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  • Should Starbucks Do Market Research? Yes, But...
  • What is the role of the more recently adopted sophisticated market research versus informal approaches Starbucks relied upon during its impressive growth?

    Not that long ago, the business press reported that Howard Schultz, Starbucks CEO, who had been known for his reluctance to do market research, was now starting to give market research a newfound emphasis. This increased willingness to embrace market research came during challenging times for Starbucks that contrasted markedly from its prior track record of impressive growth.

    But, after impressive growth without embracing formal market research, should Starbucks be changing its ways? Will market research help Starbucks face challenging times?

    If used effectively, formal market research can be a powerful resource. It provides valuable information and insights which can help companies be more successful. But, formal market research is not a magic bullet, nor is it the only way to get an understanding of the market.

    Still, a shift in business conditions can bring times that are tougher and more competitive for reasons well beyond the mere recessionary effect of a weak economy. In these situations, an increased emphasis upon formal marketing and market research techniques is not an unusual response. But, that newfound emphasis will not necessarily solve a company's marketing challenges.

    For example, some time back, General Motors tried to address its challenges, by bringing in more sophisticated marketing and market research. Awhile later, a Wall Street Journal article reported that GM had been making greater use of market research techniques like focus groups to help shape new products, but the desired new product success did not materialize. Thus, GM's marketplace challenges were not solved despite the infusion of marketing talent and their research methods.

    Unfortunately, GM was adopting these approaches just at the time when the limitations of traditional market research techniques were about to be highly publicized and much more widely accepted, a time when even major business publications made the case that focus groups were dead. Despite this heightened awareness of their potential weaknesses, focus groups can still be valuable if used for the right purposes. But, GM's timing did not help since it had been using its focus groups under the old paradigm that paid less attention to those weaknesses.

    Furthermore, aside from General Motors, giant corporations have faltered. Yet, it was not unusual for these behemoths to spend sizable budgets on formal market research. Still, these giants experienced decline. At the same time, however, companies with strong growth, like Starbucks, may have used little, if any, formal market research.

    In fact, Starbucks' track record had been excellent, despite not embracing formal market research. Starbucks successfully experienced tremendous growth and developed a strong brand--all under the leadership of a CEO known for avoiding market research. Just as Sam Walton's frequent visits to stores helped shape Wal-Mart, however, Starbucks' approaches to its market in years past did contribute to its success. And, Starbucks should not lose sight of that, since informal sources of market intelligence can be quite valuable.

    Additionally, as the business world became aware of the weaknesses of traditional research methods like surveys and focus groups, market research professionals as an industry had begun to use more observational research techniques. This entails observing what customers and prospects do, much more so than asking them. Interestingly, compared to traditional market research methods like surveys and focus groups, these observational techniques are closer to what companies like Starbucks did before embracing more formal market research.

    Thus, Starbucks should not completely abandon the ways that got it to where it is today. Instead, Starbucks should bring in the new sophisticated market research, since it can play a valuable role. But, Starbucks should combine the use of newly adopted formal methods with the informal approaches previously relied upon. There is room for both, and combining the two can improve the overall understanding of the market.

    Also, if what is discovered via informal methods happens to conflict with what sophisticated research finds, companies like Starbucks need to dig deeper and try to understand the dynamics of why this might be. They should not immediately assume that the formal market research is more correct than the informal approaches.

    Finally, if the sophisticated marketing and formal research techniques are instrumental in making Starbucks more strategic about its marketing, this is a plus. Strong strategy is valuable and making the right strategic moves, or what I call Winning Moves, leads to success.

    In conclusion, Starbucks should not entirely forgo its old ways as it adds a new level of sophistication. What's important is to truly understand the market and the business dynamics, and to use that knowledge to develop and implement successful strategy. This is essential regardless of whether formal or informal approaches brought about that knowledge and understanding.

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