Ignore Costly Market Data and Rely on Google Instead? An HBR Management Puzzle

"It's decision time," Stefanie said to her younger colleague. "I can't wait any longer. The managing director needs to know when and where we're launching. Google Trends is telling us one thing. Our traditional market research is telling us something else. I need to decide which one to believe. And why are you smiling?"

"I'm sorry," Eugen said, trying to keep a straight face. "It's just that you've been having this argument with yourself for two months: Should we or shouldn't we trust Google's free data on the intensity of web searches? Look!" he suddenly exclaimed. "There's one of those Rohloff motors. What a work of art — even though it's one of our competitors. Fourteen gears spaced evenly at 13.6%. A 526% total gear range. Beautiful."

Stefanie soon saw what her tech-obsessed colleague had noticed in the crowd of bicycles here along the Danube: A black electric motor attached to the frame of a handsome white bicycle. The rider of the e-bike drew admiring stares as he swiftly overtook other cyclists. Stefanie and Eugen had gone for a walk to finalize the details of their company's launch of a similar high-end electric bicycle, named the Oryx. These were exciting times for their employer, the German automaker Vado, as it moved into the rapidly expanding e-bike industry, but Stefanie, the manager of the new e-bike unit, was feeling the weight of the decisions she faced.

"I want to believe the Google data. I really do," she said to Eugen, the Oryx's chief engineer. "But it's — it's — Google."

(Editor's note: This fictional Management Puzzle dramatizes a dilemma faced by leaders in real companies. Like HBR's traditional case studies, HBR.org's Management Puzzles are based on academic research into business problems. This story was inspired by "Forecasting private consumption: survey-based indicators vs. Google trends," by Simeon Vosen and Torsten Schmidt, in the Journal of Forecasting (September 2011). Please contribute by offering insights, solutions, and stories from your own experience.)

"The only thing quote-unquote wrong with the Google data is that it's free," said Eugen. "That's why I always smile when I hear you agonize over whether to rely on it. I think the reason you trust traditional market research is that you have to pay for it out of your budget." Stefanie was indebted to Eugen for his brilliance, but that grin was beginning to grate on her.

"The data may be free, but we still have to spend money on analysis," she said.

"Still — it's nothing compared to the cost of corporate market research."

Stefanie was a new-product pro — she had handled numerous product launches when she was in Vado's motorcycle unit. And of course she knew how to Google things on the internet — who doesn't? But Google Trends was a whole new world for her. She had stared wide-eyed as Eugen showed her spikes in consumer interest in e-bikes during specific times of year — spring, when cycling enthusiasts were beginning to take to the roads, and midsummer, when the Tour de France was on every television and mobile phone — and in certain regions. Hungary, for instance. Massive amounts of data were there at her fingertips, and all for free. She had spent some money on an outside firm that specialized in Google-data analysis, but the cost hadn't amounted to much.

"When you pay real money for something, there's accountability," she said as she and Eugen crossed the long footbridge on their way back to the company's executive building, whose soaring profile was visible in the distance. "Remember when our market research people showed us that in Germany, France, and Switzerland, purchase intentions for e-bikes reach a peak in the weeks before Christmas? We were able to go back to them and ask them questions: How big was your sample? How do you know your data are accurate? For every question, we got an answer. Our market-research people know what they're doing. That's why I used their data to set our prices, and it's why I have confidence in their analysis about a launch date and site. They say November in Switzerland, and I'm inclined to agree with them. The Berne Bicycle Fair, roads with giant hills, and consumers who are fanatical about cycling and have money to spend. It all adds up."

"But it turned out their sample was small, and heavily skewed toward older consumers. There was a lot of spin in their results."

"I admit, the sample wasn't huge," she said. "With everyone using mobile phones now instead of land lines, telephone surveys are difficult. But older consumers are one of our most important markets."

"Google draws on millions and millions of searches, from people of all ages. Google sees that the real heat in the e-bike market comes in the early spring and is strongest in eastern Europe. Google shows we should launch in March — in Budapest."

"And if Google is wrong, what recourse do we have?" she asked.

"Google isn't going to be wrong. Google data is like this river: It's an organic part of nature. It's not concocted, like the analysis of a survey or a focus group. It comes directly from real users. It's pure and unbiased, and it's updated every week, so we can see trends as they develop. That's why I keep arguing that Google Trends should be our go-to source of market data — not just for this launch, but for next year's launches in southern Europe and the UK. And for all of our decisions on where we put our advertising money."

"But we don't really know the exact relationship between the intensity of Google searches and product purchases, even with all the analysis we've done. And what if Google stops publishing this kind of data someday? Or starts charging for it?"

"That's 'someday.'"

They walked in silence. Finally, Stefanie said: "If the managing director hears we're basing our launch decision on Google data, he'll be livid. He'll want to know what's the point of spending millions on traditional market research, if we can get all the information we need for free off the internet."

That grin again. "Exactly," Eugen replied.

Question: Should the company place its trust in the market data that Google provides for free?



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