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The market researcher’s dilemma

By Gary Gustafson

Gary Gustafson Blog 8-13“What enables the wise sovereign and the good general to strike and conquer, and achieve things beyond the reach of ordinary men, is foreknowledge.” — Sun-Tzu, The Art of War

Data, analytics and insight are to business planning what air, fuel and spark are to an engine. Unlike a well-running engine, however, sometimes these three inputs don't align conveniently and this forces a business decision where one must be trusted more than the others. Here’s a motorcycle industry example: A global automotive brand once contracted me for the due diligence phase of an engine-related supplier acquisition they were considering. They wanted my opinion on the company’s future prospects in the powersports industry. The supplier’s internal projections were rosy. They had three powersports OEM customers – one major and two smaller ones in addition to some tier-2 and tier-3 agreements with automotive companies. The supplier also had concept sketches for an all-new off-road vehicle that they believed they could produce themselves, or partner with an OEM to produce. Analytics indicated, without a doubt, that the firm could grow based on historical trends and reasonable organic growth from their existing OEM customers. Indeed, if the company realized even a fraction of the possible revenue from the new vehicle launch, it would be a home run investment.

My insight was that the supplier’s sales would probably tank with their current approach. The new vehicle involved two or more rotating tracks for propulsion, and that should be all I need to say. The major OEM incorporating their products was perceived as “behind the times” with their technology. One of their smaller OEM customers was not doing well and in fact declared bankruptcy within the next 12 months. The other smaller OEM was nothing to stake a future on. But there was another, rather amazing insight that was the most important of them all. I had discovered that the same engineering leader championed the supplier internally as an employee at all three OEMs in succession and was no longer employed by any of them. Based on these and other facts, I suggested that the acquiring brand expect losses, not growth, with the supplier in the 3-5 year powersports industry window. They were a bubble about to burst, and they did. In this case a key insight trumped the data and analytics.

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Good data, however, trumps poor insight. Even recently I heard of new product manufacturers being told something like the old adage: “What wins on Sunday, sells on Monday.” This is arguably true in some markets like sport side-by-sides and NASCAR, but is decidedly less helpful today in others like sport ATVs and motorcycles because the age of the typical powersports buyer has risen and because more women than ever are riding. Men and women, young and old, love things that go fast but even if they do watch races the majority of these customers aren’t perfecting their stand-up wheelie or trying to nail triple jumps. Insights into advancements on race-ready ATVs and motorcycles have limited value in their respective markets because there are fewer customers left to use them. There is still lots of fun and some profit to be made in these segments – especially entry-level sport motorcycles. But today’s sport-oriented customers prefer UTVs to ATVs and the racing/high performance market there is booming. Motorcycles with a third wheel are becoming more popular in part because baby boomers’ legs have grown unsteady and their reaction time is slipping. It is also statistically proven that women have a higher preference for three-wheeled motorcycles than men. The more spacious bodywork on all of these types of vehicles permits creative styling cues which is an advantage for style-conscious buyers. Hence the growth in side-by-sides, Slingshots, Spyders and the like.  The demographic data is relevant and many manufacturers are profiting handsomely by adapting to it. Others that go to the race track and focus on helping people on sportbikes or LTZ400 ATVs win races often discover that it’s more of a lifestyle choice than a well-paying business. A side note -- not all data relied upon in the powersports industry is good. Building a data set requires skill. I’ve seen UTV and side-by-side new-unit annual sales statistics in the United States vary by 125,000 units between two professional sources. I’ve seen replacement part reference data that was thoroughly inaccurate. MIC new unit sales data is solid but not every OEM belongs to the MIC so data on those brands must be found elsewhere. Ironically, it takes some insight to know where to get good data! In the end though, good data can frame the broad reality of a market.

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“James finds things in statistics that most people don’t know are there!” – Sports Illustrated review of Bill James' Sabermetrics databook, circa 1982

“Judge a man by his questions rather than by his answers,” Voltaire said. Voltaire would have liked Sabermetrics. Sabermetrics proves that if good data can be obtained, good analytics will bring it to life. Today’s Major League Baseball proves the value of analytics as this article describes. Good analysis (or analytics) hinges entirely on asking the right questions and Sabermetrics has changed the game by doing just that. A traditional ERA statistic simply described the number of runs scored on a pitcher per nine innings apart from blatant errors. Sabermetrics’ Defense-independent ERA (dERA) isolates how well a pitcher, alone, keeps other teams from scoring regardless of the overall effectiveness of the defense behind him. Obviously this is a far better comparative metric for pitchers. Similar Sabermetric measurements exist at a more granular level to empower managers to confidently pinch-hit a specific player once in an entire series, or even once per season. Likewise, there are huge opportunities in powersports analytics. Dealer CRM systems are making good progress on the retail side, but something akin to Sabermetrics is due in other areas of our industry. One analytic might be something like a calculation of ETGR or Effort To Go Riding. The formula would include things like trailering time, putting gear on, average maintenance per ride and finding an open riding area. I guarantee that tracking improvements to a statistic like this would help recruit more customers. Also, purchasing departments might rank suppliers in a more analytical way than just the current “Big 3” of on-time shipments, PPM and Y-O-Y Cost Reductions. These measurements, in some ways, are similar to the batting average, home runs and ERA of baseball’s yesteryear.

The latest studies show that the human brain can store as much as a petabyte of data and process it at 10 billion or even more than 1 trillion MIPS using parallel processing. In other words, computers can’t compete with the human brain for good judgment. In Malcolm Gladwell’s bestseller Blink he talked about “thin-slicing”. Thin-slicing is the unconscious mind’s ability to recognize vital details that the conscious, analytical mind – or a computer with an analytical program -- might otherwise miss. These abilities make the human mind able to arrive at informed judgments with astonishing speed and accuracy. To have great insight, one must be a thin-slicer extraordinaire whether it is done with the conscious mind (key facts) or unconscious mind (informed hunches). This ability is best developed by astute observation of data, experience, design, culture, trends, polling other experts, and other sources of information. It can be a single observation or just a hunch. A couple of years ago, I was asked to promote a new type of throttle control intended to replace the thumb levers on ATVs and snowmobiles. It was (and is) a beautiful design, and truly innovative. There was one small problem. It was usable only to riders who were seated in a “touring” position on the vehicle, and many riders stand and lean rather aggressively; hence the effectiveness of the flat, simple “outdated” throttle lever designs that can be accessed from any riding position. Despite data proving that it reduced thumb fatigue and was more controllable by the rider, despite the data showing hundreds of thousands of vehicles being produced with ancient technology, the new throttle control was simply not viable for most of the off-road vehicles it was intended for.

To sum up: when a baseline for the business is defined and the operating environment is predictable, good data is vital for business planning. This is useful for continuous improvement efforts or organic growth campaigns. Analytics can be used to clarify the true operating environment and help a company succeed more often when taking calculated risks to achieve these same kinds of goals. When an enterprise is truly innovating, entering a completely new market or navigating a sea change in regulations and technology however – expert insights can be the most critical tool of all until a company establishes a base line for its place in the market. Thus, expert insight should continue to play a central role, and sometimes the key role in business planning.

Powersports industry consultant Gary Gustafson is president of G-Force Consulting Inc. based in Clear Lake, Minnesota. G-Force Consulting provides custom market surveys, expert insights, and key account sales management to help manufacturers increase revenue and profits. Learn more on the web at www.marketresearch.motorcycles

2 comments

  1. Thanks for your insights Gary
    Reality checks by real world experts of visionary ideas and products is often not included, or regarded as simple negativity or resistance to change. These checks are often most valuable when they are sourced from folks outside of the internal 'loop'. I've seen multiple large financial and time investment projects and products move forward that were not based on clear analytics, but simply because executives felt pressure to change and/or run faster.

    • First Name: Daniel
    • Last Name: VanEpps
    • Email Address: danve@msn.com

    [Reply]

  2. Right on. Thanks, Dan.

    • First Name: Gary
    • Last Name: Gustafson
    • Email Address: gforcegary@gmail.com

    [Reply]

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