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Tuesday, June 12, 2018

When You Can't Believe Marketing Research Findings

(A Note:  Our background is marketing research, so this issue may strike you as somewhat hypocritical.  But, we've always prided ourselves in fielding thoughtful marketing research and encouraging our clients to be equally guardful in how they interpret research results.  So consider the following as an example of what can happen if one either naively interprets research findings or actively seeks findings to support a business proposition.)

If we unquestioningly accept marketing research findings many of us will be pretty excited to hear results of a research study cited by the Huffington Post.  According to this research, “70% of millennials are willing to pay more for a product that makes an impact on issues they care about.”1  Since there are over 53 million millennials now working in the US, spending as much as $2.45 trillion annually, their willingness to support social cause marketing sounds like a 'fact' that’s too good to be ignored when contemplating marketing strategies for the future.

But, Proceed with Care!

However, things often aren’t always what they seem.  Just a few months ago, in a story about social cause marketing for this column (March 14, 2018), we cited Tom’s Shoes as a preeminent proponent.  Virtually every discussion of social cause marketing includes Tom’s.  We, too, cited the company known and widely praised for its policy of giving away one pair of shoes to children who can’t afford shoes for every pair of Tom’s it sells.  Tom’s is widely praised for this policy and its contribution to the company’s apparent success.  A societally positive ‘slam dunk’; a huge strategic success.  But a May 3, 2018 headline from Bloomberg (“Even Wall Street Couldn’t Protect Toms Shoes from Retail’s Storm”) describes a markedly different reality.  While Tom’s did generate revenue of $91 million in the fourth quarter of 2017, it reported only $8 million in profit and is currently carrying about $350 M in total debt .

So, What's the Problem?

It seems the bulk of Tom's’ business is based on its $54 a pair trademarked Alpargata slip-ons. That’s the shoe that for every pair Tom’s sells, they give a pair away.  But unfortunately (for Tom’s) competition has entered the market, and no matter how sincere potential customers were when they told researchers they’d pay more for a product that “makes an impact on issues they care about”, in reality more and more are buying bargain alternatives.  Tom’s and its touted social cause marketing is in trouble!

For example, Skechers has created a shoe it calls “Bobs,” which mirrors Tom’s design, mimics Tom’s charitable business model and sells for half the price of Tom’s shoes. Then, discount stores like Target and Payless joined the frenzy by selling their own knock-offs of Tom’s that can be found for $20 or even less.  At the end of the day, consumers’ cash register behavior has proved far different from their ‘lofty’ answers to marketing research questions.

This ‘disconnect’ really shouldn’t come as a surprise.  For years marketing researchers have wrestled with the challenge getting honest answers from respondents.  Instead, many survey/study participants answer by positioning themselves as the person they think they should be, or the person others expect them to be, rather than the person they actually are!  We are all familiar with surveys that would suggest the public loves to attend the opera or reads the classics over pulp literature.  (These are all the result of social desirability bias.)  And, research which allows such departures from reality suffer the consequences.)

A Better Predictor

When it comes to money and the support of noble causes it might be more reliable for researchers to think like the traditional direct marketer.  As Ed Nash (a direct marketing legend) is reported to have frequently observed, “the only research I care about happens when a prospective customer looks at my product and decides to open her/his wallet and hand over the cash to make the purchase”.

Attitudinal research has its place, and sometimes it’s the best information one can get (or for product concepts, the only customer input you can get), but it’s hard to find anything more reliable than measuring actual consumer behavior.  Thanks to today’s online sales and our ability to make various offers, using various promotions, at varied prices to potential customers, we can come closer to Ed Nash’s classic skepticism, than would ever have imagined!  Given multiple options and our ability to track, not attitudes but actual purchases made with consumers’ own very real money, we can observe which choice(s) they actually make.  Such results will better support generalization to which product mix(es) should work in the broader market.

10:12 pm edt          Comments

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