Get PAID to spot great ideas with Negative-Cost Market Research (NCMR)
Today, I'm coining a new term: 'Negative-Cost Market Research' (NCMR).
If you've ever looked at the seven-figure marketing budgets of megacorporations and felt woefully ill-equipped to compete, this one's for you.
I've been waiting for a nice example to illustrate the idea, which I've come across recently in the form of July's Diary of a CEO podcast (DOAC) featuring Josh Kaufman, entrepreneurship expert and author of The Personal MBA.
The format of the episode—namely the juxtaposition of two examples from Procter & Gamble (P&G) and the DOAC team—is a perfect demonstration of the power of NCMA.
Industrial-strength market research
Kaufman explains to Bartlett how BigCo’s like P&G employ terrifyingly sophisticated market research techniques to figure out what kind of laundry detergent to sell you next – to the extent of following you around your home while you do the laundry.
Through this example, we learn how the idea for liquid laundry detergents was sparked by a keen-eyed P&G research team who observed consumers going to unnecessary lengths to dissolve powdered detergents—their precursor—in water before turning on the machine.
P&G's engineers knew the powders dissolved perfectly well without pre-mixing, making liquid detergent a fun demonstration of how psychological innovation can be used to alleviate a functionally unsubstantiated concern.
You don't need to be a detergentophile to appreciate this.
However...
Something even more interesting happened next
Kaufman and Bartlett flowed from the P&G example neatly into a discussion about how all entrepreneurship starts with noticing a problem, but problems are all around us, and it can be difficult to choose which ones to solve.
(Cough... subscribe to ProblemKit... cough)
Bartlett then shares how he and his podcast team were frustrated with constantly having to remind guests not to bang their hands on the interview table whilst talking, lest the mic stand would transmit the vibrations and contaminate the audio.
A member of the team, Jack, even assembled a rudimentary vibration-dampening mic holder for which, in true DOAC fashion, Bartlett coordinated a scrappy market validation test during the podcast (!) to see if listeners would put down money to pre-order it.
Blink and you'll miss it: Negative-Cost Market Research
These two examples, in perfect juxtaposition, explain why you don't need to be afraid of competing with big established companies as a new entrepreneur.
In fact, you can do something that's very hard to replicate in a corporate environment.
Consider this...
How much did it cost P&G to discover the problem with powdered detergent?
Estimates vary, but the average cost of a single small focus group might be anywhere between £3,000 and £20,000.
How much did it cost the DOAC team to identify the problem with the mic stand?
Nothing?
No, they actually MADE money
The DOAC team made money producing the podcast – probably even more than the cost of a P&G focus group.
(And that's not even counting any pre-orders they got for the mic holder!)
This perfectly valid problem statement was a useful byproduct of other value-creating activities.
We can even say that, because they made money, this activity actually had a negative market research cost because they produced valuable podcasts in the process of discovering the problem.
This should be a powerful idea for anyone who a) thinks entrepreneurship has to be antagonistic to their day job, or b) is worried they don't have enough money to discover genuinely valuable market insights.
I hereby name this phenomenon 'Negative-Cost Market Research'.
Any method for discovering market insights from a target activity where the standalone value of that activity to the researcher is greater than the cost of the enquiry.
Moreover, you're free to do this in ways that established companies actually find very difficult.
If big companies incentivise their employees to build new solutions to new problems they encounter through the course of executing their work, this can be a great thing...
But it's often seen as a distraction that diverts too many resources away from the company's (vastly more important) core capabilities, and toward excessive creation of new tooling.
P&G, for example, are better served by doubling down on incremental improvements to liquid detergent than making vibration-dampening mic holders for the company's podcast (yes even P&G has a podcast).
More often than not, it's better to contract somebody else to do it...
Like the business you could start.
Putting it to use: NCMR
Which activities are you doing anyway—even being paid to do—that might contain excellent problems worth solving? How might you structure your problem search in parallel?
On that second question, stay tuned! I might have something for you soon...
Wishing you lots of problems,
Alex