Understanding market potential is key to business performance

Peter Drucker, regarded as the father of modern business management practice said ‘if you can’t measure it, you can’t manage it’. Indeed, my experience in research has taught me that measurement of your business activities is critical in the path to success. I’ve also discovered that measurement means nothing without clear goals at the beginning.
After years of selling media measurement and analysis to corporations with big marketing budgets, and as we watched many company executives struggling to understand the significance of research to their bottom line, it dawned on us that something was wrong with the process.
The penny dropped when we asked a client about the decisions they would make following a presentation of our data on the latest advertising performance. The client curtly told us that the decisions had already been made even before they had received the data, and that they only needed to validate those decisions!
David Ogilvy once said “I notice increasing reluctance on the part of marketing executives to use judgment; they are coming to rely too much on research, and they use it as a drunkard uses a lamp post for support, rather than for illumination.”
We spent time reviewing the client’s revelation and discovered that a large number of clients were paying little attention to research and were not able to relate the findings to their core activities.
Research and insights are most valuable when you are making decisions. If the research does not answer the key questions asked by decision makers, then its value is limited. The biggest concern for brand companies is marketshare, and you can’t run a serious enterprise if you do not know the size of your universe. The universe represents the entire group of people who are the focus of the company’s brands and includes everyone who needs or wants the product and can afford to buy it. With this information you can set realistic goals to grow marketshare and measure your marketing activities based on their support of your marketshare goals.
Underperforming on market potential is your biggest risk if you do not know the size of your universe. Market potential is the extent of the existing and unserved customer base for your product category, and you will probably set the wrong expectations if you do not know its magnitude. For example ‘the better option’ mobile company didn’t understand the size of their market when they set their initial goals in 1997, and after surpassing their targets consistently over a number of years, the Africa & Middle East Telecom-Week article declared with a headline in 2005 that ‘Safaricom is 15 years ahead of its initial growth targets’.
At that time the CEO said that he didn’t need research because he knew what the market wanted, and time has shown that he was correct. But what also happened, due to increased competitor activity, aggressive regulator initiatives and others, Safaricom eventually became one of the biggest investors in market research. Rarely have I seen a company use research better than they do as nothing important happens in the their market for more than a week without them knowing of it and how it affects their business.
In a client review meeting recently, we shared advertising effectiveness numbers and then proceeded to request for the clients sales performance data. The sales performance report was not available and they promised to share the same in the following week. We told them that in our experience in advertising measurement, the instances of sale performance reports presented at an advertising review meeting are extremely rare. The client stated that they did not fall in that category, until the following week when we again requested the sales data, only to receive an admission that, sadly, they had fallen squarely in that category.
In the final analysis it all comes down to measuring the effectiveness of your marketing initiatives in order to fully benefit from the markets potential. Could you imagine a financial analyst informing a board of a major corporation that he’s using ball park figures to determine shareholder return-on-investment? Or a construction engineer informing his clients that he’s using a guesstimate for the bill of quantities required for their 14 floor building? Why then, do companies take the 10% their revenue invested in marketing and use the thumb-suck approach to determine how well they are doing?
I’ll cap this off with another quote from David Ogilvy where he says, “Advertising people who ignore research are as dangerous as generals who ignore decodes of enemy signals”.

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