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RetailWire: Observing Consumers Beats Listening to Them?

By Tom Ryan, Managing Editor, RetailWire
What follows is an excerpt from one of RetailWire.com's recent online discussions featuring commentary from its "BrainTrust" panel of retail industry experts.

Nate Bolt, co-founder and chief executive of user research firm Bolt Peters, argues that while tech entrepreneurs are encouraged to listen to potential customers, observing is a much better tool to see whether a new product will succeed in the market.

"The main problem with opinions is self-reporting bias," wrote Mr. Bolt in a column in the venture-capital blog, VentureBeat. "Opinions are often inconsistent with behaviors or other attitudes, especially when discussing hypotheticals."

As an example, he noted that Clippy, Microsoft's animated paperclip helper, came about after the company's researchers found that when asked, users roundly agreed that they wanted help working with their documents.

"But once people started actually using it in the real world, they hated it -- it might be one of the most hated features in the history of computing," said Mr. Bolt.

Mr. Bolt offered three ways tech entrepreneurs can gauge whether people would use a service:

Mr. Bolt concluded, "Do whatever you need to do to understand how people use your product. If it's a device meant to be used in cars, watch people use it cars; if it's a video game, avoid sterile lab environments. Just don't ask perfunctory, cookie-cutter survey questions to your potential customers, and expect that to ensure your product's usefulness."

Discussion Questions: What are the merits of observation versus listening in testing new products? What are some ways researchers can incorporate observational research alongside listening techniques?

BrainTrust Comments:

We've been making this point for years, which is why our VR research has been so popular. Yes, it's great to listen to your audience, but you should also take what they say with a grain of salt -- the social psychology literature is replete with reasons why people would say positive things about your product or service.

Note that this is applicable to any industry, not just tech. Highly appropriate to the CPG business, for example.
Stephen Needel, Managing Partner, Advanced Simulations

One of the issues with listening is what you hear depends on the wording of question and the tone, delivery, etc, of the researcher. The same could be true for observing -- the environment, the mere fact someone knows that they are being observed, etc, can influence behavior.

That being said, I admit to being a fan of real world observation. We did this first in a small store format in 1990 and while we were likely not the best at interpreting all the behaviors we saw, we did learn a lot and made significant changes in the layout and merchandising of the store.
Steven Montgomery, President, b2b Solutions, LLC

Why not do both? Frequently listening to existing customers can uncover opportunities for new products or for product improvements. Depending on the cost of going to market, the most requested items can be incorporated directly into the product or service or can be tested by groups of users, as suggested by Mr. Bolt.
Max Goldberg, Founding Partner, The Radical Clarity Group

It sounds like a case of "observe first, listen second" -- and I agree. I've sat behind the glass at focus group sessions, and even the most well-prepared session can go off the rails at the drop of a hat, and you'll never get to what you're looking for. But the Apple example underscores the point -- throw it out there (set expectations that it's early generation), and then watch what they do with it, and then listen to their feedback.

This is exactly why I am amazed when I hear retailers say, "We're not doing X (X=some consumer-facing technology investment) because we don't see the ROI." Well, you won't, unless you get it out there and see what consumers do with it.
Nikki Baird, Managing Partner, Retail Systems Research

Retail in general, and grocery retail in particular, have a unique opportunity to "observe" customers: retailers and their vendors are able to watch what customers buy. More than usage patterns, stated preferences, or anything else, actual purchases is the strongest indicator of what your shoppers care about.
Joshua Herzig-Marx, Founder, Incentive Targeting, Inc.

When it comes to determining what people will do, don't listen to the words. Listen to the actions.

If you ever took a course or listened to a program on communication, you will remember the widely quoted research on communication. It talked about the fact that the message is not in the words you use or the tone of voice but over 55% of the message is conveyed by the gestures (actions) of the speaker.

Actions speak louder and more truthfully than words.
Mel Kleiman, President, Humetrics

Not every company is Apple and can afford to throw it out there and see how it works. It's not about one size fits all.

Research must be formed on the basis of what will bring the necessary information. Even observation can be misguided if the form of observation influences the results or doesn't capture the context of the customer experience.

Professionally trained researchers understand the dynamics of what is real and what is not. Combining tools of observation (and there are many) along with interviewing techniques (everything from structured to unstructured to in-depth) can provide answers and insights that guide successful new product launches.

I understand that it's "newsworthy" to start off by knocking a well-respected approach to research. However, "newsworthy" is not necessarily accurate or even helpful. There are many techniques and methodologies in the research world that can be part of a well-designed program for new product development or an evaluation of existing products seeking opportunities for enhancement.

If you think that any doctor can perform your operation or any X-ray technician can interpret the findings, you probably expect the same with research. But I suspect you ask around for the best doctor and have a specialist help with X-ray interpretation. Doesn't it follow that you would follow the same process when it comes to backing your new product launch with research?
Joan Treistman, President, The Treistman Group LLC

Since we work in the technology field, we have had to use user observation and can attest to its importance in the research mix. For technology, we are often offering use cases or user interfaces not seen by consumers before, so focus groups or questions often cannot get the feedback needed. On the other hand giving items or models or mockups to consumers and observing their reaction is very useful.

This also extends to more basic ethnographic work where one can observe the "pain points" and gaps that we want technology to fix or bridge. Asking consumers about things they have not experienced often leads to useless input. However, as in all things balance is what is important as one has to scale observation with some quantitative work to see.
Robert Heiblim, Principal, RH Associates

There's a reason that people read the Daily Racing Form (which has been published since 1894!) when they bet on horses: past behavior is a great and typically the best predictor of future behavior.

Observing behavior can take many forms but in our world there is an abundance of behavioral data (transactional, online, etc.) that leads to the information that drives valuable insights. Of course this applies to services like retail and telecom as much as it applies to products like consumer electronics. The challenge is always to make the data usable.

There are times where observing behavior is impossible without actually putting something in (the real) market. Loyalty programs are prime examples and for this reason, we always recommend piloting live tests (even through loyalty promotions or scaled down programs) versus simply relying on conventional research.

The world, and especially marketing, needs more fact-based evidence.
Phil Rubin, CEO, rDialogue

I am truly amazed at the headline of this article. 'Listening' vs. 'Observation' is a totally false choice ... one does not have to choose between one or the other and it would be ridiculous to do so since both activities have value. Generally speaking, 'listening' helps you understand ATTITUDES while 'observing' helps you understand BEHAVIOR...and understanding BOTH is important!

For example, you could be in a focus group, ask how many people are interested in buying a product being investigated, and count the 7 out of 10 hands raised. Should you pay attention to 7 out of 10 who indicate they're interested in buying the product? Of course not! You need to observe behavior to gain a meaningful assessment of how many customers you will have. What you DO care about, however, is learning WHY the 7 say they would be interested...AND learning WHY the 3 others AREN'T interested. There is enormous value in understanding how the consumer thinks about products or services!
Kevin Price, President, The Market Performance Group, Inc.

It is always more reliable to observe what people do than to ask them. The single greatest flaw in "ask" research, is the presumption that the researcher knows what the question should be. This means that, to a greater or lesser extent, ask research always provides a look in the mirror for the researcher.

Historical researchers have noted this problem, (self-referential results,) and describe it as the researcher looking into a deep well to perceive the past. They see a reflecting pool at the bottom of the well, and often inadvertently describe their own image as the past.

Of course, that blurs the line between ask and observe, and points up our self-referential perception of the world. Maybe ask research simply exacerbates the problem. In any event, the soul of science is observation.
Herb Sorensen, ScientificAdvisor, TNS Global Retail & Shopper Practice

Every consumer will tell you they want variety in the stores. Invariably they don't buy variety. In a typical supermarket, 85% of the SKUs move less than a case per month per store. It's crazy to only listen to consumers, and not try things and see how they actually react. Keep up the experimentation.
Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM

This discussion calls to mind an interesting company, Affinova (www.affinova.com), that seeks to straddle the "Listen vs. Observe" divide when it comes to new product development. They take various features and design aspects of a new product or new packaging, and then their system uses evolutionary algorithms to mix and match the different features to create hybrid designs, which consumer panels then rate against one another.

It's not quite as pure a test as actually putting the hybrid products on a shelf next to one another and seeing what shoppers buy, but because it's presenting each product as a whole, and it's asking consumers to rate them against each other, it is far more concrete than a focus group discussion would be.
Ben Sprecher, Founder and President, Incentive Targeting, Inc.

Read the entire story and discussion here.

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Last Week's Poll


We discussed a perceived lack of differentiation among retailers last week, and wondered whether retailers could use their private label products as differentiators: Can retailers successfully differentiate themselves through their private label products?

• 26%: Yes
• 26%: Yes - but only in non-commodity product categories and channels
• 48%: No - not to any great extent

The results were mixed – roughly half think PL is not a differentiator. The remaining half are split evenly between those who think it can be a differentiator and those who think it can be, but only for non-commodity products (e.g., fashion apparel).

This week we want to ask you to help us make TPMA Outlook better for you, so please tell us what types of articles you find of most value. Our exit question is: What should this newsletter have more of? Please feel free to add any comments or suggestions to the choices offered.

Follow-Ups

Books & Records
The rapid developments recently in the book world, as it has begun its transition from print to digital, have attracted our interest in the past. In particular, it’s interesting to see how the book publishers are trying to craft an approach that does not mimic the failures of the music industry. This week, we’ve come across a few more items of interest in this area.

Amazon may be preparing a riposte to Apple’s iPad, according to Information Week, which notes that Amazon has a help-wanted ad for someone to “design and implement new features on the browser" – presumably referring to the Kindle.

Meanwhile, as Amazon tries to fend off an attack from Apple, Barnes & Noble is suffering from, among other things, attacks from Amazon.

Will the bookstore disappear as the record store did a few years ago? Among those you might ask are the former boss at EMI, who just got canned for his failure to turn around that company. The new guy is believed to have a very short time period before creditors close in and sell the company to Warner.

Media
Speaking of a switch from print to digital, a study says that this is the year spending for digital advertising will be greater than spending for print.

It should be noted that half the online ad spending will be companies spending money on their own websites, rather than media purchases.

International
We’ve commented in the past about the rush by major multinational retailers to get into India, in the expectation that the country will soon loosen its restrictive laws. Walmart and Tesco are there, and Carrefour just announced they’re on the way. But there’s another side to the story.

The government has apparently backed off on plans to cut back on regulations against foreign investment in retail, in the face of opposition from small retailers and wholesalers.

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Quickly Noted

Walmart Is Top GPS Destination
There may be a new way to measure store traffic – how many people are trying to find your store. A company that provides GPS information through cellphones released info for the first time on how many people were looking for certain businesses, with Walmart being the #1 destination. To add fuel to the ongoing argument over Chicago’s pizza vs. New York’s, pizza was the top food search in Chicago, while New Yorkers looked for Chinese food. Are New Yorkers giving up on their pizza, or are Chicagoans desperate to find something better than what they’ve been getting?
New York Times, 10 March 2010

Department Stores End Free Gift-Wrap Department
Department stores continue to give up the things that differentiate them from other channels and provide a value-add to their customers. Remember when your local department store had knowledgeable sales people to help you select the right item? That was a reason to pay a bit more than a discounter charged. Gift-wrapping was another reason, and now that’s going away, too.
Chicago Tribune, 4 March 2010

Couche-Tard Awaits U.S. Buy Opportunities
Alimentation Couche-Tard, the second biggest c-store company in North America, with almost six thousand units, is looking to get bigger. They think declining gasoline margins (down from 18c in 2008 to 12c last year) are putting pressure on independent operators, who account for 60% of the US market, and that some of these independents may welcome a buy-out offer.
Financial Post, 9 March 2010

Smart & Final Expands to Denver
Smart & Final will create a new banner, SmartCo, to use on a new format they are introducing in five former Albertsons locations they will operate in Denver. “The stores, ranging in size from 40,000 square feet to 61,000 square feet, will be the largest operated by Smart & Final, whose stores generally run from 17,000 square feet to 35,000 square feet.”
Supermarket News, 8 March 2010

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