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Mercurial13y00

I had never heard of this fellow before. Doing a quick skim of his website, it looks to me like his main claim of expertise is that he has successfully started a number of businesses despite the odds seemingly being stacked against him.

While I agree that it's probably a good idea to talk to people like that, I'm concerned that they might think they know why they succeeded but not actually know. Is there a reason to believe that this fellow knows his real reasons for his success rather than just what the experience of being successful is like?

EvelynM13y00

Blank's suggestion is to get out of the building and talk to the people who with either pay you or will use your products and services. So, he's advocating empiricism. And I'm not skeptical about the effectiveness of testing your hypothesis against reality.

There are always many factors for any economic model. You will not be able to discover all of them. To function as a business, though, you only need to discover enough of them to get to some small sustainable profitable growth. Hopefully, from there, your customers will fund your learning. And if not, it... (read more)

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4 Good resource for marketing research?

by Mercurial

19th Aug 2011

2 min read

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I'm planning on starting a business in a few years. I realize that I have absolutely zero entrepreneurial experience and really don't know what I'm doing when it comes to appealing to my target audience. I know a number of psychological tricks that should in theory work, but theory and practice often differ and my understanding of the theory isn't robust enough to make up for the difference.

So, what I need is some kind of rational direction to look in so that I can start digging into the basic marketing research I'll need to do before I plunk money down on a business. At this point my expertise is limited to having read Michael Gerber's book The E-Myth Revisited, which in my naivety seems like a good way to address the question of how to avoid being a victim of the stunning failure rate of private businesses. But I really wouldn't be surprised to discover that Gerber is just dead wrong and that I don't have the background needed to understand that.

So, my question is: Where can I look to get rational guidance on this? I prefer a book or a series or something like that since I don't have the money to hire a professional yet, and it's still a bit early to start plunking money down on the seed of a business idea.

I doubt the nature of the business I'm thinking of is all that relevant since I'm looking for pretty basic, general information on marketing. But as I could easily be wrong: This is for a school. My hope is to get an alternative high school set up that trains students to be meaningfully ready for the modern world, dropping the stuff that's there purely due to cultural momentum. By and large (but not completely), this means focusing on metacognitive skills rather than primarily on subject content. I'm an education researcher and know of a number of psychological tools that are extremely promising and have proven effective in a wide range of cases but simply haven't been adopted for use in classrooms on any relevant scale, so part of my work between now and when I start this school is going to be aimed at doing research to hammer out the pragmatics. But that's the idea in a very tiny nutshell: use findings in psychology and sociology to teach stuff to teenagers that they'll actually find useful throughout their lives and that society will be glad that they know. I'm interested in making this a business primarily because I need it to provide me with enough of an income that I don't have to distract myself with some other job in order to support my family.

So: rational marketing research methods. Anyone have a good direction for me?

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[-]jimrandomh13y20

One piece of advice that I see often, which seems to apply here, is: start with a minimum viable product, then scale up from there to what you really want. In this case, the minimum viable product is probably a summer school.

[-]Mercurial13y00

This will probably start with some research based on summer sessions meant to verify that the methods as implemented really do work as advertised, and to hammer out the kinks that will inevitably appear. So yes, I agree, this seems like a good idea. I'd just like to get some research-based info on whether what seems to me like a good idea really is a good idea!

[-]Vaniver13y20

What state do you live in / want to set up the school in? It seems like emailing someone at a charter school association for your state might get you partially where you need to go.

[-]Mercurial13y00

What state do you live in / want to set up the school in?

I'm currently in California. I doubt this is where I'll set up the first school, though, since my wife and I aren't really comfortable here. (We're here only because I'm finishing my Ph.D. down here.)

It seems like emailing someone at a charter school association for your state might get you partially where you need to go.

Yep, that's on my to-do list. Thanks for the suggestion!

My concern is that I could totally see existing charter schools thinking they're doing well (or at least surviving) because of their "focus on excellence" or their "guaranteed method of college preparation" or this or that, but have it turn out that their marvelous common sense missed the fact that, say, the people geographically near the school with money happen to like blue and the school's logo has a lot of blue in it. And stupidly, the blue probably matters more than the college preparation.

Gerber's suggestion for getting at this kind of info (what he calls "psychographics") is to put out a poll to the people in one's intended demographic and ask things like, "What brand of computer do you prefer?" and "What brand of toothpaste do you use?" Then backtrack by looking at the advertising methods of the things they indicated that they actually buy in order to get a hint about what kind of subconscious influence actually "generate a 'buy' response". (Unsurprisingly, it's useless to ask people what color most encourages them to try a product. They tend to claim no color does that to them despite statistical evidence to the contrary.)

Because I'm interested in doing something quite a bit different than what many charter schools do, I could easily get skewered by listening to their advice but have it turn out that they had absolutely no clue why they were actually successful. If it's something they take for granted but I end up changing, that could be a problem.

So while I agree that talking to charter schools is a really great starting point, I can see where I'll need to do at least a little bit of my own research. I'm just hoping I won't have to reinvent the research methods on top of actually conducting it.

[-]EvelynM13y10

Steve Blank has some good pointers on his blog: http://steveblank.com/books-for-startups/

http://steveblank.com/category/customer-development-manifesto/

http://steveblank.com/tools-and-blogs-for-entrepreneurs/

Business Model Generation: by Alexander Osterwalder is good for figuring out the different components you need to have to get a business going.

The crucial learning comes from actually talking with potential customers and listening to them. And eventually trying to sell them something. Remember, it doesn't have to be original.

[-]Mercurial13y00

[-]EvelynM13y00

Would you grant me an explanation about why 'actually knowing' is important?

[-]Mercurial13y00

Would you grant me an explanation about why 'actually knowing' is important?

Sorry I missed this question earlier. It's not important per se, but not actually knowing when one is under the impression of knowing is a problem.

In this case, a lot of entrepreneurs who have started successful businesses have a lot of opinions about why they succeeded while others failed. But their self-reports don't necessarily tell us why they succeeded; those reports tell us only what they think was responsible for their success. Someone who insists that their aggressive advertising campaign was essential to their success might totally miss that a vastly more important factor was actually, say, that they exude more pheromones than average.

So, I'm weary of success advice even from successful people because it's all too common for people to be oblivious to the most potent factors responsible for their success.

[-]jsalvatier13y00

You might try talking to Peter Scheyer a LWer who starts businesses for a living.

[-]Mercurial13y00

Great! Thanks!

[-]play_therapist13y00

I think you might start by deciding first what kind of students you want to attract. Are you planning to open a private school for wealthy children whose parents will pay for it? If so, then you might want to do an assessment of what motivates parents to send their children to private schools and what needs there are that are being under served. Then your marketing would be aimed to reach those parents and to show how your school will fit their needs.

If you have in mind an alternative high school that would be funded by tax dollars and free to the students, that is a very different thing. You would have to research policies and procedures to establish the schools. They may need to be set up as non-profit institutions. My impression is that in many cities students will enroll in the local charter schools mostly because they don't want to attend the public schools.

Good luck.

[-]Mercurial13y00

I think you might start by deciding first what kind of students you want to attract.

That's a good point. I've put some thought into this, but not a huge amount - probably because of a flinch. To me, the real point of what I'm doing is to produce competent, mentally healthy individuals. Ideally that would include everyone, but pragmatically that just isn't going to happen. So, whom shall I omit early on? It's an uncomfortable question, but you're quite right that it needs asking.

[-]play_therapist13y00

I wouldn't so much think about omitting anyone, as focusing on who you want to attract. The default plan for most students is to attend the local public school. So, you need to think about how you are going to convince people to attend your school instead. If you are going to start a private school, you will need to convince parents who can pay tuition that it's worth paying it and that it is better spent at your school than other available schools. If you want to start a charter, you'll need to convince the involved government bodies to approve and fund you. You'll have to be able to convince them that you will be filling unmet needs.

Often charter or private schools specialize. They market themselves to attract

gifted students who are bored in the public school or students with special needs students who don't feel safe in the public schools students with behavior problems students who are trying to get into top colleges and feel that they'll have an edge coming from there students wanting to study particular subject matter in depth, such as music, art, science

or some combination of the above

All schools hope to produce competent, mentally healthy individuals. You'll need to focus more tightly.

[-]Morendil13y00

Yours is an exciting project and I wish you the best - I can't wait to see what comes out of it.

I'm an education researcher and know of a number of psychological tools that are extremely promising and have proven effective in a wide range of cases but simply haven't been adopted for use in classrooms on any relevant scale

Your major hurdle probably isn't going to be marketing-in-general, but specifically finding an answer to the why of the above observation.

Still, you might be interested in this fellow's writings, as they have been quite influential among a crowd which substantially overlaps the readership of LW: he writes about "entrepreneurship as a practice that can be managed rather than purely an art form to be experienced".

[-]Mercurial13y00

Yours is an exciting project and I wish you the best - I can't wait to see what comes out of it.

Thanks!

Your major hurdle probably isn't going to be marketing-in-general, but specifically finding an answer to the why of the above observation.

I have a pretty good idea as to why at this point. Some of it is because it's pretty difficult to sort out the touted-and-good stuff from the touted-and-overhyped stuff in education research. The popularity of a theory and the status of a researcher making a given comment both have vastly more weight in this field than they should, possibly more even than empirical evidence. It's unpopular to overthrow widely cited theories with findings from neuroscience, for instance. There's virtually no control for cognitive biases from what I've been able to tell.

That said, you're right in that it's possible that I've just missed something critical and that the stuff I'm thinking of applying flat-out doesn't work like I expect it will. That's why I'm going to spend a few years doing some rational research verifying the methods and working out the pragmatics before I actually start the business.

Still, you might be interested in this fellow's writings, as they have been quite influential among a crowd which substantially overlaps the readership of LW: he writes about "entrepreneurship as a practice that can be managed rather than purely an art form to be experienced".

I think this is the same fellow EvelynM suggested, yes? I'll certainly take a look, although I'm skeptical for reasons I mentioned in my reply to EvelynM.

[-]lukeprog13y00

Principles of Marketing, 13th edition.

[-]Mercurial13y00

Thanks, Luke!

Is there any reason to preference this particular text over any given other one in marketing?

[-]lukeprog13y00

Not sure. It's the only marketing textbook I've read sections from, and it seemed pretty good.

[-]Mercurial13y00

Fair enough! Thanks!

[-]Oscar_Cunningham13y00

Paul Graham (guru of internet startups) has this to say:

And what I discovered was that business was no great mystery. It's not something like physics or medicine that requires extensive study. You just try to get people to pay you for stuff.

[-]Jayson_Virissimo13y50

This has got to be the most ignorant quote I have even seen from Graham. If it is "no great mystery" and doesn't require study, then why do so many fail at it?

[-]atucker13y10

I think the ignorance depends on the target audience of the quote.

For normal people, its actually a fairly large insight. Starting a business isn't impossible, you just need to get paid to do something.

For entrepreneurs who already know that starting a business is possible, its pretty useless. Of course you're trying to get paid, the question is how.

[-]Jayson_Virissimo13y20

Right, and playing professional basketball isn't impossible; you just need to throw a ball through a hoop.

[-]Oscar_Cunningham13y10

Thinking through Graham's essays an example that comes to mind is being so excited about your own product that you fail to see that it has no market. He claims that most successful startups change their product entirely at least once.

[-]Mercurial13y30

Hah! That's pretty clever!

The thing is, most businesses fail. I keep hearing slightly different statistics on this, but roughly speaking, any given random American business has somewhere around a 98% chance of failing in the first five years. This means that if you are trying to start a business and you listen to others who are trying to start a business and you hear the same kinds of thoughts and business strategies from them as you are using, the chances are extremely good your business will fail.

In other words, common sense is utter trash for starting a business that works. Pragmatic sense is important, I'm pretty sure, but common sense is entrepreneurial poison. So if we "try to get people to pay [us] for stuff" using our naive intuition, we will probably just lose the business game.

So, what to use instead of naive intuition?

I really don't know!

[-]gwern13y10

I keep hearing slightly different statistics on this, but roughly speaking, any given random American business has somewhere around a 98% chance of failing in the first five years.

From Mike Darwin's "The Armories of the Latter Day Laputas, Part 5":

"While it is well known that most start-up businesses fail, the uniformity of that failure is generally under-appreciated by members of the general public. Historically the rate of start-up failure in the US has been in the range of 98%, however, since the 1940s this has declined to ~5% of all new business enterprises.[1]"

Better than you thought, perhaps, but the mortality doesn't go away:

“In 2009, the Japanese business analysis and survey firm Tokyo Shoko Research (a combination of Dunn and Bradstreet and TRW in Japan), conducted an examination of the founding dates of the 1,975,620 enterprises in their database.They found 21,666 companies which have existed for over 100 years. The Bank of Korea conducted a similar evaluation of their database and found that there are 3,146 firms founded over 200 years ago in Japan, 837 in Germany, 222 in the Netherlands and 196 in France. There are 7 companies in Japan over 1,000 years old; 89.4% of the companies with over 100 years of history are for profit businesses. However, a closer examination of the history of these long-surviving enterprises reveals that many underwent takeovers, buyouts and essentially a complete restructuring of mission and the nature of the business the firms were engaged in – often more than once in their history. Thus, the chances of a business entity (excluding religious and academic institutions) surviving for >100 years is 1.096%.”

If those two quotes don't help, possibly other statistics in Darwin's article would?

[-]Mercurial13y00

Ah, this does look quite valuable! It's not quite what i was looking for, but it'll be helpful nonetheless. Thanks!

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