As we discussed in part 1 in this blog series (Market Research ROI: 5 Questions to Make Your MR Pay Off), market research, like any investment in information, should demonstrate a clear return on investment (ROI).
It should speak directly to a business need or opportunity that’s crucial to your organization, whether it’s for an immediate business solution or part of a long-term strategy. And it must be trusted by the ultimate decision makers and actionable. In other words, you have to be able to use the research to make decisions that improve your results, or you shouldn’t do it at all.
Of course, this begs the question of timing—how do I know when to confidently act on the results and recommendations from my market research? The answer, in many cases, is simply this: use action standards and benchmarks.
What are action standards and benchmarks?
The term “action standards” is the market researcher’s way of saying “decision criteria.” Simply put, action standards describe what decision will be made and which objective criteria will drive that decision.
In most cases, the action standard is a market research-based numerical score or outcome that triggers the acceptance of (or selection of) a proposed concept or approach. If the research results do not meet or exceed the unambiguous action standards, the “go forward” decision will not be made. The next steps are usually to remain with the status quo or go back to the drawing board and retest a new concept.
Importantly, action standards are predetermined, like goalposts in American football. This way, the results from the market research can be objectively and dispassionately interpreted and acted upon (or not). And, as with football, there’s no moving the goalposts.
Along with predetermined action standards, corporate or industry benchmarks are often paired with action standards to help make the post research decisions quickly and confidently. These benchmarks are usually compiled, tested, and proven over time (by companies or research suppliers) using very similar question types, scales, and sampling methods.
Action standard examples
Here are 2 examples of how a CPG company (or a private label for a retailer) uses action standards and benchmarks to improve their trial, revenue, and share results from a package redesign and new product name.
- In the first example, we’ll assume that Java Joey Coffee is planning to redesign the packaging for their popular organic coffee line.
- Java Joey wants to compare consumers’ reaction to the new design concepts against its current package. In this example, the existing package design result—think of it exactly as a control group—serves as the benchmark.
- Java Joey’s prior research and in-market results over the last 5 years have proven that new concepts succeed if they are at least 20 percent better than the current concepts. As a result, the action standard is a 20 percent improvement over the existing package.
- So, if consumers rate the new package design at levels that are at least 20 percent better than the existing design, the new package concept will be selected.
New product naming:
- In the second example, we’ll assume that Java Joey is planning to launch a new type of instant coffee that is intended to rival Starbuck’s “Via” brand.
- Using several online community (MROC) and online focus group (OLFG) sessions, Java Joey has narrowed the brand names down to 2: “Zip” and “Pep.” It wants to select the best name between the two.
- In this example, Java Joey’s prior naming research and in-market results provide the benchmark for success: a consumer preference index score of 8.0 for new product names.
- Java Joey’s prior research and in-market results over the last five years have proven that new names succeed when they meet or beat the 8.0 threshold. As a result, the action standard is the achievement of an 8.0 or better on one or both names.
- So, if Zip or Pep scores 8.0 or higher, that name will be selected. If they both score an 8.0 or higher, the higher of the two will likely be selected, although other factors and results may influence the final selection. The “tiebreaker” rules are also set forth in the action standards for the project.
Using action standards: parity vs. superiority
How you set your action standards will depend on your business objectives.
- If your new concept or product must outperform an existing product or that of a competitor, then it must be superior across certain measures that are most important.
- If it must perform at least as well as your current product or your competitor’s product, then it must be at parity.
In either case, performance measures (value, trust, preference, price, convenience, overall satisfaction, etc.) must be predefined by the company (client).
Parity vs. superiority examples
- Java Joey’s new organic packaging is redesigned with the hopes that it will take share from competitor’s coffee. Result: Java Joey is seeking parity with its own coffee and superiority vs. its competitor’s coffee. Importantly, Java Joey’s realizes that to increase its market share, it will have to acquire new customers. So the package redesign must reflect attributes intended to drive trial from new customers, not just increased repeat purchases.
- Java Joey’s organic coffee is considering a reformulation and resourcing of its organic coffee to lower shipping costs and stay within the industry standards for organic and free trade coffee. The reformulated coffee simply needs to perform as well as its current offering so that revenue and share at least remain the same while margins increase. Result: the goal is parity.
- Finally, if Java Joey is re-launching a line of coffee with the promises that it is “bolder and smoother,” the new formulation and offering should actually perform better in the research. Result: the goal is superiority.
Statistical hypothesis testing is used to determine if a concept or product is inferior, superior, or at par (or parity) with an existing concept.
In general, benchmarks should not be set too high or too low. When benchmarks are too high, the new concept may be rejected, when in reality the in-market results may have performed very well. On the other hand, if they are too low, the new concept may show up falsely as very strong in the research, just to perform poorly on the shelves.
When to apply action standards and benchmarks
Action standards and benchmarks are vital when large or risky investments and strategic decisions must be made about new concepts, including: products, packages, names and ad campaigns.
They predetermine the criteria, which will clearly, unambiguously, and objectively determine which new concept, if any, is selected or rejected. In other words, action standards and benchmarks use hard metrics to guide companies to make better decisions and get better in-market results. For CPG companies or private label retailers, they are very frequently used when products are reformulated or lines are extended.
New concepts and products can make or break a company’s long term financial performance, consumer loyalty and brand equity. And these new concepts and products are driven by clear objectives to increase revenue, share, and margins.
It is imperative that the company (client) and research supplier work closely to establish the action standards and benchmarks before the research begins. They must fully support the strategic and financial objectives of the new concept or product. Once set, put your best concepts into the market research crucible, and never move the goalposts.