and support) will be eliminated. Prices will also go up, and the quality of support will decline, as staff reductions kick in and the acquisition costs weigh down SAP’s P&L. It’s a familiar story.
Culture also matters. With SAP’s 95,000 employees and German influence, the Qualtrics hipster culture will fade. The relatively few Qualtrics employees can’t swim against the SAP tide for long. And there will be many companies that will now see Qualtrics as a conflict: those using Oracle, Microsoft, or Salesforce won’t want SAP snooping around, and thus they will hesitate. Many SMBs who may have considered Qualtrics will now have second thoughts, as they never envisioned bringing in such a behemoth.
The $8 billion price tag is an amazing achievement – congratulations to all. However, Qualtrics as a brand will persist only as long as SAP leaves it alone.
But it’s impossible not to play with that shiny new toy they just paid so dearly for.
by Bob Walker | Oct 31, 2018 | Uncategorized
Happy Halloween!
As expected, Qualtrics filed its Form S-1 registration statement (IPO) on October 19, 2018 under the oh-so-sexy symbol ‘XM’. Qualtrics, backed by VC firms Sequoia and Accel, has been valued at as much as $2.5 billion; soon we’ll hear what the market says.
XM’s IPO was certainly hurried along by the recent public offering of SVMK (SurveyMonkey). How quickly expectations fade: SVMK began trading on September 26, 2018, as high as $20 and closed at $17.24. Today (October 31, 2018) SVMK closed at $10.71 — a drop of nearly 40% in a month. BOO!
Still, SVMK’s market cap of $1.31B is nothing to scream at.
Interestingly, both companies are roughly the same “core” size (i.e., revenue from subscriptions), although they got there in very different ways. In 2017, SVMK subscription revenue was $219 million and Qualtrics was $213 million. However, Qualtrics adds nicely to their subscription business with service bureau-style programming, sample, and integration services that combined are $77 million (26% of total revenue) for a grand total of $290 million. SVMK is making a significant effort to expand their team and enterprise offerings.
Qualtrics is a different story. While the operating picture is a bit ghoulish, the real story is Qualtrics’ growth rate. According to the S-1, as of June 30, 2018, Qualtrics had an overall net operating loss of -$3.4 million, slightly ahead of its 2017 loss of -$3.7 million (amounting to about -2% of revenue). Conversely, Qualtrics’ subscription revenue grew nearly 50% in the full year ending 2017, and 42% in the first six months of 2018. And Qualtrics’ total revenue grew 52% in the year ending 2017, and 40% for the first six months of 2018. The street likes a Cinderella story (sorry, wrong genre), and Qualtrics is certainly that. But maybe I am missing something.
Still, SVMK revenue grew at a reasonable 6% between 2016 and 2017, and for the first six months of 2018 grew somewhat faster at 14%. But this was not enough to overcome a gaping operating loss of -$27 million (the first six months of 2018).
Given weak financials and a significantly depressed stock price, SVMK looks like a juicy acquisition target. Likely prospects include Facebook (limited survey capability but a vast supply of sample) and Google Forms (part of G-Suite with basic functionality). Are scary spirits propping up the stock price?
With rapid acceleration, costs at Qualtrics have also grown fast. As revenue from labor-intensive “professional services” grows, labor cost growth must outpace revenue. These costs are not as scalable. Qualtrics’ “professional services” gross margin (currently at -20%) drags subscription margins down (which are 80%). Sales and marketing expenses are a whopping 50% of revenue (with R&D at just 15%). License fees are not funding more R&D; instead, fees largely support the sales team, marketing, and the Qualtrics Summit. That doesn’t seem like a very sustainable business model to me. Maybe I am missing something.
Qualtrics says that their “business model relies on rapidly and efficiently landing new customers and expanding our relationship with them over time.” Translation: XM’s cross-sell tentacles quickly reach across organizational boundaries wherever feedback is involved. Qualtrics has smartly leveraged their survey data collection engine across corporate silos with similar data and benchmarking needs (i.e., effectively the back-end of Research Core).
This templated approach is attractive for “large customers” (those with $100K+ in subscription revenue) who seek a familiar look and feel, a shared platform, and a tiered pricing model. Large customer growth has been very fast: +60% in the six months ending June 30, 2018, impressive by any measure. Qualtrics is also able to leverage its technology investment by modularizing its code base.
Qualtrics claims to have created a “new category of software, Experience Management, or XM™, which enables organizations to address the challenges and opportunities presented by the experience economy.” This is largely magical thinking for the IPO syndicators and future investors. In reality, there are only so many whales. The pod is fairly static and growth of 50% YOY is simply unsustainable in any industry. Maybe I am missing something.
Qualtrics has a few options: headcount and cost reduction, price increases, and perhaps packages for lower-end customers (and hope to upsell/cross-sell). These don’t seem likely. Rather, as Qualtrics continues its rapid move into consulting (and away from DIY subscriptions), they will be attractive as an acquisition target for companies in software, accounting, and management consulting. And Qualtrics fits well into a blockchain-enabled, supply-chain world.
No doubt, the IPO will make the founders very rich. But with a sweet acquisition offer, the management team may find itself working for a new employer sooner than they think. But maybe I am missing something.
BOO! That’s a scary story indeed!
by Bob Walker | Oct 31, 2018 | Uncategorized
As expected, Qualtrics filed its Form S-1 registration statement (IPO) on October 19, 2018 under the oh-so-sexy symbol ‘XM’. Qualtrics, backed by VC firms Sequoia and Accel, has been valued at as much as $2.5 billion; soon we’ll hear what the market says.
XM’s IPO was certainly hurried along by the recent public offering of SVMK (SurveyMonkey). How quickly expectations fade: SVMK began trading on September 26, 2018, as high as $20 and closed at $17.24. Today (October 31, 2018) SVMK closed at $10.71 — a drop of nearly 40% in a month. BOO!
Still, SVMK’s market cap of $1.31B is nothing to scream at.
Interestingly, both companies are roughly the same “core” size (i.e., revenue from subscriptions), although they got there in very different ways. In 2017, SVMK subscription revenue was $219 million and Qualtrics was $213 million. However, Qualtrics adds nicely to their subscription business with service bureau-style programming, sample, and integration services that combined are $77 million (26% of total revenue) for a grand total of $290 million. SVMK is making a significant effort to expand their team and enterprise offerings.
Qualtrics is a different story. While the operating picture is a bit ghoulish, the real story is Qualtrics’ growth rate. According to the S-1, as of June 30, 2018, Qualtrics had an overall net operating loss of -$3.4 million, slightly ahead of its 2017 loss of -$3.7 million (amounting to about -2% of revenue). Conversely, Qualtrics’ subscription revenue grew nearly 50% in the full year ending 2017, and 42% in the first six months of 2018. And Qualtrics’ total revenue grew 52% in the year ending 2017, and 40% for the first six months of 2018. The street likes a Cinderella story (sorry, wrong genre), and Qualtrics is certainly that. But maybe I am missing something.
Still, SVMK revenue grew at a reasonable 6% between 2016 and 2017, and for the first six months of 2018 grew somewhat faster at 14%. But this was not enough to overcome a gaping operating loss of -$27 million (the first six months of 2018).
Given weak financials and a significantly depressed stock price, SVMK looks like a juicy acquisition target. Likely prospects include Facebook (limited survey capability but a vast supply of sample) and Google Forms (part of G-Suite with basic functionality). Are scary spirits propping up the stock price? With rapid acceleration, costs at Qualtrics have also grown fast. As revenue from labor-intensive “professional services” grows, labor cost growth must outpace revenue. These costs are not as scalable. Qualtrics’ “professional services” gross margin (currently at -20%) drags subscription margins down (which are 80%). Sales and marketing expenses are a whopping 50% of revenue (with R&D at just 15%). License fees are not funding more R&D; instead, fees largely support the sales team, marketing, and the Qualtrics Summit. That doesn’t seem like a very sustainable business model to me. Maybe I am missing something.
Qualtrics says that their “business model relies on rapidly and efficiently landing new customers and expanding our relationship with them over time.” Translation: XM’s cross-sell tentacles quickly reach across organizational boundaries wherever feedback is involved. Qualtrics has smartly leveraged their survey data collection engine across corporate silos with similar data and benchmarking needs (i.e., effectively the back-end of Research Core).
This templated approach is attractive for “large customers” (those with $100K+ in subscription revenue) who seek a familiar look and feel, a shared platform, and a tiered pricing model. Large customer growth has been very fast: +60% in the six months ending June 30, 2018, impressive by any measure. Qualtrics is also able to leverage its technology investment by modularizing its code base.
Qualtrics claims to have created a “new category of software, Experience Management, or XM™, which enables organizations to address the challenges and opportunities presented by the experience economy.” This is largely magical thinking for the IPO syndicators and future investors. In reality, there are only so many whales. The pod is fairly static and growth of 50% YOY is simply unsustainable in any industry. Maybe I am missing something.
Qualtrics has a few options: headcount and cost reduction, price increases, and perhaps packages for lower-end customers (and hope to upsell/cross-sell). These don’t seem likely. Rather, as Qualtrics continues its rapid move into consulting (and away from DIY subscriptions), they will be attractive as an acquisition target for companies in software, accounting, and management consulting. And Qualtrics fits well into a blockchain-enabled, supply-chain world.
No doubt, the IPO will make the founders very rich. But with a sweet acquisition offer, the management team may find itself working for a new employer sooner than they think. But maybe I am missing something.
BOO! That’s a scary story indeed!
by Bob Walker | Oct 3, 2018 | Marketing and strategy, Marketing research
There is an old joke about sharing research results: management’s response is either “I could have told you that”, or “I don’t believe it”. Humorous, but too often true.
Yet if a company has spent serious money on research, perhaps management should listen more closely to the full story. As researchers, we know all too well that any research project will usually confirm some obvious things. For example, a brand’s overall position or market share, key benefits, or common usage occasions are standard by-products of many studies.
But what happens when we peel back the layers a little more, and drill into more subtle differences? That is where we can uncover new learning and turn doubters into believers.
Recently, a well-known management consulting firm was hired to develop a new growth strategy for a major pain reliever brand with over $300 million in sales and a 30% market share. The consulting firm’s research convincingly showed that 60% of the brand’s usage occasions were for muscular pain. It was therefore argued that the product should concentrate all of its advertising dollars on this single use indication. By going narrow, it was argued, we could grow huge. In doing so, it could capture the lion’s share of the muscular pain “market”. It was brilliant strategy – or was it?
By solely concentrating on a single indication, 40% of the business would be at risk (i.e., the non-muscle pain usage). Ad support would only be for muscle pain, leaving all other indications vulnerable and up for grabs.
The new campaign would, therefore, start with a significant share deficit – roughly 12% (40% non-muscle pain usage of the 30% share). It would have to make up the share loss by stealing from other muscle pain usage occasions – if that was even possible. The strategy was severely flawed.
My client immediately felt uneasy with the recommendation. She questioned the way in which the firm had asked its questions. The approach they used virtually guaranteed the results obtained and, in fact, it was designed to simply confirm what they had recommended.
We urged caution and requested resources to conduct a better-designed study. Management initially balked, saying “I don’t believe it”. But we prevailed, and showed that the pain reliever market is really a huge basket of symptoms far greater than muscular pain alone. There were many pain indications: headache, fever, menstrual pain, dental pain, fractures, flu/fever, swelling, fatigue, and more. Muscular pain was actually a smaller indication than headache or flu/fever. Our brand just didn’t have as much share for these indications.
With the executive team’s support, the brand was successfully re-positioned as an all-purpose pain reliever. Other pain reliever brands that went the “single indication” route ended up being much smaller businesses.
And we don’t hear people saying “I don’t believe it” anymore.
by Bob Walker | Sep 17, 2018 | Marketing and strategy, Marketing research, Survey research
On August 29, 2018 SurveyMonkey filed an initial registration statement with the SEC (symbol “SVMK”) to float an IPO; the offering is now expected in late September. A recent update to its IPO filing includes a first pass at pricing; it has printed a price range of $9-$11 which, at a midpoint valuation, is $1.29 billion (lower than originally estimated).
In 2017, SurveyMonkey had revenues of $219MM, up 5.5% from 2016, and appears to be on track for around $240MM in 2018. However, the company is losing money: the loss of $24MM in 2017 has already been exceeded in the first six months of 2018 ($27MM). The company attributes this to increased R&D spending, but this accounts for $15MM of that figure.
In the research space, there are other possible IPO candidates, e.g., Qualtrics (we expect an IPO eventually), Decipher (part of FocusVision), and Confirmit (already listed on the Oslo exchange). Of all of the SaaS offerings, SurveyMonkey has perhaps the most to gain as it contemplates expansion – or sets itself up to be acquired. The list of potential suitors could include social media, e.g., Facebook (Sheryl Sandberg owns 5% of SVMK) or Google, and on the research/data science side are ResearchNow/SSI, IBM (SPSS), or even Microsoft.
Yet the opposite might be true: SVMK notes that their large user base, offerings, extensive data set, and integrations provide opportunities to drive acquisition: remember Zoomerang?
The S1 statement is interesting from a trends standpoint, as SVMK makes the following observations (paraphrased) about the survey research industry:
- The nature of engagement between organizations and their key constituents is fundamentally changing by becoming more open, bi-directional and frequent. Internet-enabled business models, together with rapidly evolving societal changes have revolutionized constituent expectations for service, speed and experience. Organizations that ignore, misinterpret or react too slowly to feedback risk falling behind the competition.
- “Big data” alone is insufficient to optimize decision making. To make good decisions, organizations need to marry “big data” with “people powered data” so that organizations can see beyond basic trends and better understand issues affecting key constituents.
- Employees are increasingly empowered to make decisions, and decision making within organizations has become decentralized. Employees throughout organizations are directly collecting and analyzing feedback. Access to information enables more decisions to be made at more levels across the organization. This accelerates the operating speed of the organization and increases accountability for decision making at all levels. As this data set is aggregated, organizational leadership is also using these insights to improve organization-wide decision making.
- Technology adoption is changing: IT solutions are now shaped by decentralized use. As organizations let employees become more empowered, technology becomes accessible to more individuals with varying levels of skill. IT departments then must step in and impose enterprise-grade security, customized company branding, and integration with software applications.
SVMK bolsters its IPO case by noting that quality research requires design, analysis time, and expertise that many companies do not have. Thus, individuals with absolutely no research expertise can gather and analyze data like a pro. As a long-time marketing research consultant, I find this assertion to be silly. Believe what you want; an additional planned layer of AI technology is envisioned to add support to this naive conceptual model.
Of note, a study conducted by SVMK in 2017 showed that 45% of business users who utilize online survey software considered SurveyMonkey to be their survey platform of choice. This makes perfect sense to me: SurveyMonkey fits the needs of individuals and small teams who need answers to basic questions. The design tool and integrations are good, and the online reporting is solid (better than several enterprise platforms), and the mobile app is very good.
In the right hands, SurveyMonkey can work as well as enterprise platforms, giving SVMK much more runway to grow. Conversely, growth in enterprise platforms like Qualtrics is flattening, as more revenue must come from consulting services and thus stealing business from full-service research firms. And, unlike many enterprise platforms, SVMK has developed a huge stable of free integrations to expand its functionality, while other companies charge ridiculous amounts for the same thing.
There is no question that the impact of SurveyMonkey on the survey research industry has been vast: there are 60 million registered users, of which 16 million are active. While most accounts are non-revenue generating (i.e., free), there are still 600K paying customers across 300K organizations.
by Bob Walker | Sep 16, 2018 | Marketing and strategy, Uncategorized
Blockchain provides the basis for a dynamic shared ledger that can reduce time when recording transactions, intermediary costs, and fraud. In the last couple of years, I’ve seen an increasing number of presentations on the value of blockchain. In industries where digital record-keeping is lacking, an immutable ledger (guaranteeing the chain of custody between parties) can be an enormously powerful tool.
Now it is much more than a concept – blockchain is being implemented around the globe. As the development of the “physical cloud” evolves, blockchain will thrive as more processes are truly automated, presenting fewer vulnerabilities and opportunities for fraud. Supply chains will have less buffer inventory, and more materials will be harvested just-in-time to feed fluctuating demand.
Yet in the marketing research industry, blockchain faces significant challenges. Current efforts, like those in other industries, are primarily focused on accounting benefits and fraud prevention. In particular, online consumer panel companies are dealing with huge amounts of fraud: they have been paying out millions in incentives for surveys with no data! How does this happen? Bots, click farms, and illegal software can all circumvent legitimate data collection efforts. One of the worst is a program called Coby. Once installed, it hides behind a VPN. Coby brags that it can generate personal information “to protect your privacy”, can complete Captcha prompts, completes surveys that have just enough variability, and generates email to fool panel companies. No wonder research companies are panicked.
Data privacy advocates say that blockchain will allow consumers to take control of their personal data “assets” such demographics or financial data. Online consumer panelists allow access to their anonymized personal information using tokens, which are digital permission slips with a limited lifespan. One a token is exchanged, the anonymized information (including survey responses) is passed to the survey research company. Then the token expires and the transaction is immutable. From a data privacy standpoint, these are positive developments.
Conversely, while blockchain is good for fattening research company profits, it does nothing to address the biggest issue in the marketing research industry: survey participation and non-response bias. Non-response needs significantly more attention, and is a major omission in blockchain discussions. One could argue (and I would agree) that putting the individual in charge of their own information is essential (and is at the heart of GDPR). In doing so, we may reduce the number of inappropriate requests for survey participation. Perhaps this will increase the likelihood that individuals will participate in the future.
For the short term, blockchain may solve part of the data quality problem. Can blockchain restore trust, and foster greater cooperation? Time will tell – and it will take a lot of time.
by Bob Walker | Aug 28, 2018 | Customer satisfaction, Marketing and strategy, Survey research
Many companies have established ongoing customer satisfaction programs: your department or company may be one of them. If not, you probably see many customer satisfaction survey examples once you finish a purchase transaction with a company. The airlines and lodging industries are particularly good at sending out requests for feedback shortly after every flight or stay. Yet a recent conversation with a client gave me pause: he rather confidently indicated that customer satisfaction research was the primary tool used for strategic insight into the performance of their business and the minds of consumers. Um, not.
Customer satisfaction research is not strategic research, and it never will be because it was never intended to be. Customer satisfaction research results cannot identify areas for new product development, a new advertising or communications strategy, or possible new market opportunities. Importantly, customer satisfaction research cannot tell anyone if the business is expanding or contracting, or effectively meeting customer needs, since it is restricted to recent customers.
At its best, customer satisfaction research is a process control and exception reporting tool. But even these goals are sometimes elusive, especially when the measures being used are general and nonspecific. Customer satisfaction can be very useful if trying to determine if specific performance criteria are within acceptable limits. However, the research ‘container’ (i.e., areas of investigation, questions, scales, and metrics used) is generally naïve in terms of whether the dimensions themselves are relevant or not.
One can hypothesize that, in a number of cases, some of the measures being asked probably have little to do with characteristics of the transaction that matter, or where the business is going – or where it is been. As an exception reporting tool, customer satisfaction is useful; as a business guidance and strategy development tool, it is of limited use.
But where does that leave us if most marketing managers and researchers don’t recognize the essential distinction between a process control tool and research designed to help grow the business?
The function of strategic research is to help an organization look out the window and navigate the uncertain and constantly changing road ahead. It is both quantitative and qualitative in nature. Strategic research helps the management team understand their customers’ attitudes and behaviors about the products they are using – and also those of their competitors. Additionally, strategic research helps identify the direction in which category users feel the market is going. It’s research that is dynamic, and always listening to customers general feelings and more detailed perceptions of your brand or service, rather than restricting their responses to the measures that are predetermined in a customer satisfaction study.
Don’t be lulled into complacency by positive customer satisfaction research results that indicate your business is doing well among your existing customers. You are only getting part of the story, and strategic research (which can take many forms, and should be conducted routinely) involves actively listening and responding to the ever-changing needs of today’s customers.
