Insight, hypotheses and theories
Although models are at the heart of research, the term model is a technical term and few people doing market research use the term when describing what they are doing. Sometimes people will instead talk about theories. A theory is just another name for a model.
Sometimes people talk about hypotheses. A hypothesis is a tentative part of a theory. Often research is conducted to check a particular hypothesis. By checking and refining a model, we better understand how a market works. For example, if somebody says "we have a hypothesis that we need to reduce the price of our product to below $4 in order for people to notice our product", they are saying that a stakeholder believes that this may be the case and they want to check if it is true. Similarly, the hypothesis that "price is more important than brand" is a speculation about the strength of the relationship between variables in a model (i.e., they are speculating about estimates).
Most often, users of research talk about wanting to conduct research so that they can find insights. An insight is a conclusion about how a market works that is useful. As discussed, a model describes how a market works, so an insight is a description of a model, or a part of a model. However, to qualify as an insight, the conclusions about how a market works need to be useful. Thus, an insight is a conclusion about how a market works which results in a company doing something that they would not have otherwise done. Research that does lead to some improved outcome, such as a better strategy or policy, has thus, by definition, failed to produce insight.
Consider the 4P model of marketing, which says that the success of a product is determined by price, product, promotion and place:
This is a popular model in introductory marketing courses (particularly once 'promotion' is defined to include advertising). Many students in introductory courses know little and, as a result, find this model useful. For some, this simple framework is an insight. However, this model would never be a source of insight to an experienced marketer.
To qualify as an insight, we need to have something that is a statement about how a market works which is non-obvious to the end-user of the research. A conclusion like “if we advertise at the same time as offering discounts, we get twice as many sales as when we offer discounts without advertising” may qualify as an insight, provided that this is correct and not already known by the end-user.
Throughout this site we will discuss lots of quite technical aspects of research. However, it is important to never forget that they are just means to an end, and the end is insight with potential to create competitive advantage. Research that provides no insight is useless. The challenge of obtaining insight is at the heart of the tension that exists between research consultants, and their clients, as illustrated in this joke:
A man flying in a hot air balloon suddenly realizes he's lost. He reduces height and spots a man down below. He lowers the balloon further and shouts to get directions, “Excuse me, can you tell me where I am?”
The man below says: “Yes, you're in a hot air balloon, hovering 30 feet above this field.”
“You must work in market research,” says the balloonist. “I do” replies the man. “How did you know?” “Well,” says the balloonist, “everything you have told me is technically correct, but it's of no use to anyone.”
The man below replies, “You must work in marketing.” “I do” replies the balloonist, “But how'd you know?” “Well”, says the man, “you don't know where you are, or where you're going, but you expect me to be able to help. You're in the same position you were before we met, but now it's my fault.”
How to find insights
The best chance of obtaining insights from research is to:
- Create models.
- Use the right type of data.
- Work out what is known before attempting any research.
Use appropriate data
The data that is used needs to be capable of containing insights. Although it is certainly the case that some people are more gifted than others at extracting insights from data, it is also true that some forms of data are more useful in helping to find data than others.
Remembering that an insight is a new conclusion about how the world works, it follows that our best chance of finding insights is to use data that we have not previously examined. The more varied the data we examine, the better our chance of finding insight. If we have gained most of our understanding about how a market works by analyzing sales data, when trying to crack a difficult problem, we should focus on using some completely different type of data (e.g., qualitative research, surveys). Similarly, if a firm has typically used qualitative research, the likelihood is that it will gain better results from a quantitative survey.
Identify what is known before doing any research
If we do not know what models are currently being used to make decisions, it is extremely difficult to design research which will uncover insights. When we analyze data, there are a thousand and one results that may appear to be interesting. As most people do not have the patience nor the capacity to review thousands of findings, researchers focus on presenting the findings that seem to best explain how the market works. If these are already known it is almost inevitable that nothing ends up being found out from the research.
Unfortunately, many people that commission research fail to understand this last point and, when asked for their theories and hypotheses, say things like "I want the research to be objective ... I don’t want to taint the research with my prejudices … you just do the research, I’ll work out it means", failing to recognize that in doing so they are maximizing their chance of getting useless research (i.e., finding out they are in the balloon).