Sword and the Script

Market Research Mistake: Falling in Love with an Idea


Market Research Mistake

Self-checkout proved a costly market research mistake for Tesco. (Photo: Flickr)

by Frank Strong

In a perfect world, one grocer might have begun their market research with a null hypothesis.  “The null hypothesis assumes that any kind of difference or significance you see in a set of data is due to chance.”

Instead of setting out to prove the American consumer would enjoy the efficiency of self-checkout in the grocery store — they might have done better to set out to presume prospective customers did not gravitate to self-checkout until, “statistical evidence nullifies it for an alternative hypothesis.”

Or they could have walked into any grocery store — Kroger, Costco or Safeway — and watched as customers preferred to stand in line over using self-checkout.  Or how those taking the caculated risk in hopes of completing their shopping experience sooner, waged battle with a machine seems to assume every customer is either trying to steal groceries or is a teenager attempting to purchase alcoholic products. 

The UK grocery chain Tesco was blinded by it’s love for it’s idea of moving into the crowded US market for groceries. It was a market research mistake, according to a Marketplace story last week titled, High-end versus low-end: How do you succeed in the grocery business?

 

With apologies to Charles Dickens, you could call it a Tale of Two Grocers. It was the worst of times for British retail giant, Tesco. Its annual profit tanked 96 percent, mostly due to a failed foray into the American market. Tesco opened 200 Fresh & Easy stores in the U.S. since 2007, targeting the value shopper. Now Tesco is bailing out.

Tesco did its research.  In fact, according to this story, the CEO actually moved his family to the US in order to study up.  Other executives too, were immersed in this strange culture where — with a bow of courtesy to the Queen — we prefer coffee over tea, think “bespoke” software sounds haunted, and where football is played in four 15 minute quarters.

The result: An emphasis on low prices, an efficient shopping experience and lots of prepared food. Also, a complete misread of the American shopper, says Phil Lempert, industry analyst and editor ofSupermarketguru.com.

The problem according to Lempert, is the company set out to prove its assumptions right. The only thing it might have proved is that it’s dangerous to fall in love with an idea.  It happens elsewhere in business too:  dealmakers fall in love with an acquisition and hiring managers fall in love with a level of experience.

In the spirit of a null hypothesis, perhaps we should set out to prove it’s not dangerous to fall in love with a deal. Or at least, we can keep an open mind about our own bias.

Note:  the Flickr image used in this post can be found here

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2 comments
Joshua Wilner/A Writer Writes
Joshua Wilner/A Writer Writes

Hi Frank,

It is a classic example of a significant problem in the business world. People often make decisions based upon their personal preferences so I am not surprised to read about a company that tries to prove its own assumptions/wishes as being correct.

It is nice to be validated on personal matters but when it comes to the professional world it is really important to spend a bit more time trying to see outside your own sphere of reference so that you don't get slammed because you were unwilling to believe not everyone acts as you do.

Frank_Strong
Frank_Strong moderator

@Joshua Wilner/A Writer Writes No doubt!  We see things through out own lenses. It's hard to look through another lens, let alone accept what we see!  Thanks for the comment Joshua.