Podcast. Season 2. Ep 7. Understanding the basics of market research, human rationality and how it affects consumerism. 

Home 5 Podcast 5 Podcast. Season 2. Ep 7. Understanding the basics of market research, human rationality and how it affects consumerism. 

Understanding the basics of market research, human rationality and how it affects consumerism. 

In this episode, Paul and James along with Faisal Khan (VP Products at D/A) explore and discuss the basic understanding of market research and how the rationality of human beings ultimately effects choices and decisions in consumerism. 

They also talk about the history of market research and how significant it is to adapt to the new tools available in order to effectively reach target markets in a digital first marketplace.

Listen to the full recording below or on your favorite podcast platform. 

Transcript:

Dr James Piecowye:  Hi, I’m James Piecowye. 

Paul Kelly: I am Paul Kelly.  

Faisal Khan: I’m Faisal. 

James: And this is the “Know your audience Micro Mini podcast”. And in this episode, we’re talking Market research 101, because up to this point, we have had a wonderful conversation about AI, how we can get better insights on our audiences, how we can understand what’s going on with our audience sentiment. And I think, Paul, we’re there’s a little bridge we need to make between all of these tools. And what we’re actually using them for.

Paul: Yeah, that’s right, James, I think, you know, we’ve talked about AI, I guess, and like you said about how, how the technology and how technology actually works in our everyday life. And that was a great episode we had with Diego a couple of episodes back where we talked about what natural natural language processing is, over time, we’ve talked about also the importance of understanding and knowing your audience. It’s the name of the podcast. But we yeah, when we had a chat about this. It was we thought it was time to bring up probably something that we hadn’t talked about before and exactly what is actual market research. So coming in at episode, whatever it is 12 or 15, or 130. We’re bringing, we’re bringing in the topic about actually knowing your audience and who better than to bring in an expert in, Faisal.

James: Faisal, welcome to the program. It’s great to have you here. And as Paul has said, we’ve really talked around this whole idea of market research without really elaborating on what is market research, and it is quite a large area of conversation. And I get the sense that a lot of people use the words market and research, but maybe are not really clear what it is they’re talking about. So we thought Market research 101 Faisal is in the building. Let’s ask him some questions to help enlighten us. So Faisal, I want to kick it off with when you hear the words market and research and they’re put together, what are we talking about? What is market research?

Faisal: Thanks for having me over James. Market research, like you said, is a is a complex subject. It’s a large subject. And it’s offered interchangeably used with, let’s say, marketing research. But if you get into the technicalities, they’re actually both different, and one follows the other. So market research is like the name is quite intuitive. It is the understanding of the market, the consumer is living in the market. And marketing research almost follows market research, but as used interchangeably, is any understanding typically of consumers, that has an implication on the marketing elements, for instance, the four P’s, the price, place, promotion, placement, so any decision that you need to take on these marketing elements, you need knowledge of consumers, you need to see how they’re responding to the market. And these decisions can be taken based on the information. 

So simply put, it is the understanding of the market, and consumers living in the market, and how they’re thinking, what they’re doing and why they’re doing. So that’s this that’s summarizing a complex subject. 

James: So, are there any limitations to market research? Like is there anyone who wouldn’t use market research who’s, who are the users of this?

Faisal: Market research is relevant to any brand to any brand, however, in whichever lifecycle or whichever stage of the lifecycle it is in. So even if it’s an introductory, if I’m a new brand that’s launching, I would want to understand the market who my target audiences, how do I, what are the what works in this market, so I might be a brand that’s sitting in the West, coming to the Middle East, the consumers are here different, the strategies that are working in the West may not necessarily work here, right.  Or, even if I’m a mature brand, let’s say Nike of the world, it’s actually much more difficult to to be relevant always and move ahead with time that actually an introductory brand. So a Nike years old brand, constantly struggled to be relevant today. 

And it’s these information or an understanding of consumers to be able to kind of resonate as they kind of progress. Or if there are business issues that need to be addressed. You will read the news a couple of days back Netflix has suddenly lost a lot of subscription, a lot of financial loss they’ll be very interested for example, at this point of time that what’s going on, you know, how do I win back my consumers there’s something and I’m guessing the scheme by surprise they’re not sure what suddenly hit them. And they want to know what is really running and the consumer’s mind is not easy to understand. 

James: So Faisal, so let’s let’s jump on the Netflix idea for a second and, and pick your brain a little bit. If we’re talking market research and we’re talking Netflix at this moment, what might this look like in market research terms what they might be doing in a practical sense.

Faisal: So what we call this is lapsing. So lapsing is basically a consumer behavior where you start seeing a decline, or a loss of shares and this could be true for any brand. And it typically happens when there’s a larger societal change. So there’s a larger societal change, where there’s some kind of trends that are changing, consumer preferences are changing, or evolving in a certain direction, and the lack of understanding that often leads to lapsing from consumers. And that could be for a product or in this case, Netflix, there can be multiple reasons for it. And market research kind of fits in here, because it helps you say, these are reasons we’ll come back and sharply tell you, these are the top four reasons in hierarchy saying 1234. 

These are the reasons it could be how the competition is changing, it could be content related, it just could be that you’re just a matter of transfer in the COVID world, your subscriptions and increasing, they’re going back to normal behaviors, and hence your numbers are going to pre COVID numbers. Or it could be something else. But it gives you clear answers to these other four or five reasons in hierarchy and hence, what do you do about it?

James: So if we’ve got these these benefits make there’s clear in that that example, there are clear benefits to doing market research. What are the challenges they face in getting the data or getting the insight to try and answer the those questions?

Paul: And just on top of that, before you answer that, I think it’s also worth maybe having a look at maybe Faisal, so just taking us over the different types of market research from like, the qualitative side versus the quantitative side? And just what those differences are? Because I think that would help answer James’s question as well, if I’m not mistaken,

Faisal: There are two broad pillars of market research, which they call us quantitative research and qualitative research, I’ll just give you a very quick historical context, I won’t take too much time on it. But market research kind of dates back to 100 years, approximately, when this gentleman called Daniel Starch. he kind of had an hypothesis that an advertisement is successful only the when people understand it, believe it, and act upon it. Till then they will just creating advertisements without knowing whether it’s successful or not. And that’s when they that’s when the introduction of what Paul was mentioning quantitative research where they realize that I need to go out and talk to people. And understand how many people are understanding this advertisement, how many people are believing in it, and have acted upon it for me to know whether my advertisement was successful or not. And for the first  twenty three years of market research, it was all about quantitative research, I got the words I got, I met a larger proportion of people. But when it got interesting when market research got really interesting is Post World War 2, where there was an economic boom consumerism, consumptionism was on the rise, especially in the American society. And there was a brand’s fighting, and the radio game became a big channel. And there were brands fighting for kind of share. 

That’s where bands realized they need to understand the why’s. That’s where qualitative research came into action, because it was extremely important not to know how many people are the whats, but the consumer motivations, and qualitative research help you do that. So qualitative research is literally like we’re having a discussion right now a conversation right now. And you’re trying to understand what is market research, I would go out, or people would go out have what they call this in depth interviews or focus group discussions, to understand their behaviors and the motivations behind their behaviors. And market research hasn’t changed since then. And this has been a big industry, but we haven’t really moved with times. These two pillars since the World War have actually been still as this strong pillars. 

But quantitative research kind of gives you larger scale responses, the width of responses, they’re their numbers, the quantitative numbers, whereas qualitative numbers are words, they help you understand the whys. So in in the Netflix example, for example, if I were to do a, I might do a combination of both, I might come and tell you 123 are the issues. But to understand issue number one better, let’s say, I need to have in depth discussions to understand what’s really going on in the mind of the consumer. So quantitative has helped me identify the issue the top issue, but for that better understanding, I might have to meet certain people, a shorter sample, it could be as small as 10 people 15 people just to get a better in depth understanding of what’s feeding the consumer psyche behind what’s really driving the issue number one, and you kind of then based on that creative strategy.

James: So when we look at the fact that we’ve we’ve got this longevity of using qualitative and quantitative research tools. The challenge is then our, the way we’re ultimately gathering this information has changed, in that there are more channels to gather the information from as opposed to what we had, and even even 10 years ago,

Faisal: Yes and no. Yes, I would say because it has changed, there are new ways of doing things. No, because it hasn’t changed the way we would have liked it to change at least a few years back, I was just giving you an example of I mean, I’m talking about 1920s 1930s 1940s. The core. And there’s a reason we so the the agencies, or the organizations do this market research, qualitative quantitative research called market research agencies. But today, they’re called traditional market research agencies, and not necessarily qualified with the word traditional in the right sense, it’s actually because they haven’t been able to really move time. So for example, if I give you a example of another industry marketing, which is which kind of works in tandem with us, marketing and marketing technology, or digital marketing has moved at a much faster pace, or has been more relevant with the times. 

So today, there’s a clear, important space that let’s say digital marketing enjoys, and they have moved away from the same mass communication in many ways, some organizations just to digital marketing, and not mass communication. So that’s an industry that’s really moved with times has leveraged technology. So market research, like I was saying yes, and no, yes, because it has started using the basics, at least a few years back. So yeah, you can collect data online, you can train sort of meeting people in a room of 8 people doing a focused discussion, you can ask them and invite them to come on Zoom. Is that really technology? Yes, in some ways, but it’s, it’s just at best, in my mind, minor tweaks is only now, in the last few years, where they have really been able to kind of, and these are the the so called, you know, smaller agencies or who are really, we’re really taking willing to take the risk. But it’s just that the bigger agencies have just not been able to disconnect themselves with the traditional, this has become too big, to really transform themselves, and adopt technology.

Paul: And I think just on that, and things not changing. And some industries, I mean, marketing kind of had to change in a lot of ways, because the consumer so rapidly changed that marketing is on the front end of everything, right, like budgets. So you know, like, often the CFO won’t see the benefit of marketing, because they’ll they’ll put more focus on promotion, for example. So cutting the price or value adding or that or that type of stuff. So I think marketers probably have come at it with a much more open mind, I guess. But also, one thing that always really got me about market research, and I’m not I’m not, I think it’s got a very, very strong place in a number of areas, but for some things, asking people what they think about something is inherently flawed. Act action, you know, if you sort of go back to a lot of work has been done over, tons of work that’s been done over, say, the last 30 years on behavioral science, particularly, in particularly around I guess, thought systems. 

And whether you buy into that or not, it is true that, you know, we do you have, I guess, our automatic or system, one type behavior, which we’ve covered, I think in another episode, before, and then you’ve got your very deliberate act and deliberate thinking, and when somebody asks you a question, you’re being very deliberate about it. And you’ve got biases as well.

Faisal: 100% 100%. I mean, that’s a very valid point, Paul, and that’s a challenge that the industry has realized. And it’s high time that they question the so-called claimed responses. I mean, if I asked you right now, if I asked you or consumers that what toothpaste do you buy, they might say, okay, buy a Sensodyne. Why do you buy it? It’s not easy to articulate it, right? And they’re almost put in a spot, and they will give you answers that are manufactured that are that may not necessarily be conveying what’s really running, you know, or what are the underlying motivations it’s difficult to articulate some things and it’s not only about difficulty in articulation, also a lot of claimed responses because you’re heavily relying on memory. 

Again, if I’m doing a study to understand a cooking behavior, I might go and ask someone. Okay, when was the last time you cooked I don’t know, used cheese in a, as an ingredient to a cooking recipe. They’ll tell you the approximated and say a week back and what was the recipe look like? What was the quantities you used? It’s, it’s, it’s you’re relying too much on claimed responses and that may not necessarily give you accurate information. So it’s the more we are not the more we stop asking people. And the more we start getting our responses through either natural conversations that are people happening in real time, or observatory methods is the way to go. And that’s where the future is sitting. And that’s where you’ll get information that’s useful.

Paul: And also, I think, on that as well, what I mean, people don’t intentionally lie, we just have our biases. And also, you know, so firstly, I might ask you about something about a social topic, like the environment or something like that. And it’s very not, I guess, mainstream to say that you might not care. So you might ask me about, you know, when I go shopping, when you go shopping, do you use plastic bags? And you know, if I think you want to hear me say that No. You know. Like, you’re not going to listen to me go, I don’t care. I just want the most convenient way of getting my groceries in my trolley. I think that you might not want to hear that. Right, that. And so I, I changed my answer. Now that’s not that’s not a deliberate process. That’s just a what’s called a social desirability bias. And we change how we change our reasoning, because as humans, we have to have a reason for everything. Rather than just sort of saying the truth, we post rationalize our decisions, we post rationalize everything, and then that affects our memory. And there’s some great studies around about all of this. And also the way it’s also can go back to and Faisal will probably agree about the question that’s asked.

 And I know there’s a really famous one that I think we’ve covered before, but I’ll say it again anyway, which was about when Coca Cola changed their formula in the 80s. Do you remember that? Yeah. And so they basically came up with new coke. They asked people do you like it? They said, yes, they went. So based on that, testing, they went to market with it. And then it flopped. Now, when they actually went back and looked at all of this, again, the question they should have asked was, we’re going to take away the Coca Cola that you have right now and replace it with this, would you buy it? And the answer was 98%? No. And that was the question that should have been asked. But instead, it was like, Do you like this without without any other thing, and that that had a massive consequence on Coca Cola sales, but also PR, the crisis. Now they they’re big enough to bounce back of course, it wasn’t the end of Coca Cola. 

But those types of things happen more regularly than than one would assume. But perhaps we just don’t hear about it, because it’s not the magnitude of Coca Cola.  But there’s a whole system there. If it’s not just the person you’re asking, it’s also the person asking the question, it’s trying to find the answer to something. So I’m trying to find the outcome in something rather than sort of letting the outcome come to me and go, Okay, it’s more like, well, I want to know if these people won’t like the taste of this drink instead of going, you know, instead of thinking through the various scenarios, so I think that’s another area that, you know, hasn’t really evolved.

Faisal: The biggest lie that’s been told to us or but we, as humans believe, is that we are rational. So there’s this entire concept around system one and system two, that your brains divide into parts, one kind of, is attentive things through decisions, and one is quick to respond right, and kind of acts very, subconsciously. And it’s 95 of the percent decisions. And this is proved as though it’s scientifically proved that 95 of the person decisions we take are impulsive, or quick, or irrational in nature, you know, and we like to believe that we are rational and we have thought through a decision, you know, the brands we buy the car, we buy the house, we live in our everyday life decisions, or career options, etc. 

We think that we really thought through them. But trust me, we haven’t, you know, these are all outcomes of irrational and there’s this entire multiple books around cognitive behavioral psychology, etc. And that’s where market research becomes extremely relevant. And that’s where also this because you’re irrational, it doesn’t make sense asking questions, because when I’m going to ask you, you are going to give me a rational response. And that is, trust me, not the motivation of the decisions you really take. It was the irrational thought process. And to uncover that thought process or to understand that irrationality behind the decisions we’ve taken, you have to steer away from asking people what they did, and start just observing what they’re doing, what they’re talking about.

Paul: I think a great example but that is also post rationalization. So we make a decision and then afterwards, like, look at the reasons for it. And a big one is like, Oh, that was a good learning or something like that like, No, it’s not,

James: It was a good learning experience. Oh, yeah, I learned a lot.

Paul: Yeah, that’s just a post rationalization, like every experience is a learning experience, because there’s a decision being made. Whether you repeat that or not, is obviously, you know, depends on the severity of the outcome. But, you know, ask anybody, you know, in short, any listener to us right now would think of something decision they’ve made, where they’ve looked back after that decision and gone, you know, that was a good learning experience, or they tried to rationalize it another way by going like, I meant for that to happen, or, you know, and usually that’s around like things like investment decisions, like poor investment decisions, particularly, and things like that, we tend to try and find a reason for things rather than it was just a decision that you made and decisions are irrational, were super irrational. And trying to rationalize everything is just the folly of our being is I guess, as intelligent, intelligent beings, is that we constantly search for answers to things where there’s not necessarily an answer to the reason why you picked up the cornflakes. You know what I mean? There could have been a multitude of factors that was like, I just want a box of cornflakes. There’s no reason for it. So yeah. 

James: Let me try and bring this this conversation together a little bit, because I think it leads nicely into where we’re going to go in our next podcast. And in listening to what you’ve been saying Faisal, and listening to what you’ve added to this, Paul, when we talk about market research, we’ve got an area of study, that is that has a nice long history of working in qualitative and quantitative manners. And we’ve got a nice history that’s, that’s really fundamentally based on this idea that we’re rational thinking human beings, which we’re not. And ultimately, as we leave this conversation, anyone who’s listening to this is going to say we’re working in a way, and we’re using these methodological tools that are flawed, and they’re flawed, yet we keep using them, which ultimately could suggest that the insights we’re gleaning from our research tools are not really giving us the insight we need to make better decisions. Paul, would you say that that kind of pulls it together what we’ve talked about so far here? 

Paul: Yes. And I think just to add to that, we know a lot more than we did during the time of World War 2. And that’s largely why we’ve avoided world conflict since then. That’s that said, you know, some industries move, move with time, some don’t. And some, some of the flaws that we know about it within market research have luckily been addressed by technology over the last few years. And there’s an enormous opportunity to understand people better. And as consumers, we should be embracing that because it means that we get things that we actually want, we’re not disappointed by things, you know how many times if you bought something and just gone, that didn’t live up to the expectation that I had for that particular product, or whatever it is, if we can get a suit, if we can better match products with consumers, then everybody kind of wins in a lot of ways. And we understand more about ourselves and everything like that. So that’s what’s really interesting about technology and it’d be great to have a chat about that in the next episode. 

James: And that’s exactly what we’re gonna do. Because while we’ve painted a picture that one could listen to and say, this is bleak days. There are solutions, there are possibilities. And that’s what this podcast series is all about. And we’re going to pick that up in our next podcast, what are the possibilities for getting better insights on your audiences, through technology and using our traditional tools, putting them together. That’s where we’re gonna go. This has been a lot of fun, guys. I really enjoyed it. And I feel like I’ve got a whole new level of understanding of market research. I’m James Piecowye.

Paul: I’m Paul Kelly. 

Faisal: Faisal. 

James: And you’ve been listening to “The Know your Audience Micro Mini podcast”.