Friday, November 14, 2014

unCon 2014 Session: Primary Market Research

By Ellen Askey

Session led by: Elaine Chen, entrepreneurship lecturer at MIT

Building from the basics, that entrepreneurs must leave the office to interact with costumers, we discussed qualitative versus quantitative market research.

Elaine took the position that quantitative measures are best for pricing research – in fact, the only viable way to research prices is to try selling the product at various prices and see whether or not customers buy. Survey takers tend to respond that they would buy a product, though when faced with the purchasing decision, they would not follow through. Katarine Cai countered that qualitative research may be more useful B2B companies making more customized sales for which one would want to understand a given customer’s motives for buying the product.

Hardware companies follow a slightly different principle, too. Because they cannot iterate as quickly as software companies, they cannot use the “sell and see” method for pricing research. However, they can use surveys for which target customers rank their likelihood to buy a product on a 1-5 scale. Different prices are used for different groups of survey takers. Using such surveys, Kindle researchers determined that the best price for mass adoption was $99, which they eventually lowered the price to. Surveys can also help determine product-market fit. One can administer a test for how upset target customers would be if the product were taken away. If 40 percent respond “extremely upset,” the product fits the market quite well. Josh Bob challenged that even this tests is too qualitative; he holds that raising the price is again the only way to learn customers’ true responses. 

Survey tips include keeping it short – every 10 questions, 10 percent of responders stop – and asking only actionable questions, not just any and all interesting questions. Start by asking yourself what information you need to make the decision.

Yet, the heart of qualitative market research lies in interaction with target customers to gain insights. Observation can be a doorway to pain points. Market researchers can see how customers interact with the product or how target customers act with pain points lacking a given solution. Elaine noted the time she spend 8 hours in a car with a real estate agent to see how they passed that time.

Discussion, too, is a great way to learn about the pain points that target customers face. One cannot simply ask, generally, “Do you have a problem?” Instead, make a hypothesis about who you target customers are, bring them in, and have a conversation. Elaine once researched target customers with sleep problems for a sleep-tracking alarm clock. There, one could first ask, “What are your sleep issues?” Perhaps the interviewee does not even realize their abnormal sleep patterns are problematic; that’s also important to consider.

The conversation should flow from general to specific. The interviewer should let it flow freely, without guiding the conversation towards their own solutions.  Thus, the interviewer avoids leading the witness, and the witness avoids responding positively though falsely, out of kindness. Elaine suggests that the interview prepare 4 open-ended channels of conversation; the interview can listen to the interviewee’s story and follow them to narrow the conversation. Once the conversation is complete, the interviewer may talk about potential solutions and could even ask “If a genie cam with a solution, what would it look like?”
Elaine strongly recommends the free ebook, “Talking to Humans, Success Starts with Understanding Your Customers,” for more on this topic.

Regarding methodology, Elaine recommends recording the interviews on video so that the market researchers can use facial cues. However, the opposing school of thought holds that recording can detract from the interviewee’s honesty.

Elaine also recommends interviewing in pairs, with one person talking and one taking notes. The interviewers can debrief ever 5 or so discussions, sharing insights and looking for patterns among target customers. In this way, they test their target customer hypothesis, and they see potential correlations between the target factors and other factors.

Near the end of our discussion, one participant asked when entrepreneurs should disregard customer feedback completely, as Steve Jobs claimed he did. We determined that customer opinions typically have no bearing in aesthetics, from the fast-changing fashion world to user interfaces.


In the end, says one participant, customer feedback is a useful as a way to mitigate risk. Entrepreneurs can then choose whether or not too listen to feedback, weighing the risks and benefits of pursuing a potentially disruptive innovation. 

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