Digital Matters -- Issue 50

First, focus groups were cool. Then they became the loser's club. Now, thanks to the Web, they've become obsolete.

They gathered this past this spring at a research facility 20 miles north of downtown Chicago. In attendance were the focus-group research team, four people from the advertising agency, five members of the client company, and a couple of outside consultants. They had all flown in from somewhere else at considerable expense. They were all staying at a downtown hotel, again at considerable expense. Throw in the car service, the rental cars, the meals, and all the rest of it, and before you knew it, $25,000 had evaporated into thin air. They sat in a dark room, with two minifridges crammed with bottled water, assorted juices, and soft drinks. All around them were bowls of M&Ms and a variety of other munchies.

Later, a catered meal arrived, a great sodium-laced groaning board that, by morning, would cause their hands to swell up to the size of catcher's mitts. In front of them was a one-way mirror. They could see out into the room where the focus-group session was taking place, but those in the room could not see them. That night, participants were being asked to gauge their interest in a new energy drink. The average weight of these unenergetic participants hovered between rotund and obese. A friend of mine attended this energy-drink focus-group session at the request of the client. He noted that at least half of the respondents seemed to be focus-group professionals whose sole interest and only reasons for being there were the $100 honorarium and the free food. "They couldn't have been less interested or engaged," he said.

After it was over, the focus-group research company ground out a report, which was then incorporated into memoranda at the client company and the advertising agency. As it turned out, the lethargic fat people liked the idea of a new energy drink, but they didn't like the proposed names for it. And once the reports had been filed and the memos had been emailed, everyone involved promptly forgot all about the experience.

There was a time, not so long ago, when focus-group research of this kind was considered to be fresh and exciting. Research professionals called it "qualitative" research, because it enabled marketers and advertisers to get beyond the "quantitative" research (a telephone poll of 500 - 1,500 respondents) and drill down into how brands, products, and concepts were understood: what was appealing about them, what was interesting about them, what engaged various market segments.

Over time, however, focus-group research became a kind of losers' club. If you were one of the lost souls who actually had to observe focus-group research sessions, then you were a nowhere man on the organizational chart. The findings from these sessions are still presented to clients as "key insights," but everyone understands that they are anything but. At some level, it's a wonder that clients still commission focus-group research at all.

Almost a year ago, an article appeared in Advertising Age that signaled the end of traditional focus-group research. The article was about PG.com, the Web site of Procter & Gamble. Mark Schar, P&G's vice president for iVentures and consumer knowledge, said in the article, "I would say it's pretty clear to all folks involved that the Internet is going to be the future backbone of our consumer-research activity." And that was the day -- if you had to pick one single day -- when the business of research changed forever. Because Procter & Gamble isn't just any company. It happens to be the biggest buyer of market-research services in the world.

What P&G is buying is a tool set created by a company called Recipio. Go to PG.com and click on the "Try & Buy New Products" link or the "Help Us Create New Products" link, and you will be transferred to a virtual, real-time focus group. Recipio serves as the "interactive-session-application provider" -- which means that it works with P&G to keep the conversation rolling. As consumers express their opinions (and rate the opinions of others) about various P&G brands, says Schar in the article, "you can see literally as a consumer goes through a concept and gets instantaneous feedback about what they liked, what they didn't like (in ways) you could never do in a paper-based environment."

All the while, Recipio's back-end technology is doing analysis of what's going on, in real time. The result is that P&G's best customers -- those who care enough to go to one of P&G's Web sites -- are providing the company with extraordinarily rich information about its products, services, and brands. At one-tenth of the cost and four times as fast.

Needless to say, Recipio's business has been booming as more and more clients have become aware of its tool set. General Motors uses Recipio-enabled research to get customer feedback on all of its brands and new lines. NBC uses Recipio to get a steady stream of feedback on all of its programming. (Negative customer feedback may have been one of the reasons that NBC pulled the plug so fast on the XFL.) Whirlpool is using Recipio to find out what people think of new appliances before they hit the market. And soon, two large financial-services corporations will use Recipio to understand what their customers like and don't like about their products and services.

Tom Kehler, Recipio's president and CEO, believes that all customer research -- qualitative and quantitative -- will soon move online. He is almost certainly right. Today, more and more companies are using AOL's Digital Marketing Services Inc. to conduct quantitative surveys that are large (1,500 - 2,000 respondents), statistically valid, and remarkably cheap. A Connecticut-based company called InsightExpress LLC will build you a sample of 750 respondents and conduct a 30-question poll for less than $2,000. The same parameters for a telephone-based research company would cost between $20,000 and $25,000.

It is said that only two things matter in utility businesses: price and security of supply. At the advent of the Internet Age, traditional research companies argued -- successfully -- that online research was flawed because a statistically valid sample could never be drawn from so-called early adopters. Thus, the "security of supply" was not insured. But we're way beyond that now. The truth is, unless you are conducting a major research project (like siting the next Toyota Camry plant in the United States), there is no longer any reason not to use online research firms. They're faster, cheaper, and, statistically speaking, every bit as good.

As more and more companies start using services such as Recipio and PlanetFeedback.com, the idea of "research projects" will erode into one never-ending consumer-feedback loop: the permanent ad campaign. Have a problem with Verizon or SBC? Let them have it at PlanetFeedback.com. Want to propose a new, more kid-friendly dental product to Procter & Gamble? Visit PG.com, and let them know. Want to learn what your customers think about your advertising? InsightExpress can have the numbers on your desk in an hour.

The Internet has begotten the Age of the Customer. Now, thanks to the ingenuity of people at companies like Recipio, PlanetFeedback.com, and InsightExpress, customers can vote on existing products and services. Even better, they can play an active role in the development of new ones. They can cocreate the products they wish to consume. The impact of this technology is just beginning to be felt. But they will become central to the operations of every company in very short order.

John Ellis (jellis@fastcompany.com) is a writer and consultant based in New York.

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