Freeze: “Paralysis by Analysis” and other Joys of Marketing Research

“There are many methods for predicting the future. For example, you can read horoscopes, tea leaves, tarot cards, or crystal balls. Collectively, these methods are known as ‘nutty methods.’ Or you can put well-researched facts into sophisticated computer models, more commonly referred to as ‘a complete waste of time.’” — Scott Adams, The Dilbert Future

I recently attended a meeting at one of the world’s largest PR agencies. In the midst of a luxurious high-tech conference room featuring an HDTV and a tower of high-quality donuts, the agency told its client — an Internet start-up — that it needed to conduct more research. The client was visibly shocked…This start-up company was on the verge of launching its beta site. It had already worked with this PR agency for nearly a year. The additional research would have cost thousands of dollars and set the launch back several more months. Why was this recommendation coming now?

My typical cynical thought: That’s just like a giant PR agency to recommend yet more research rather than do any actual work for a small client. (That’s why I prefer small to mid-sized PR firms — feel free to ask for my recommendation.)

I also thought of the value of research: certainly, it helps, but too much research can leave you stricken with that deadly disease known as “paralysis by analysis.” That’s when action is delayed again and again because somebody wants to do more studies. By the time the company completes its studies, the rapidly evolving business world has changed to the degree that the original findings no longer apply. So the company decides to do more studies on these new developments…

Example: I know a guy who’s been talking about starting a business for three years now. He’s jumped through all the official hoops from incorporating to designing a logo. He’s also visited prospective manufacturers for his low-tech consumer product. But he’s yet to officially launch or manufacture a single item; instead, he’s been sending out one marketing survey after another to friends and family. I recently discovered that someone else has launched a product similar to his idea, so while he’s been researching, a competitor has appeared where there was none before. On top of that, there’s this little matter of the recession, which makes him even more nervous about quitting his job and launching a consumer product. Oh, to be back in the sunny days of 2005…

Private sector advocates often criticize the public sector for “paralysis by analysis,” but this viral contagion is spreading to the private sector from business schools (where most professors exist for the sake of doing research) through a vector called “MBA’s.” As a recovering MBA myself who now teaches MBA students, my goal is to stress the importance of strategically thinking through decisions, and not just blindly accepting traditional processes or so-called “best practices.” (How I loathe that term.) That’s especially true of research.

Criteria: The Right Amount at the Right Time

I do think research is absolutely essential before launching any business or major marketing campaign — but only the right amount at the right time. No amount of planning can prepare you for everything. You can’t know exactly what your competitors are planning (unless you’re the New England Patriots). You can’t predict disasters or the stock market. But research and planning are far superior to just working from gut instinct — just look at W’s follies in Iraq as proof of that.

I also endorse as much research as possible in such categories as warfare, medicine, product safety and potential spouses. But when it comes to marketing, I recommend moderating one’s research urges based on these three criteria:

1. The urgency of your situation. Is there a deadline? Is your competition preparing to launch a similar product? Are your investors breathing down your neck and telling you to get on with it already?

2. Your financial resources. Can you afford to hire a professional research firm? I knew a barely competent researcher who charged $10,000 to conduct a simple focus group with 10 people, the results of which were completely ignored by the client. (I don’t blame the client. I personally find little value in focus groups, which have notoriously rejected everything from telephone answering machines to minivans to the TV series “Seinfeld.”) Are you better off searching the Web for the information you need? The site Marketing Sherpa, for example, offers a number of reasonably priced reports, and if you subscribe to their free newsletter, you get the fresh reports at no charge.

3. The size of your investment. How much is at risk? If you’re launching a multi-million-dollar project, by all means, conduct extensive research before beginning. If you’re running an ad in a magazine, just run the ad. I once worked with a dotcom “VP of Marketing” (little more than a former computer engineer with a Stanford MBA) who asked me to create a spreadsheet projecting the full range of possible returns of a $3000 print ad. I questioned the value of the research, since not all benefits of advertising can be projected or measured, but did as requested. At my rates, the spreadsheet cost $1000. After reading it, she declined to run the ad. So essentially, her risk aversion guaranteed a loss of $1000 and a 0% chance of success. Not surprisingly, a year later, the company still has no audience growth despite being in a hot sector. The timorous VP has since left the building.

The Alternative

If none of the above criteria justifies conducting research, then I suggest learning by doing. Not exactly a revolutionary concept there. The key is to test your idea on a small basis — small being larger than a focus group, but smaller than a worldwide campaign. For example, you can launch your product in a representative mid-sized city like Portland, Peoria or Pittsburgh before conducting a national rollout. Hollywood often does this with its more experimental films, such as “Juno”: releasing them on a limited basis, then gradually extending that release based on reviews and audience reaction.

Learning by doing is what that client of the giant PR agency decided to do. Rather than conduct additional extensive and expensive research at this stage of the game, the company decided to go ahead with its beta launch: after all, the point of a beta release is to learn by doing. Will they make mistakes that could have been prevented by research? Perhaps. But they’ll actually be in business and interacting with customers. And that beats sitting around staring at spreadsheets, even if the donuts are good.

Update 4/23/9: One of my new favorite blogs, OK/Cancel, just posted a brilliant comic on research overzealousness. (Rather than have me rip it off, please treat them to the benefit of your traffic by clicking on that link.) Companies will tout their miniscule savings from conducting research, without considering the opportunity costs — what lucrative deals did they miss out on while conducting trivial pursuit? In addition, their micromanagement alienates their most creative employees. In the long run, the result of their “improvement” is often a net loss.

Update 4/26/9: Marketing writer Seth Godin asks procrastinators, “What happens if, starting today, you make every decision as soon as you have a reasonable amount of data?” While I generally agree, the problem is that most business people don’t know how to define “reasonable.”