The evidence is in. Super successful technology-based enterprises average about two dollars in market research for every dollar invested in engineering. Business disasters invest less than a nickel in upstream marketing for each engineering dollar. The implication for the board of directors is that prudent oversight of a company’s affairs must include a commitment to invest resources in decisive, up-front marketing.
The Marketing/Engineering Investment Ratio™ (M/E Ratio™), was developed as a new ratio to guide technology-based enterprises. In this metric, created for the MIT Enterprise Forum, marketing is defined as the market research process that comes before the product is ready, and excludes promoting or selling. The M/E Ratio™ should be a minimum of 1. The magnitude of the challenge simply requires it.
Understanding a company’s place in its market is the fundamental intellectual discipline underlying the creation of effective business strategy. If the board is to be ultimately concerned with strategy, and it should be, then the board must be concerned with the amount and relevance of the company’s market research activities. Strategy must be based on facts, not on wishes.
Twenty questions are posed as a method for the Board to guide the CEO and the corporation. Market research is not a commodity that can be purchased by the ton. Inquire not only about the quantity of marketing, but also about the relevance of the market research, the caliber of the market research staff, and the quality of their activities.