Market Research

Episode Summary

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The early 20th century was a golden age for American car manufacturers, who could barely keep up with demand for their products. But by 1914, the market was becoming more discerning, especially at higher price points. Charles Coolidge Parlin, now considered the world's first professional market researcher, was hired by a magazine publisher to study the auto market. After months of work interviewing hundreds of car dealers and traveling tens of thousands of miles, Parlin produced a report detailing consumer preferences. At the time, no car manufacturer actually employed market researchers or conducted consumer research. Henry Ford famously quipped that customers could have a Model T in any color they wanted, as long as it was black. The assembly line allowed Ford to streamline production around a single color. Parlin, on the other hand, had been hired by a magazine publisher looking to sell more advertising. The company realized that understanding markets could make advertising more effective. Though some were skeptical of Parlin's research, he helped pioneer a shift from a producer-led to a consumer-led approach to business. Rather than making a product and trying to sell it, companies began trying to identify consumer demand first. Parlin showed there was value in researching the market. By the late 1910s, companies were setting up their own market research departments. The field became more scientific over time, incorporating techniques like surveys, focus groups, and beta testing. Marketers also realized they could shape consumer preferences through advertising. Campaigns featured aspirational figures to influence behavior. Public relations techniques were used to manufacture desire for products. Market research has become integral to the modern economy, with companies probing the consumer psyche in ever more sophisticated ways. Whether this manipulation is beneficial remains an open question.

Episode Show Notes

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US car makers had it good. As quickly as they could manufacture cars, people bought them. By 1914, that was changing. In higher price brackets, especially, purchasers and dealerships were becoming choosier. One commentator warned that the retailers could no longer sell what their own judgement dictated – they must sell what the consumer wanted. That commentator was Charles Coolidge Parlin, widely recognised as the man who invented the very idea of market research. The invention of market research marks an early step in a broader shift from a “producer-led” to “consumer-led” approach to business – from making something then trying to persuade people to buy it, to trying to find out what people might buy and then making it. One century later, the market research profession is huge: in the United States alone, it employs around half a million people.

Producer: Ben Crighton Editors: Richard Knight and Richard Vadon

(Image: Market research, Credit: Bildagentur Zoonar GmbH/Shutterstock)

Episode Transcript

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SPEAKER_00: Amazing, fascinating stories of inventions, ideas and innovations. Yes, this is the podcast about the things that have helped to shape our lives. Podcasts from the BBC World Service are supported by advertising. Hello, it's Tim Harford here. Before we get started on the invention of market research, SPEAKER_02: I wanted to let you know that at the end of this episode, I'll be telling you how you can help me choose a 51st thing. That is, if you're listening to this in August or early September 2017. Details coming up in approximately nine minutes. SPEAKER_02: In the early years of the 20th century, US car makers had it good. As quickly as they could manufacture cars, people bought them. But by 1914, that was changing. In higher price brackets especially, purchases and dealerships were becoming choosier. One commentator warned that the retailer... SPEAKER_01: That commentator was Charles Coolidge Parlin. SPEAKER_02: He's widely recognised as the world's first professional market researcher and indeed the man who invented the very idea of market research. A century later, the market research profession is huge. In the United States alone, it employs around half a million people. Parlin was tasked with taking the pulse of the US automobile market. He travelled tens of thousands of miles and interviewed hundreds of car dealers. After months of work, he presented his employer with what he modestly described as... SPEAKER_02: You might wonder which car maker employed Parlin to conduct this research. Was it perhaps Henry Ford, who at the time was busy gaining an edge on his rivals with another innovation, the assembly line? But no. Ford didn't have a market research department to gauge what consumers wanted. And perhaps that's no surprise. Henry Ford is widely supposed to have quipped that people could have a Model T in any colour they like, as long as it's black. In fact, no car makers employed market researchers. Parlin had been hired by a magazine publisher. The Curtiss publishing company published some of the most widely read periodicals of the time, The Saturday Evening Post, The Lady's Home Journal, The Country Gentleman. The magazines depended on advertising revenue. The company's founder thought he'd be able to sell more advertising space if advertising were perceived as more effective. And he wondered if researching markets might make it possible to devise more effective adverts. In 1911, he set up a new division of his company to explore this vaguely conceived idea. The first head of that research division was Charles Coolidge Parlin. It wasn't an obvious career move for a 39-year-old high school principal from Wisconsin, but then being the world's first market researcher wouldn't have been an obvious career move for anyone. Parlin started by immersing himself in agricultural machinery. Then he tackled department stores. Not everyone saw value in his activities. At first, even as he introduced his pamphlet, The Merchandising of Automobiles, an address to retailers, he still felt the need to include a diffident justification of his job's existence. He hoped to be of constructive service to the industry as a whole, he wrote, explaining that car makers spent heavily on advertising, and his employers wanted to ascertain whether this important source of business was one which would continue. They needn't have worried. The invention of market research marks an early step in a broader shift from a producer-led to a consumer-led approach to business. From making something, then trying to persuade people to buy it, to trying to find out what people might buy, and then making it. The producer-led mindset is exemplified by Henry Ford's Any Colour As Long As It's Black. From 1914 to 1926, only black Model Ts rolled off Ford's production line. It was simpler to assemble cars of a single colour, and black paint was cheap and durable. All that remained was to persuade customers that what they really wanted was a black Model T. To be fair, Ford excelled at this. Few companies nowadays would simply produce what's convenient and then hope to sell it. A panoply of market research techniques helps determine what might sell. Surveys, focus groups, beta testing. If metallic paint and go-faster stripes will sell more cars, that is what will get made. Where Parlin led, others eventually followed. By the late 1910s, not long after Parlin's report on automobiles, companies had started setting up their own market research departments. Over the next decade, US advertising budgets almost doubled. Approaches to market research became more scientific. In the 1930s, George Gallup pioneered opinion polls. The first focus group was conducted in 1941 by an academic sociologist, Robert K. Merton. He later wished he could have patented the idea and collected royalties. But systematically investigating consumer preferences was only part of the story. Marketers also realised it was possible systematically to change them. Robert K. Merton coined a phrase to describe the kind of successful, cool or savvy individual who routinely features in marketing campaigns. That phrase? The role model. The nature of advertising was changing. No longer merely providing information, but trying to manufacture desire. Sigmund Freud's nephew, Edward Bernays, pioneered the fields of public relations and propaganda. Among his most famous stunts for corporate clients, in 1929 Bernays helped the American Tobacco Company to persuade women that smoking in public was an act of fraud. To persuade women that smoking in public was an act of female liberation. Cigarettes, he said, were torches of freedom. Today, attempts to discern and direct public preferences shape every corner of the economy. Any viral marketer will tell you that creating buzz remains more of an art than a science. But with ever more data available, investigations of consumer psychology can get ever more detailed. Should we worry about the reach and sophistication of corporate efforts to probe and manipulate our consumer psyches? An evolutionary psychologist called Jeffrey Miller takes a more optimistic view. Like chivalrous lovers, Miller writes, the best marketing-oriented companies help us discover desires we never knew we had and ways of fulfilling them we never imagined. Well, perhaps. Miller sees humans showing off through our consumer purchases, much as peacocks impress pea hens with their tails. Such ideas hark back to an economist and sociologist named Torstein Veblen. Veblen invented the concept of conspicuous consumption back in 1899. Charles Coolidge Parlin had read his Veblen. He understood the signalling power of consumer purchases. The pleasure car, he wrote in his address to retailers, is the travelling representative of a man's taste or refinement. SPEAKER_01: A dilapidated pleasure car, like a decrepit horse, advertises that the driver is lacking in funds or lacking in pride. SPEAKER_02: In other words, perhaps not someone you should trust as a business associate or a husband. Signalling these days is much more complex than merely displaying wealth. We might choose a Prius if we want to display our green credentials, or a Volvo if we want to be seen as safety-conscious. These signals carry meaning only because brands have spent decades consciously trying to understand and respond to consumer desires. And to shape them. By contrast with today's adverts, those of 1914 were delightfully unsophisticated. The tagline of one for a Model T? Buy it because it's a better car. Isn't that advertisement in its own adorable way perfect? SPEAKER_02: But it couldn't last. Charles Coolidge Parlin was in the process of ushering us towards a very different world. SPEAKER_03: Douglas Ward wrote an excellent history of market research titled A New Brand of Business. For a full list of our sources, please see bbcworldservice.com slash 50things. SPEAKER_02: As promised at the start, I am back. The title of our podcast might well give this away, but I've come up with 50 things that have made the modern economy. But I want to have a 50-first thing. So what's the one extra thing that you think I should be looking at? And if you've listened to a few episodes, you'll know that we're not always looking for the obvious ideas. We're looking for the overlooked, the unexpected, the underrated. Anyway, please send in your suggestions. I will then choose my six favourites and in a few weeks you'll have the chance to vote online. There'll be a special extra podcast all about the winning 50-first thing. So get your thinking caps on. The deadline for your suggestions is 12 noon GMT on Friday the 8th of September 2017. You can email me at 5151things.com or you can send a message on the BBC World Service page on Facebook or let us know on Twitter at BBC World Service. Remember, the deadline for suggestions is the 8th of September 2017 at 12 noon GMT. You can see a list of all my 50 things at bbcworldservice.com slash 51things. Again, 51 is 5-1. I can't wait to see what you suggest.