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1/15/2007

Participating in one 15-minute telephone survey can significantly affect subsequent customer behavior for over a year. While conventional wisdom has been that market research surveys do little more than elicit opinions, studies by Rice University Associate Professor of Management Paul Dholakia have shown that these surveys actually influence customer opinions and behaviors in ways that, in turn, impact company bottom lines. According to Dholakia, for every $15 a company spends on market research, it can show a $50 return — a finding that may call into question the very nature of market research.

Market research, in the form of one 15-minute telephone survey, can be a powerful way to get customers to do what you want them to do. While businesses have traditionally viewed market research as an expense focused on information gathering, Rice University Associate Professor Paul Dholakia found it’s actually an investment with very real returns — spend $15 and get $50. The robust effects of market research often go under the radar, yet they occur across companies and industries and can last up to two years.

Survey participation influences customer behavior in very discernable ways that translate into increased receptivity to promotions, opening more accounts, more frequent purchases, higher profitability, and lower defection rates. “All these behaviors, if you actually calculate their value, are worth more than the cost of a market research study,” Dholakia said. “We’re just beginning to discover and understand the lasting effects that occur and how customer behavior is impacted.”

A recent study by Dholakia and colleagues Sharad Borle, Siddharth Singh and Robert Westbrook at Rice’s Jesse H. Jones Graduate School of Management looked at which customer segments are most affected by market research. “There are many variables, such as age, gender and income,” Dholakia said. “We want to begin to understand the individual differences in susceptibility to survey participation influences.”

The field study was conducted with customers of a national automotive services firm. The researchers found that survey participation had a substantial effect on all customer behaviors examined, including coupon redemption, number of services purchased, purchase frequency and amount of money spent on each visit to the firm’s stores.

The study found no differential effects based on gender, but a few age-related differences emerged. For instance, the younger the customer, the more often he or she bought services after participating in the survey. Also noticeable were behavioral differences among income groups. The wealthier the customer, the more likely he or she was to visit the store after participating in the survey.

The effects of survey participation held up over time. An increase in both the number of services purchased and the amount spent post-survey lasted up to a year, while the increase in number of promotions redeemed and reduction in interpurchase time persisted even after a year.

Dholakia said these specific, lasting results highlight the practical purposes of the analysis for a company. “You can see right away which segments are influenced. You can determine where you want to do more research and how you can influence customer segments more.”

This all leads to the potential for some interesting controversy, according to Dholakia. “In the U.S., we try to separate market research from sales activities with regulations like the Do Not Call list. But our studies, as well as others, show that this separation is artificial.”

The Do Not Call list does not apply to market research firms since they call to solicit opinions, not to sell. Yet, while these firms have no intention of influencing, the Rice research confirmed that is exactly what’s happening. And it has a direct impact on the sales, profitability and promotional activities of the sponsor company.

You can’t expect any of these effects from online market research, according to Dholakia’s findings. He identified three characteristics that have to be present: the survey has to be conducted by telephone, you need professional interviewers who know what they’re doing, and you have to tell the customer that the firm is sponsoring the survey. “To get this kind of connection, you have to spend money. And telephone surveys are expensive — in many cases 10 times more so than online.”

Expense is one reason a company would not want to conduct too many surveys. Timing is another. Dholakia found that there’s a limit to how often surveys should be done. In future research, he hopes to help pinpoint that optimal timing.

For more information, contact Paul Dholakia at dholakia@rice.edu or Laura Hubbard of the Jesse H. Jones Graduate School of Management at lhubbard@rice.edu.