The recent business news has been full of the problems besetting the UK’s largest retailer Tesco. Part of the blame for its poor performance has been laid at the failure of its “Fresh & Easy” chain in the United States, which lost the supermarket £3bn. This was to have been Tesco’s grand entrance into a notoriously difficult market.

For a consumer business supposedly so focused on its customer, how did they get this so badly wrong? And what should your business learn from their mistake?

1. Did Tesco do the ‘wrong’ market research for Fresh & Easy?

I recently watched a couple of short documentaries on Fresh & Easy – before and after its launch. One aspect really grabbed my attention. In the early days of the launch, the company made much of its rigorous market research strategy. It read like an A to Z of research tactics.

Researchers lived in people’s houses to understand their buying habits. Secretive forays to the competition included making cash only purchases (some in big quantities) lest some researcher’s credit card was traced back to Tesco. Everything that seemingly could be researched was researched and Fresh & Easy was born, a different concept with different food offerings and different store sizes.

Yet this new retail offering did not succeed and Tesco is walking away.

It reminded me of the days in the 1990s when I was working in the UK museums sector. A number of museums came and went pretty quickly. One of these was the National Museum of Popular Music in Sheffield (formerly an important steel manufacturing city). Research was obviously done. The theme was obviously attractive. The museum opened in 1999 and closed in 2000.

And let’s not forget the daddy of them all – the 1980s re-launch of Coca Cola into New Coke. Research panels were organised. Secrecy was everywhere. Consumers rated the taste – to a statistically valid %. Yet, months after launch, New Coke was dumped to be replaced by old Coke!

So what does this tell us? That all market research is a waste of time? No not at all. I’m a great believer in market research. But sometimes all can just be too much.

Back to Fresh & Easy, a market research agency’s dream. So secretive that no-one could discuss it in reality land – the world outside Tesco. It was all done in a bit of a bubble. Yet when Tesco announced its exit, those in the know in American supermarket retailing said it was a concept born to fail for a couple of simple reasons – it didn’t sell what Americans wanted to buy and it wasn’t the size of store that Americans liked to shop in.

Back to the Museum of Popular Music. Nice theme but wrong location – visitors wouldn’t travel from around the UK to visit its pop music museum and there was not a sufficient local population to support the venture.

And finally, New Coke. Everybody said when it failed that it wasn’t the taste that people complained about, it was the fact that they didn’t want their iconic brand messed around with.

Three brands. Three in depth market research projects. Three failures. Three predictable failures.

2. The best market research?

I’m a great believer in understanding the customer, what he or she does or could do, thinks or could think. But it doesn’t mean that I have to spend mega bucks on endless research to appreciate the obvious.

I believe that we should start major market research initiatives by just hanging out and talking to people. Yes, I’ll say that again, talking to people – a skill that we seem to be increasingly unable to master as we hide behind technology. We’re rapidly losing the skills of Sherlock Holmes to those of Mark Zuckerberg.

3. Three steps to market research that works

So what should companies do?

1. You could find out what your customers (or prospective customers) are thinking by just talking to them. An hour with a group of 20 (not 20 consumer panels) will give you a steer, if not a final answer. Take time out of your management grind to engage – you’ll be surprised at the insightfulness of your customers.

2. And what about understanding the competition? Don’t be so secretive! It’s possible to hang out with the competition! I once did some work for a bakery/retailer. Its Chief Executive wasn’t quite sure how to understand what the competition was doing. So we spent a day wandering around the competition’s outlets, asking questions, buying products, looking through shop windows and so on. It didn’t give the complete picture but it took us quite a way. It soon became apparent where we were strong and not so strong.

3. Hunches are not always nonsense. But the processes of “getting things right” and the fear of doing the (obvious) right thing can get in the way.

There’s a great academic article (Encoding advertising, the creative perspective – Kelly/Lawler/O’Donahue. Journal of Marketing Management, volume 21, 2005) which is probably way too long for me to recommend that you read, but it’s all about how managers with vision employ creatives to create great communications campaigns and then get scared when they try to do so. “They analyse it and analyse it and analyse it…like a poem that is overanalysed…eventually it’s not a poem anymore.” Sometimes we need to be bold enough to follow what we believe is actually right.

In summary – the caution of over-elaborate market research means that poor ideas can be turned into expensive strategies and good ideas can be junked for fear that they might be too good!

It’s time for senior people to get out from behind their desks, hang out with their customers, wander around the competition and at least get themselves part of the way there before they put even more money into the market research industry. Hanging out won’t give you the complete picture but it can go a long way to contributing to it.

And if Tesco had done more hanging out, would Fresh & Easy have been a success?

Market Echoes can help you ask the right questions…and save time and money in the process.