Linking Research to Profitability

Marketing research often is thought to be a corporate cost center rather than a profit center, even though it can bring in information invaluable to the sales effort.�

Industry or regulatory required customer satisfaction surveys, such as patient satisfaction in healthcare or ISO 9000 required surveys for international companies, sometimes justify the cost-center point of view. When these programs become automated and monotonous, and no internal proponent develops the research strategically to affect change, it's hard to prove program effectiveness, much less any link between marketing research and corporate profitability.

Another example is syndicated media research (TV/cable/radio/magazine/Internet), where results are used competitively by the various media properties to attract advertising dollars by demonstrating that they reach specific, targeted audiences (think Nielsen for TV or Arbitron for Radio). Thousands upon thousands of syndicated media research analysts work for media outlets and, while they are very important to the marketing and sales processes of their companies, they often are seen as a necessary cost rather than profit center. Why is that?

Looking specifically at the media example, it is hard to show a direct correlation between the researchers' ability to analyze the syndicated ratings and their company's ability to leverage that information toward profitability. An analyst may show creatively that their company's media property reaches more redheaded California surfers that are car buyers than the competition. Their marketing and sales teams would then use this analysis as part of a presentation, pitch or proposal package for an auto manufacturer. But with all of the variables involved in the sales process, it is hard to say what part creative research analysis played. Since the analyst has no control over the pricing included in the proposal, even if the business is won, it is difficult to directly tie their work to profitability. Most times, research is simply too ingrained in the process to be separated out.

The same rules apply to other forms of marketing research, such as customer satisfaction. Say a company's researchers produce a perfectly accurate customer satisfaction baseline and tracking survey program that shows the length of customer call-in hold-time is directly correlated with negative overall satisfaction and/or repurchase intent. The company still has the prerogative to decide not to act on that information. Even if their company does act on information, reducing hold-times and seeing overall satisfaction levels rise, linking that improvement directly to overall profitability is difficult because there are far too many other variables to consider, such as market conditions (competition) and the cost of other resources (petroleum products for example), which both substantially affect corporate profitability.�

We currently work with a homebuilder that we have built a comprehensive customer satisfaction program for, and their performance on key satisfaction measures has steadily increased. The internal research proponent at that company operated under the assumption that, "if we got [satisfaction scores] high enough, there would be significant financial benefits. Our referral rates would go up, and word of mouth would have far greater impact on our sales, so fewer marketing dollars would need to be spent." Our client has certainly been profitable over the past few years, and we would like to think our great research has had a hand in their success, but just as with the above examples, it is unfortunately impossible to make such claims - no matter how much we might like to.�

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