Using Primary Research

What do you do when you’ve scoured the web and subscription databases without finding the information you need to make a business decision?  The answer is primary research, the often misunderstood world of actually calling people and interviewing them.  To make the discussion a little more specific, I thought I’d use the example of a tree nursery owner who works with residential landscapers and who’s considering whether to enter the commercial landscaping market.

First, let’s be more precise in our definition.  Primary research technically refers to all research conducted by gathering information that is not already collected in a document, including interviews, customer surveys, focus groups, and analysis of raw information like construction projects started.  For our purposes, let’s call surveys and focus groups primary market research.  I’m referring only to individual interviews when I say primary research.  Interviews are typically conducted by phone, but in-person or email exchanges are also sometimes involved.

Why primary research?

Why am I so focused on individual interviews?  It’s because they’re one of the best ways to get a deeper and more nuanced understanding of a topic.  Primary research can be applied to analyzing customers, competitors, distribution channels, suppliers, and your overall industry.  It’s a useful tool for answering questions with a high degree of qualitative clarity.  You can get:

  • Information from knowledgeable sources that’s impossible or impractical to get online or in research reports
    • In our landscaping example, is the local commercial landscaping market growing right now?  Are there particular plant categories that are “hot”?
  • A degree of specificity unavailable in secondary sources
    • If the market is growing, is it primarily due to big projects?  Or are there also enough smaller projects going on to allow the nursery owner to start small and then invest in greater scale as the business grows?
  • Qualitative information or context that’s too subtle to get from secondary sources
    • What are commercial landscapers’ top priorities for their suppliers?  What do current plant suppliers do well or poorly?  Are there innovative ways our nursery owner can run the business to create differentiation or cost advantage?

What it doesn’t accomplish

Primary research is a great qualitative tool, but it’s difficult to get reliable quantitative answers out of it.  Driving more quantitative results is possible but requires a significantly higher budget to conduct more interviews, cross-check results, and do additional analysis.

And forget about statistically significant findings.  In order to get valid statistics, you typically have to use a survey-based approach, where questions and answer choices are carefully planned in advance.  While that approach is useful in its own right, it doesn’t provide the opportunity to identify the most important trends on the fly and address them in subsequent interviews.  Primary research interviews tend to be somewhat free-form in order to address the highest-priority topics related to each interviewee’s experience.  Essentially, an interview-based approach trades off statistical significance for qualitative insight.  If statistical significance is an important requirement, use a survey instead.

So what are the implications?  In our nursery owner’s case, he should avoid setting prices or estimating costs solely based on primary research because it’s difficult to control for all the variables involved in prices that interviewees might have mentioned.  Similarly, you wouldn’t want to set growth targets based on a market growth rate determined through primary research.  While the estimate is likely to be in the right ballpark, it could be a few percentage points off in either direction.

Who do you talk to?

The list of people you might make calls to would depend on the project.  If you’re trying to understand how the market perceives your company and products, you would primarily contact current customers, prospects, and former customers.  You might also throw in some industry analysts and competitor salespeople.  If you’re examining distribution channels, you would primarily talk to salespeople, store managers, and so on.  For each project, you need to come up with a list of all the potential sources that might be relevant.

Sources of potential contacts run the gamut from LinkedIn, company sites, job boards, and conference proceedings to personal network contacts and referrals.  I’ll go into more detail on the process of finding contacts in a later post.

Who does it?

Most primary research projects are conducted by outside consultants rather than someone within the company.  There are a few good reasons for this:

  • More objectivity on the part of interviewers
  • Less temptation for interviewees to skew answers to suit their objectives, especially if the identity of the client and/or the purpose of the project are not disclosed
  • Consultants more practiced and skilled at managing and conducting primary interviews

Time and budget

The downside to having an outside firm do your research is of course cost.  Projects range in scope but often run around 4-12 weeks in length and involve 30-100 interviews.  Depending on the scope, the price of an engagement often runs $30-150k.  Outliers could run up to $500k, $1 million, or more, depending on the scope of the work.  Larger projects could involve hundreds of interviews and substantial analysis of the results.  Top-tier consultants like McKinsey and Bain are of course priced at a premium as well compared to smaller firms.  On the lower end of the scale, individual contractors can often accomplish the same work with a much smaller budget.

For our nursery owner, the budget would likely be slim both based on the available budget, the fact that the research is restricted to one geography, and the size of the business opportunity being investigated.  An independent contractor might be able to complete the work for as little as $10-20k and provide very actionable information for planning the business expansion (or canceling it if it turns out to be unattractive).

So that’s primary (interview) research in a nutshell, based on my experience.  How have you seen it applied?  Any questions I should answer in further posts on the topic?

Next up: How to make your primary research  project successful

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