Art and Bart were college buddies at the University of Georgia (Go Dawgs!). They both graduated from the school of Landscape Architecture and went on to work at various companies to gain experience and knowledge. In 2014, they each embarked on opening their own Landscaping business, Art on the Northside of Atlanta and Bart on the Southside of Atlanta. Each started slowly, but by the end of 2018, through hard work and talent, they had each established very successful businesses with the following financials at the end of 2018:
| ART’S LANDSCAPING | BART’S LANDSCAPING | |
| Revenue 2018 | $4,800,000 | $4,800,000 |
| Number of customers 2018 | 500 | 500 |
| Revenue per customer /month | $800 | $800 |
| net adds / churn per month* | 0.5% | 0.5% |
At the beginning of 2019, a large landscaping company, Grass R Us, established 4 new franchises in the Atlanta area with a heavy advertising campaign and an initial price offering 10% lower than Art and Bart. This resulted in a change of net adds/churn to -2.75% per month. Through the end of June, Art and Bart had each lost about 75 customers and over $60,000.
Art felt confident that he knew his business and knew the market. He had anecdotal information from some of his crew that the lower prices offered by Grass R Us was the issue. So, as of July 1, Art lowered his prices across the board by 10%. This did have an immediate effect of decreasing net adds/churn to -1.5% per month. The overall result for Art’s business at the end of the year was a loss of about 114 customers and over $90,000. He wasn’t happy about the outcome, but by swiftly lowering his prices, Art believed he had averted a much larger hit on his business.
On the other side of town, Bart was faced with the same issue. But Bart remembered another old friend from UGA, Suzanne, who was in the Master of Marketing Research (MMR) Program. Suzanne was now working for a small research agency in Atlanta. Bart called Suzanne and asked her if she could help him with his problem. Suzanne designed a marketing research study for Bart to identify the core issues causing his customers to move to Grass R Us. Although the cost of the research was $30,000 and would take 6 weeks to complete, Bart felt that having good information would help him make a better decision.
The research was executed by Suzanne’s company, and the results indicated that the most important issue was NOT cost. Bart’s customers were satisfied with Bart’s service and pricing but were drawn to Grass R Us by fancy marketing and a highly promoted 100% guarantee. Bart decided, that, unlike his friend Art, he would not lower prices, but started to promote his own written 100% guarantee in September. Not only did the loss of customers stop, but net adds soared to +4.0% per month! By the end of the year, Bart had lost only about 32 customers and just over $25,000. Including the cost of the marketing research, Bart lost about $15,000 less than his buddy Art!
Projecting out to the next year, if everything remains equal, Art will continue to lose customers at a rate of about 5 per month and will lose an additional $50,000+. Bart, on the other hand, will gain about 20 customers per month and increase revenues over the year by over $200,000!
Although this is a hypothetical example, we are left with two important lessons. First, the cost of doing marketing research is justified by the savings in cost or increases in revenue experienced through better, data-based decisions. And second, whenever possible, hire a graduate of the UGA MMR program to lead your marketing research!
Carl Fusco is an accomplished Marketing Research Consultant who helps businesses more effectively solve problems by applying research techniques and data-based insights. For more information, email him at carl_fusco@yahoo.com or call him at 770-364-7160.
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