Discovering business opportunities

 Howard R. Moskowitz is president and CEO of  MOSKOWITZ JACOBS INC. . Dr. Moskowitz is both a well-known experimental psychologist in the field of psychophysics (the study of perception and its relation to physical stimuli), and an inventor of world-class market research technology. Among his important contributions to market research is his 1975 introduction of psychophysical scaling and product optimization for consumer product development. Whereas these methods are standard and well accepted today, they required a massive culture change in the 1975 business community. In the 1980’s his contributions in sensory analysis were extended to health and beauty aids. He has also developed and refined procedures which enable research to interrelate products, concepts, consumers, experts and physical test instruments, in order to accomplish product optimization and reverse engineering. Finally, his research and technology developments have led to concept and package optimization (IdeaMap), integrated and accelerated development (DesignLab)), and the globalization and democratization of concept development for small and large companies alike, in an affordable, transaction-oriented approach (IdeaMap Wizard; IdeaMap.Net).
Dr. Moskowitz developed the notion of RDE or research developing experimentation. RDE comprises easy-to-use Internet-enhanced experimental designs (similar to conjoint analysis), coupled with high-level, automatic analyses. RDE reveals what messages synergize to produce exceptionally strong performance, and what messages either work with each other or do not work with each other. RDE further segments people by their mind-sets, using direct responses to messaging, thus making segmentation immediately actionable.

He is autor of the book Selling Blue Elephants, awarded with Best 30 Business Books of 2007 Excellence Award by Executive Book Summaries.

1. How to understand the mind of the consumer?  What are the major tendencies in this area?

The big problem here is the drift of market research towards two areas. The first is tracking studies. These studies don’t tell you much. The second is observational research or ethnography. These are in-depth, but too expensive.

I favor experimental design of ideas, where you mix and match ideas, present these as test concepts to consumers, get ratings, and identify what works. If you do this properly you learn a great deal about the algebra of the mind. I have written books on this (see my website www.SellingBlueElephants.com – go to ‘about the authors’, and see the ‘books’. You have a table of contents. The books and chapters dealing with concepts go into this area of understanding the customer’s mind.

A good example of this approach is what customers want in credit cards. About 15 years ago we worked with Discover Card in Chicago, and uncovered the fact that customers wanted cash back primarily. Management wanted to give gifts and other less costly incentives. The data were clearly pointing to cash back as the KEY incentive.  We would not have uncovered this desire for cash back with observational research or tracking because it was new to the world, and certainly NOT in the marketer’s consideration set.

A second approach is Tropicana’s Grovestand® Orange Juice, with pulp. Pulp was considered a waste product in orange juice. No one knew they wanted pulp, not could they. Pulp never appeared in a product usage tracking study, and there was no way for people in observational research to find out the people would like pulpy juice. Yet, put the pulp in the juice, and a whole segment loved it.   So it was experimentation, not tracking, not observation, that got to a fundamental product ‘truth’ or at least a product ‘opportunity’.

2. Where does the gap come from: what people say they would like / dislike and finally what people really buy?

I think that the gap comes from the way we ask question. We tend to believe our own questions. Of course people do not do what they say they do.

The problem is our intellectual history. Most marketing research comes from sociology. In sociology you measure the number of people doing a certain thing, feeling a certain way. You describe. Sometimes your descriptions are biased. You don’t get the right answer. This is a problem of sociology.

Thus if you want to measure what is ‘real’, you either have to measure actual behavior (e.g., scanning), or you have to correct for the over-statement in questionnaires (but how), or you have to give up that area, and go into another aspect.

I choose to do the third thing, and work with experimentally designed products and concepts. I am not measuring general behavior like political polling or sociology. Instead, I am relating the physical product or the language of the concept to the reaction.  I am an experimental psychologist, and deal with the actual stimuli in front of the respondent. That is the great beauty of experimental psychology . We create the test conditions, and look for findings, and then laws.  Most market researchers don’t know the beauty, elegance, and usefulness of experiments, because as I said before, they are sociologists or former sociologists.

One good example here is coffee. When we worked with Maxwell House Coffee (owned by Kraft now), we found that more than 80% of the respondents wanted a rich cup of coffee. Well, what was rich. We found by experiment that rich to some people was coffee that was weak, whereas rich to others was coffee that was strong. We’re talking about different types of beans. So the bottom line here, again, is that when the market researcher ‘asks’ the customer to profile the product, the customer profiles a product. Create that product, and all too often the product is just plain terrible. Why – because what the consumer says is a function of advertising, etc.  Yet the product developer (food, beverage, even financial service) listens and takes literally the words from the consumer’s mouth, and tried to deliver. In the end – a disconnect.

3. What is your recipe for successful innovation, that really adds value to the brand and pleases the consumer?

Innovation is a hard thing to talk about, especially when it is about something that doesn’t exist yet. (I owe that statement to Yogi Berra, who said that prediction is very hard, especially about the future).  To me, innovation means experimentation.  A lot of what we talk about regarding innovation is really minor stuff, such as new flavors. But management has to do something, so it creates a simple, easy-to-understand things such as a new flavor, and calls it innovation. What should management call it – same old, same old?

Before I launch into a pontification of what I believe to be the truth, let me give you a simple example. What if you have to innovate on a continuing basis, one new product a week? And, what happens if you need to make sure that the innovation or at least the creation ‘works’.

My approach, at least my personal favorite, is not to rely on chance. For example, in creating an electronics product, I try to structure the problem as combining the components from different existing products. That’s pretty easy. First, I define the silos the product (features, how used, etc.). Second, I identify the options or elements that fit into the silos, generally by doing some competitive intelligence (e.g., download from the web descriptions of products from different manufacturers). Third, I populate the database of elements, with elements from different products. Fourth, I use web-based computer programs to mix/match these elements into new-to-the-world combinations or ideas. Fifth, the respondents rate these combinations, not knowing that they are rating new-to-the-world ideas.  Sixth, I deconstruct the results by statistics (regression modeling) to identify what the different elements  contribute to the responses. Seventh, I segment the respondents into different mind-sets. Eighth, and finally, I recombine winning elements from the different products into new-to-the-world ideas. 

Does this work – yes. Does this work perfectly – no. But .. since I’m taking a structured approach I can do this week after week, until the elements are right. And, there is a lot of learning. This approach is quite different from the conventional research approach which is labor intensive, mind-intensive, and essentially forces creation into the land of experts and gurus. You can see from my approach that the methods are structured, democratic, and databased, rather than unstructured, intellectually aristocratic, and one-off, unique to a situation.

Here is the introduction from a paper I presented at ESOMAR, 2002: The process of corporate innovation is often left to outside consultants and internal/external teams specializing in the invention process. Market researchers are all too often neglected in this process, even though the newly emerging tools of researchers can accelerate innovation? What may be needed is a researcher-friendly system with five properties: rapid and user friendly (days and weeks); consumer-based (to ensure ongoing inputs from the end user); knowledge-based (using data, not guesswork); reality-based (using observation to identify actual behaviours leading to these new products); and modularity (to allow flexible sequencing of specific steps in response to new learning). This paper demonstrates the integration of current tools into a flexible innovation system and deals with the creation of specific types of products (sandwich, car features, respectively), responding to the increasing use of the car as a place where food is eaten and beverages are drunk. This approach is ‘boundary crossing’ as we go beyond the current boundaries of cars as vehicles for transportation, and look at cars as venues for food consumption.

One of the big market buzzwords today is the ‘fuzzy front end’. A quick look through a search engine such as Google® will reveal 4,090,000 references to innovation, and 1,270 references to the phrase ‘fuzzy front end’. When all is said and done, however, this phrase refers to the early stage of development (e.g., Neuse, 1995; Stinson, 1996). A clearer definition of innovation was given almost 30 years ago (Zaltman, Duncan and Holbeck, 1973). Innovation, using their definition, refers to any perceived deviation from existing practices or knowledge. Innovation may or may not be planned, may or may not be deliberate, and may or may not involve action. It is easy to see, then, why the ‘fuzzy innovation stage’ is often ignored by marketing researchers, however, who prefer to concentrate their energy on the more defined, later stages of development where there are metrics, standardized procedures, and recognized analytical approaches (Earle, 1997). As a result, the important first stage of product development is poorly executed, leaving the product not optimized, to survive in a Darwinian jungle (Fuller, 1994; Peleg, 1994).

One of the consequences of the market researcher mindset is the abandonment of this early-stage research by researchers. For the most part, market researchers, under the direction of outside experts, are content to do qualitative research at this stage. Market researchers are well equipped with a variety of tools to facilitate ideas, but except for the qualitative specialist, most researchers shy away from using these tools at the early stage (Hoban, 1998; Rosenau et al., 1995).

Over the past decade, the process of corporate innovation has generally been left to outside consultants and to internal/external teams specializing in the invention process (Griffin, 1997; Wheelwright and Clark, (1991). Researchers have shied away, tending to act in the evaluative mode, rather than in an active creative mode. A consequence of this situation is that market researchers are all too often neglected in this process, even though the newly emerging tools of researchers can accelerate innovation. If researchers are creating these new tools, then why aren’t market researchers using them?

We believe the problem is not with the tools, but rather with an application mindset that favors fixed applications sequentially arrayed to create increasing “hurdles” that must be overcome to pass to the next research step. A new beginning is needed for market research in the early, creative arena of the development process (Moskowitz, 1998). What is needed is a flexible knowledge-development and knowledge-enhancing system, operating efficiently and cost-effectively (Moskowitz, 1997). The system should have these five properties which deliver knowledge in a way consistent with the worldview of the market researcher:

1. rapid and user friendly (days and weeks),
2. consumer-based (to ensure ongoing inputs from the end user)
3. knowledge-based (using data, not guesswork),
4. reality-based (using observation to identify actual behaviors leading to these new products),
5. modularity (to allow flexible sequencing of specific steps in response to new learning)

A key defining aspect of marketing research in the past ten years and, apparently for the next several years, is the use of ‘tools’. Marketing researchers graduating from universities today are awash in technological aids to creative thought. These aids span the range from computerized interviews either on personal computers or on the web to statistical analysis methods to high level quantitative treatment of qualitative data. One of the key phrases often heard is the ‘toolbox’. A toolbox simply comprises a set of well-accepted research procedures that have been designated as appropriate to help solve a problem. Although there is a method and analysis toolbox for common research problems (e.g., product testing, tracking, etc,), there is no comparable market research toolbox for innovation. There are no algorithms, procedures, analytical strategies to deal with the fuzzy front end of development, although there are numerous practitioners who provide one or another method. The business literature is replete with these methods, be they in the form of books or journal articles, in either the popular press or the archival academic press, respectively. A marketing research toolbox comprising high-level data acquisition and analysis techniques, designed to be rapidly and flexibly applied during the early developmental stage would, therefore, be a very welcome addition to the researcher’s armory.
INTELLECTUAL FOUNDATIONS – MODELS FROM STRATEGIES OF ADAPTATION IN EVOLUTIONARY BIOLOGY
Although (by definition) there are no well-accepted algorithms, procedures or strategies to deal with the fuzzy front end of development, there is an emerging view suggesting that organization improvisation and innovation appears to arise from the recombination of previously successful subroutines (Borko and Livingston, 1989). Models of adaptive systems as well as some evidence from evolutionary biology have shown that recombining routines provides one of the most fruitful sources of change, allowing systems to prosper and to adapt to new circumstances (Holland, 1975; Levinthal, 1991). We believe that, in the same way, a firm using well-developed marketing research oriented subroutines can utilize the principles of adaptive planning, recombining successful routines in rapid iterative learning cycles. Each subroutine should provide a clear ‘piece of the puzzle’ so that practitioners can easily recognize‘re-combinatorial’ possibilities as new learning occurs. The consequence would be the research-driven ability to produce and evaluate new ideas in response to unexpected learning or market changes (Flores and Briggs, 2001).

Using adaptive subroutines is a pragmatic answer to the general business conundrum of planning becoming an end, in and of itself. For business in general and for the market researcher in particular, process definition and planning is necessary in order to ensure that action occurs along the defined critical path, as well as to prevent duplication of work. Yet, planning can take too much time, as many market researchers well know. Studies can be over-engineered, research designs can be perfected, and meetings can multiply. As planning begins to take more time and costs more than the gains it promises, planning actually detracts from the speed needed to create new products (Moorman and Miner, 1995). The market researcher is especially prone to this over-planning because market researchers do not operate with external sources of validation such as profit and loss.
To round out this overview of intellectual foundations we can look at some of the critical new thinking around the concept of an ‘adaptive enterprise’ that might embrace this new paradigm. Haeckel (1999) has suggested that Adaptive Enterprises are ‘Sense and Respond’ organizations rather than ‘Make and Sell’ organizations. The barriers to innovation are removed when the organization is in constant search for new ideas and recognizes publicly that it has a constant need to add new ideas to the conveyer belt. “Change is no longer a problem to be solved, but rather an indispensable source of energy growth and value” (Haeckel, 1999).

4. What is the important of the product package nowadays? What is the key for creating a successful package concept and design?

Well, this is a very hard question to answer. For years and years researchers have swallowed the nonsense that one cannot test packaging other than as a beauty contest. Nonsense, nonsense, nonsense. One can create experiments whereby one systematically varies the components

I wrote the following in one paper:

When we think of graphics design in this systematic fashion, we are immediately struck by the possibility of using experimental design to mix and match features, test full combinations, and then deduce what every graphics element contributes to the respondent’s rating.

Figure 1 below shows this scheme. When we think of graphics design in this systematic fashion, we are immediately struck by the possibility of using experimental design to mix and match features, test full combinations, and then deduce what every graphics element contributes to the respondent’s rating.

Figure 1 – Graphics design schematized as a template, with silos and elements 

 Let’s look at this approach in action, again with pretzels.  Figure 28 shows us a schematized drawing of the different silos and elements within the silos. The bag itself without any elements presents us with the template. As we look around the template we see the different silos and the various elements in each silo.  These elements are typically developed as single options by a graphics artist. There is no reason to assume that the elements need to be ‘high art’. They simply need to have some verisimilitude. If you look closely you will see that the texts can emphasize health, brand, etc.  Like concept work, graphics design does not limit the investigator, as does the physical characteristics of the pretzels themselves in product testing.

Figure 2: The template for the pretzel bag, showing the different silos and the elements in each silo

  The rest of the package evaluation follows the path described above for concepts, except that the stimuli are graphic rather than text. Thus we see that the package itself may be evaluated, one package at time (see Figure 3). To the respondent the package looks quite veridical, and so it should because the template is realistic with curved edges and a sense of depth, and the particular elements have been rendered so that they are of the type one might see on the shelf.  Respondents participating in these types of experiments do not mind that they see ‘incomplete’ combinations, with occasionally some silos totally absent from the package design. In the end, if the researcher uses the an experimental design that ensures only one element at most is missing from a package, the respondent will be none the wiser

Figure 3: The respondent evaluates lifelike packages.
 

Tags: brand, concepts, consumers, experimental psychology, experimentally designed products, market research, marketer, package, products, psychologist, research developing experimentation, researcher, respondent, segmentation, stimuli, tracking study, value
Posted in New opportunities

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