market research roi
DESCRIPTION
Here is a theoretical example which displays how you would calculate ROI for using/not using market research for product development.TRANSCRIPT
Market Research ROI
Company ABC creates a product named the:
Lawnmower 2.0
OriginalLawnmower 2.0
ModifiedLawnmower 3.0
No market research was conducted to test the concept. The business
decides to launch the Lawnmower 2.0 on hunches and in-house information
not knowing how the market will respond to the new model.
Company ABC hires a market research firm to conduct focus groups among expected users to introduce the 2.0
product to them. The focus group reveals issues that were unforeseen to the company and offers improvements to the
Lawnmower 2.0 model. Company ABC re-launches a modified product named the Lawnmower 3.0.
Marketing Messaging
Company ABC creates an advertising campaign for the Lawnmower 2.0 which
focuses on better gas efficiency and lessened noise when mowing. The
company plans to market the advertising message through newspapers and
magazines.
Company ABC again uses market research utilizing an online survey to test 3 potential advertising concepts.
Turns out that users are not interested in the better gas efficiency and lessened noise but rather they are delighted
with the zero turn capabilities and its ability to finish the mowing job faster. Respondents also reported they
wanted to see ads online which would show the Lawnmower 3.0 speed and maneuverability through video.
Marketing Messaging
Company ABC reviews sales of the Lawnmower 2.0 after 6 months in the
marketplace.
ROI
Cost of Production: $90,000Cost of Advertising: $80,000
Total Cost : $170,000Sales: $190,000Net: $20,000
ROI Advertising: 238%ROI Market Research: N/AROI Overall: 118%
Company ABC reviews sales of the Lawnmower 3.0 after 6 months in the
marketplace.
ROI
Cost of Production: $140,000Cost of Advertising: $65,000Market Research Investment: $30,000
Total Cost : $235,000Sales: $325,000Net: $90,000
ROI Advertising: 500%ROI Market Research*: 1083%ROI Overall: 138%
* Market Research ROI is calculated as net sales of using market research (3.0) versus not using market research (2.0) divided by cost of investment for market research.
No Market Research Using Market Research