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Many small businesses in the cannabis industry tend to think that market research is a costly exercise that can provide knowledge and insight –both of which are pleasant in the abstract– but doesn’t provide tangible results like more sales and profits.
Admittedly, there are some market research projects that don’t pay for themselves because they’re poorly done – they’re not properly designed in the first place to produce a useful insight that applies directly to sales and profits. This problem is becoming more prevalent with the wider availability of subscription-based survey tools like SurveyMonkey and SurveyGizmo. Many people try to run a do-it-yourself survey project with these tools and realize that, yeah, sure, it was cheap, but they learned nothing truly insightful or actionable about their brand or the needs of their target audience. It feels like money down the drain because…it was.
Alternatively, when small businesses turn to experienced agencies to professionally run a survey for them at a higher cost than the DIY route, they’re often quite happy with the results. But don’t just take my word for it; the numbers back this up.
The AMA and the DMA tell us that for most categories and brands, guessing at what to say and whom to target will still provide you the “average nominal response rate” against prospects. This stands at about 0.002 (two-tenths of one percent). That’s a nice way of saying that no matter what your offer is or how badly you make it, among any random group of 10,000 people there are probably about 20 people who will take it.
Let’s monetize that result for, say, 40,000 people, as that’s a fair and reasonable number of people to expect to reach out to in a brand campaign in a typical store trading area. Using the math, you’ll get 80 people to respond to your campaign. Now, let‘s say further that each of those responders buys about $50 worth of stuff from you, on average, during the year. Your new money comes to $4,000 annually (80 people X $50 each).
On the other hand, the two organizations tell us that the average response rate is somewhat higher when there’s careful message refinement and more precise targeting due to well-executed market research. They estimate the average lift to be 0.005 (one-half of one percent). Let’s say you lay out $2,000 for such a properly-done professional brand survey and the research project produces the insight that your brand is deeply cherished by 55-year-olds who suffer from rheumatoid arthritis. Aha!! You now run a “seniors” sort of campaign targeting 40,000 55+ adults who suffer from RA, and you use messaging that illustrates the sense of relief they feel when using your cannabis-based products.
In this case, you’re likely to see about 280 responders (40,000 people X 0.007 response rate). If we assume each of the responders will give you the same amount of money as the responders in the previous example ($50 a year), your new money is $14,000 (280 people X $50 each). (In practice, targeted responders actually give you a little more than nominal responders.) Subtracting the $2,000 you had to pay for the research, your gross earnings from the campaign are $12,000. $12K is a nice bump up from $4K. And remember: you don’t have to amortize the research cost every time you do a campaign. You do that only once. Prospects are more strongly moved to buy from you by a finely-tuned and more persuasive message sent to the right person – a person more likely to resonate with the brand proposition you’re presenting. That more-precise targeting and more-resonant messaging comes from properly-executed research done by professionals. The bottom line is that the best research provides actionable results.
In other words, a course of strategic action based on the findings that helps build the business for the long term. Too often, most research gives you findings with no recommended course of action. At The Matters Group we strive to ensure you understand and comprehend the findings in a concise and clear report that presents a roadmap for effectively connecting with your target consumers and/or markets.