INSIGHT on INSIGHT: Establishing a Budget for Your Insight Work
How much should I spend on shopper insights?
One of the goals of any insight project should be to spend the right amount of money to accomplish the right scope addressing the right objectives. And it involves understanding how different components drive the cost of insight.
There is no specific formula to determine how much is the appropriate amount to spend on insights. However, considering several questions should improve the odds that you don’t waste money and over-spend or set a budget that is so small it cripples the ability to get the necessary insight you need.
Before we get to those questions, realize that insight from primary research can be theoretically produced for any budget. There are inexpensive ways people with more time than money can personally conduct their own focus groups or execute online surveys through barebones providers like surveymonkey.com or Zoomerang. However, these people miss out on the expertise that comes with hiring professionals.
To use an analogy, the cost (and quality) of insights ranges from grilling burgers in you backyard to buying one off of McDonald’s dollar menu to going to a local steakhouse or getting reservations at a Michelin-rated restaurant.
Some situations may be satisfied with a do-it-yourself or cheap-and-basic solution.
Others may want the confidence and convenience that comes with service from professionals.
Still others might have the desire and budget to know that the best in the business are working to answer their questions.
Each of these scenarios comes at a different cost in time and money. Each relies on a different type of experience and expertise. And each provides a different result that may or may not matter.
The better solution depends on the objectives. A McDouble might accomplish the objective of quickly satisfying hunger while a $400 meal might be a much more involved and memorable experience appropriate for special occasions.
HOW TO SPEND WISELY ON INSIGHT
As you try to determine what looks like the right budget for your insight project, consider how you would answer the following questions:
How does your company handle budget? Consider how money gets allocated to ‘special projects’ (like insights, if your company hasn’t invested in them in the past). Figure out if it makes sense to secure a larger budget and try to turn money back to the corporate coffers or if a solid case will have to be made for every dollar requested. Is it going to be easier to do a top-down approach (design work to a budget) or bottom-up approach (design the right project and find the necessary funding)?
What is the value of the insight? To grow sales by 10% or $10 million next year, a company needs to offer shoppers a compelling reason to buy and buy more. Would you be better off investing $100,000 into finding where and how to grow sales or are you confident you can just build your growth strategy on assumptions and speculation?
What other funding decisions will be driven by the insight? If you’ve got a big marketing program or new product launch coming up, consider the value of improving its effectiveness. Most people would agree that it makes sense to spend less money where you know it will work better. That is exactly what shopper insights can provide. Instead of spending $1.00 on an unproven program, invest $0.15 in making sure you’ve got the best possible design so the remaining $0.85 is far more effective.
What is the risk or consequence of making mistakes due to the wrong insight? Most products need to select a limited number of configurations to produce and sell each year. Picking the wrong attributes or wrong combination of attributes (i.e. color, size, flavor, price, etc.) can lead to an assortment of products with no buyers. Generally speaking, a product needs to miss on just one important attribute for buyers to move on and look for something else.
How much could it cost to have no insight? A new line of products is rarely picked up by retailers without a very compelling selling story focused on how the products have been designed to address demand among their shoppers and deliver incremental sales. Failure to gain distribution can translate into 12 months of no sales, which is a significant all-or-nothing consequence. In our experience, lack of this shopper-based story is one of the most common reasons buyers say no.
What is the opportunity cost of your time or capacity? Few people operate with extra room on their proverbial plate of capacity. While you may have the interest in overseeing insight projects from start to finish, be aware that it comes at the cost of not being able to do other activities. In some situations, this hands-on approach makes perfect sense. Other times, the ultimate price paid for the research significant exceeds what it would have cost to involve a third-party.
What is your particular skill set, experience or bias? It is important to assess your own understanding of the art of insight when deciding your role. The generous use of the term insight manager and frequent horizontal movement of people from other functions into insight roles has created false perceptions of expertise. Very smart business people often lack critical skills related to designing studies and analyzing insights. Or their work is unknowingly influenced by strong bias (regardless of whether it is right or wrong). Just be careful to control the risk of user error and how it can limit the value that comes from insight.
BUDGET FOR YOUR MONEY AND YOUR TIME
Answering the above questions should point you in the direction of whether it makes sense to spend more or less of your personal time on a particular insights project. It should help define your role along the spectrum from heavily hands-on to completely hands-off.
Set a budget that is proportionate to the importance you place on the insight or the value you anticipate getting out of the insight.
Having an accurate (or realistic) initial budget will help make sure work is not done in vane. It can also help third-party insight providers share perspective on what would be gained by spending more or what would be lost by spending less.