How much should I spend on research?

The answer may be “nothing”. The correct answer to the question depends on the amount of risk around the decision to be researched.

 If you’re talking about the effectiveness of a short term label violator that is going to have a minimal impact on your production costs, maybe you shouldn’t do anything. Figure out what you could possibly lose if you decide to move ahead. That’s your maximum risk and some amount less than that is what you should spend to make your research ROI positive. Just make a decision.

If you’re talking about introducing a whole line extension with capital costs, packaging design, product development, advertising and communication development, the risk is obviously much greater. It’s not unusual for a consumer package goods company to spend several million dollars to develop a line extension. In this example, spending even a million dollars on a series of research inquiries makes a great deal of sense.

The same logic applies to another factor in the cost of research – sample size. Serious decisions deserve sufficient sample size to allow for a thorough analysis of subgroups, etc. If you’re going to do a home use test, don’t skimp on sample size. Smaller decisions require less precision – save your money for some extra advertising.

For more on this subject, be sure to check out our Webinar on 1/28/15. Register on our Events & Education page or email info@new-directions-inc.com for call in and login details.