ProFiles Season 2 Episode 6: Market Research Innovator Blends Creative and Analytical to Achieve Stunning Success

00:02

TOM: Hi, Pros, and welcome to the LL Flooring ProFiles Podcast. I'm Tom Kraeutler, and I'm super excited to welcome you to this episode. You know, as a business owner, a manager, or an executive, you're often tasked to wear two hats: creative and analytical, right? It and I don't know about you guys, but those two sides of my brain always seem to be competing. I get a great idea for a new product or a promotion. I get all excited about it. And just about that time, my analytical brain starts to kick in and point out the obvious but not always welcome questions like will this work? How will we measure it? Will this take away from our brand message? Can we afford it? And on and on and on. Well, my guest today runs a highly successful market research company where they've discovered, with a little help from AI the creative and analytical teams play so well together, they're achieving stunning success after success for the brands and retailers they represent. I found the interview fascinating, and I know you will, too. So now let's get to work.

01:09

TOM: Ged King is the CEO of Sales Factory based in North Carolina. Sales Factory is a highly successful brand growth agency that describes itself as a results driven marketing company fueled by research and relentless curiosity. I love that. Welcome, Ged.

01:26

GED: Hey, thank you for having me. I'm looking forward to talking.

01:29

So, in reading your bio and researching your company a bit, it sounds like you were literally born to do this work. Your dad, George King, founded Sales Factory back in 84. And before that, I understand that he worked for Black and Decker and discovered the need for a small handheld vacuum cleaner, which, of course, we all know today as the DustBuster. So, tell me about that.

01:51

GED: Well, I'll tell you the perspective as a young guy, because I was a boy when that happened. But my father always said the best way to be good at business is to pay attention to the customer. And the world's changed a lot. There's a lot of technology differences, but understanding the customer is an old thing that can be repeated time and time again. So back in the 70s, Black and Decker was trying to invent battery operated power tools like we know those today. But back then, the battery technology wasn't the same as it is today. So, they kept making even lawn mowers and drills and things. As a kid, I could tell didn't work very well, and I'm sure real professionals could tell also. But what they kept hearing was; Yeah, I don't really need that because it doesn't work very well. But what I would love is a way to help clean up the little messages in my house.

02:40

TOM: Right.

02:41

GED: And according to my father, he heard that for three years and then finally actually heard it.

02:46

TOM: Before he paid attention. Right.

02:51

GED: That's right. They decided to go down that path, and it kind of changed the industry that enabled Black and Decker to buy GE Small Appliances. Their whole strategy switched to owning the entire home, not just the garage.  It led to DeWalt because Black and Decker had to reinvent itself to get pro users to use their tools.  And if you ask people that are older than me that were around then, they'll tell you it led to probably Black and Decker eventually being bought by Stanley, because they got distracted and they were trying to do too many things. So, it had a lot of positives and negatives to it. But in my dad's case, he was there for the positive.

03:28

TOM: And this idea of him really learning to listen and learning to pay attention to the customer sounds like what fueled Sales Factory launched in 1984, where he was really using a combination of qualitative metrics and research driven observations of customers and of their practices to come up with sort of a new agency model. Is that still true today?

03:55

GED: Yeah, the difference in yesterday and today is the technology. So, observation is a good word that you used.  That's what he did. It's what he taught me to do. I'll give you an example. I asked him one time; can we buy this report on the color trends coming next year? And he said no. He said, go to the Gap and look at the T-shirts. Those are the colors that are hot. Right. So that's a very wise approach, right? Yes.   And so, me being a smarty pants and went to college wanted to show my dad I knew better, but he was right. So, the primary difference between yesterday and today is we have all sorts of analytics capabilities that the Internet brought to us, and we can do large numbers of interviews through panel research and quantify things that we couldn't do before. So, before we observe things, we'd make hypotheses and we would go, now we observe, create a path that is test this hypothesis and go.

04:55

TOM:  It's interesting because there's always this sort of left brain, right brain, sort of push and tug between the creative side and the analytical side. It sounds to me like you've been able to take the best of both aspects of this important information and combine them to create growth for the brands you represent.

05:13

GED:  Yeah, that's definitely true and that's not in me, the person I'm analytical.

05:17

TOM: Yeah, I was going to ask you about that. You said you were a smarty-pants, so I see you went to school for engineering. That's great because engineering, it trains your mind, right?  I mean, it doesn't mean you're going to be a particular type of engineer, but you learn to think in a way that's very useful.

05:32

GED: Yeah, and I'll give my father credit. I always say my dad was the last guy that didn't go to college and became an executive in the country. He did not go to college, but he was unbelievably good at left and right brain things. In an example from today. Somebody said, are we doing a holiday card? And I said, well, let's do a holiday card, but let's do it like my dad did it. My dad would paint a painting, use the painting, and make a print, make that the card. And then he'd write a poem. And the team was like, he could do that. He was great at it. We have people that can do that on staff, but he could do both, which is quite remarkable, what I've had to do, and it took me a while to learn this I've had to surround myself with people that can do both analytical and creative thinking. And once we figured that out, our business got a lot better.

06:26

TOM: Well, speaking of combining analytical and creative, you created the Home Retail Monitor, and it sounds to me like sort of a solution to what was happening in the country a couple of years back when we were in the midst of the Pandemic asking yourself, where are we? Where are we going? And what can we do to get there? And this Home Retail Monitor is just a brilliant piece of research. I guess every two weeks you come out with another edition of this. Tell us about how this all came together. Because I probably didn't do it justice, but I'm very impressed with the data you're sharing.

06:58

GED: So, my personal experience with the pandemic was I was at the ACC basketball tournament and getting ready to walk in and people were walking the other way, and they said, it's been canceled. And I remember going, this is real, right? In North Carolina. Don't cancel ACC tournaments.

07:19

TOM: Now, it's serious, right?

07:21

GED: Very serious. So, we were set for a practice Work from Home Day that Monday anyway, so that one became permanent. We lost about half our business in two weeks. And I remember something that my mother taught me, and that was when 9-11 happened. And my daughter was a baby, and I was scared, and everybody was scared. I asked her what I should do, and she said to be a good American and demonstrate what being a good American is. So that rang in my head when this happened because it was kind of the next biggest tragic thing in my adult life that was outside of family things. And so, we sat around like, what should we do? And we decided as a team, we wanted to study consumer behavior because it was unbelievably different, right. It changed immediately. And so, the original plan was we're going to do it through April because we were pretty sure it was going to be over by April. So, here's what we know. But we got so used to having this data set and the ability to understand consumers in almost real time that it became something we wanted to keep doing. So, we keep doing it. We share it with people for free. To help them with their business. And it's fascinating. I mean, even right now, people are you know, we all said there's going to be a new normal and nobody's ever going back to stores because we all know how to shop online. Well, that's not true. Right. And our data has shown that. .

TOM: You're tracking consumer behavior through a time when there's just been a lot of movement and a lot of shake up and a lot of changes that I can't imagine any other time in recent history, except for maybe during the wars, and in particular, World War II, where behavior changed so drastically because of a world event like that. And you're right there at the forefront reporting on it in a way that is very useful to so many of us that are in the business of being in business.

09:27

GED: Yeah, I'm not old enough to remember World War II.

09:31

TOM:  Neither am I, by the way. But I'm just speculating what other world event you mentioned 911, of course, but what other world event changed everything about how we live and work and shop as Americans? More than something like that?

09:46

GED: Yeah, I think in the United States you're right, because even in all the recessions that you and I have lived through, they were short lived and fairly easy to understand. And this one is not even like today. In the last week, inflation seems to be slowing. Being careful on that because when people hear that, they say, oh, the prices are dropping now. They're not dropping. They're climbing less. The election went totally different than all the polls said it would. You've got Walmart, Home Depot and Lowes putting up pretty solid numbers and Target putting up bad numbers and Amazon putting up bad numbers. So, what is all of that?  Trying to understand that is that was one week I just went there. So being able to keep up with that and help our clients’ brands grow, it's definitely much faster paced and different than it was even three years ago.

10:40

TOM: It's a constantly moving target.

10:42

GED: Yeah, it is.

10:44

TOM: Now, a lot of agencies are focused heavily on creative versus analytics, but you took really a distinctly different approach by using that data to drive the creative. And in fact, split your company up into almost 50/50 between the designers and the analysts. Can you talk about how that all kind of comes together for you?

11:02

GED:  Yeah. Our creative director, who I was talking to earlier today, Vicky Canada, I'll tell you how she summed it up for me. When we first started working together. I said, I want to make sure you really want to work with me because I'm going to put guardrails on your creative.  And I'm going to say, you got to be in this space because the customer cares about these three things. And she said, I've been waiting for that my whole career. I can do way better work if you tell me where to play than if you just say, here's a blank sheet of paper. And so, she's done a good job of helping us build that part of our business up with designers and writers and content creators. And that's just the way we are. So, another fellow I worked with, Rick McCarthy, who actually worked at Black and Decker and knew of my dad's work, he says we do better research than most research companies because we have to live with it and use it. So, we're very careful to make sure it's great. We don't just go, here's the research, see later. So, I think the combination of those two things helps.

12:01

TOM: Well, and I looked at your revenue model. You actually are putting your money where your mouth is in terms of how you're working with a lot of your customers and basically setting those goals and only being compensated when those goals are reached.

12:13

Yeah, we have a scoreboard in our office. It's like a high school basketball scoreboard. We keep a win and loss record. Our records a little over 90% win. And our whole company, including our employees, are compensated based on those wins. And so, the whole culture is around making sure the customer grows their business in the ways that they want. And that's different because we're not rewarding our employees for us growing, we reward them for the brands we work on growing. And that focus actually makes sure we grow. So, it does end up in growth in our company, but because they're focused on the client.

12:51

TOM:  Talking to Ged King. Jed is the CEO of Sales Factory. And Ged, you mentioned earlier the technology is playing a really big role now in how you're able to collect and analyze this data. You said that AI is accelerating so fast. You can actually do more work, I guess, in less time than ever before. Can you give us some examples of how you're using that in your business?

13:11

GED: Yeah, AI is amazing. So, you couple all the change that's happening with the consumer and then you add in AI and how we can target and do things differently. It's really quite amazing. So, a very, very simple example is we used to create an ad and we get a photograph, headline, and some copy. Now what we do is we still do that, except we create 100 photographs, 100 headlines, and 100 pieces of body copy. And we let artificial intelligence pair all those things, serve up the ads, all paired in a gazillion different ways, and then tell us what's working best with which audience. And that allows us to not only because each audience is different, like we use a lot of behavioral segmentation, so each segment of the audience cares about different things. Some people like easy example, you know, some people buy cars because they want really good fuel economy. Some people buy cars because they want it to be fast. Right. So, the messaging is totally different for those people. But this allows us to dynamically serve up all the different permutations and optimize, but also learn because it becomes a version of marketing research through the analytics side that tells you that this group really likes this message. And then you back to what Vicky said. You give that back to the creative team, that knowledge, and say, do more of this and that helps them get better.

14:38

TOM:  Also, it's proof of concept. You basically know what works before you really set out to create the bulk of the creative that's going to tell the story.

14:46

GED: Yeah, and to give you a number, because I think to me this number is fascinating. We optimize 40,000 to 50,000 times a month, on one campaign, and we might run a dozen campaigns for one brand. So, you think about how big those numbers get and how fast they get. That would have taken us years and an army of people before machine learning.

15:07

TOM: So how is AI making those decisions on what is the best ad? For example, are there human surveys involved in that? Or is it all machine learning based on all the other experiences that you put in front of the machine?

15:20

GED: So, we start with using surveys that go to actual consumers people and pros those. And then we use mathematical modeling, like cluster analysis to figure out what the most sensible groupings of those people are and what they care about generally. Once we know that, we can then apply ideas, creative ideas against that and then that's when the AI kicks in. So, we already have a good idea of what these people care about. But you're talking about putting a fine, fine point on it once you let the AI go. And we're seeing response rates that are double what they were a couple of years ago. I think it's a combination because there's a lot of AI platforms out there, so we're not the only ones that are doing some of this. But I think it's a combination of understanding the consumer by talking to them the old-fashioned way, doing actual quantitative marketing research, combining that with good creators and how to use it, and then using AI to fine tune it. I'll give you an example. We're doing a test for a customer right now in four markets, and we're seeing in those four markets retail sales increasing from anywhere from 28 to over 50% in those markets. And it's purely because we're doing that, it works to not only increase the advertising metrics, which don't really matter, impressions and things like that, but it's working on sell through also.

16:55

TOM: It's fantastic and also fascinating. Are you ever surprised at the results of the AI? For me, I'll do very basic A B testing and for example, if I send in a newsletter and I have three different subject lines and I have the one that I'm really sure people are going to be most interested in and it turns out I'm real wrong. So, what do I know, having done this for all these years, do you often look at a group of things you're testing, a group of ads, for example, and say, I think this is really good, and I think this is what people are going to want, and you're completely off.

17:25

GED: Oh, I'm off all the time.

17:29

TOM:  That makes you feel a lot better.

17:34

GED: I don't know if I'm supposed to share brand names or not, but a really well-known tool brand we work for. And the team presented me with their ideas, and I thought the ideas were terrible, and it was the best campaign we've ever done for them. So, I'm not the target audience. We always have to remember that, right?

17:52

TOM: So, since we're speaking to a lot of folks that are in the home building, remodeling design, decor spaces out there, home maintenance, home repair, you did a survey back in the spring on those topics. It was one of the Home Retail Monitor surveys that you did. And what did you learn? It seemed like you had some interesting findings, given where we were, maybe first, a second real strong spring coming out of the pandemic.

18:18

GED: It's hard for me to parse which home retail monitor because we do it every two weeks. But I'll tell you what I think is happening right now, and hopefully that will get you where you want to be. So, the biggest thing that we're seeing that's driving behavior is trust. I'll give you an example. Our data says that overall, consumers are consumers overall are less trusting in brands than they were. That's a big change. Now, when I tell you they're also less trusting in government, you'll go, okay, that makes sense. The only place that people are more trusting is retail. So, teachers, doctors, lawyers, everybody less trust. And then retail is more trust. And it's not by a lot, but 29% of consumers say that they trust retailers more than they used to. So, to me, that is an opportunity for every business to pay attention to that and think about, why is that? And I'll give you some opinions, and I might give you more than you want, but you can edit. So, remember when the pandemic hit? We talked about that and then the run-on toilet paper. Do you remember that?

19:34

TOM: Yes, of course.

19:35

GED: And so, after that happened, the facts are there was no supply side problem with toilet paper. People say, well, yeah, they had to switch from office toilet paper to home toilet paper. Yeah, that's true. That took the day. All right. Georgia Pacific reports that they had no issues because the forest never closed. And if you think about where paper mills are, they're in little, tiny towns. And COVID didn't get the little, tiny towns too much later. Right? And so, there was no issue. The issue was on the demand side, and I think it'll explain it perfectly. So, we had the CDC and Dr. Fauci and all these medical experts telling us it's really, really dangerous and you should be really scared. And then we had other people in government, including the White House, telling us it's going to be fine, don't worry about it. And the consumer response to not knowing was, for whatever reason, to buy toilet paper, right? I did it. I did the same thing.  So, that is still here. As people have become less trusting of everybody, think about all the different institutions that people are less trusted now, that has remained. So, the opportunity for businesspeople and brands be that positive, consistent, trustworthy person or brand and people will gravitate to you. And so that's what we're seeing the most in home improvement. Our clients that are those things are growing like crazy. They're doing great. And so, I think that's probably my biggest learning around the home improvement industry from the how to market side.

21:22

TOM:  I can understand that being positive, being consistent, and being trustworthy are all important values, but I mean, brands can do that as well as retailers. I'm just confused as to why folks are more trusting of retailers where they spend their money than brands that are trying to just tout their products.

21:38

GED: So, I don't know the specific answer, but I can give you a hypothesis. I believe the answer is the consumer blames the brand for price increases.

21:50

TOM:  That's pretty sweet if you're in the retail business. Not my fault!

21:55

GED: Yeah, well, Walmart tells you they have the lowest prices. They tell you that. So, you go in there and the prices go up. Must be the brand's problem. Right?

22:04

TOM: We certainly want all the guest brands for high prices.

22:09

GED: That's right. And that's actually a really important point too, if you think about what's the one thing that everybody knows about. You don't have to be an economist to know. You see those gas prices and you think, this is terrible. Right. Even now that they're down a little bit, we still feel bad about it because we remember when it was a buck-ninety-nine. So, you have all that going on. Does that make sense?

22:33

TOM: Yeah, absolutely. When it comes to home maintenance, one of the things that I read in one of your surveys you did over the last year is that almost half of all homeowner’s report that repair is needed around their homes. And one of the ways they're going to accomplish that is by being a DIYer. You got 60% of respondents planning to do home maintenance in the last year and those numbers seem to be going up. Is that the College of YouTube encouraging people to get stuff done because information is so plentiful?

23:02

GED: Yeah, I think you have a couple you have a lot of things. One, information is readily available. Everyone can learn how to do even hard things like HVAC and plumbing on intellectual on YouTube. Doesn't mean they should, right?

23:15

TOM: Exactly.

23:17

GED: The other is, while Gen X sort of walked away from DIY as a group, millennials look at Gen X and think they're responding, why aren't they fixing their things? I can do this. And they're behaving, as a giant group, differently, more like boomers. And so, I do think that, coupled with economic uncertainty, is going to drive that. And in fact, looking at the retail numbers over the last couple of days, there was a lot of talking heads on TV saying that we're going to switch to making our homes better and that's going to be a trend. I don't know if that's true or not, but there seems to be a lot of people thinking that that's going to happen. In DIY you can save a ton. And by the way, you don't feel like there's a lack of trust.  If you do it yourself, you know what went into it. You're not worried about what it cost because you bought it. You're not worried about if somebody's going to show up or not because it's you. There's a lot of benefits to DIY that are very practical. Also.

24:18

TOM: We saw that when the pandemic first hit, when the nesting instinct kicked in and folks were starting to make those improvements to make their space, they're now spending a lot more time and a lot more comfortable. The number of calls and emails and social media inquiries that we got on - I host another show called The Money Pit. It's a nationally syndicated home improvement show. It's on 400 radio stations across the nation. And we saw our call volume and our contact volume, like, triple just in a very short period of time because so many folks were home, and they were seeking that sort of independent third-party expert to just sort of help them a little bit and make sure they're on the right track. And that was fascinating to us when it first started to happen, and it still has continued. Not at those rates, but the number of people that are younger and taking on these projects and asking really good questions and are really doing the research.

25:10

TOM: You can tell because I'm getting the questions that I've heard; I can do this. A method, B method, C method. Which way should I go and why? They're asking very qualified questions; not just how do I fix this?

25:21

GED: Yes, I think it's funny. I study consumer behavior, but even though I have awareness of it, it still happens to me. So, for example, I don't like to work on electrical, but during the pandemic, my son and I rewired our whole house and made every switch smart. And my wife's response was, you've known how to do this for 25 years and you've never done it. .

TOM: You've been hiding from me.

25:49

GED: I think we all tried things differently, and that's going to have an impact. If the projects go well, we're going to do more of them. Is your volume still up? above what it was.

26:02

TOM: Yeah, oh, definitely. And the station growth too, both across the podcast and the nationally syndicated show.

26:09

GED: Yup, that makes sense.

26:11

TOM: So, if I'm a remodel or a renovator, a home builder, we talked about the importance of being positive, being consistent, being trustworthy. Would you have any tactics to suggest for those that are in that space, that are worried now about the slowdown based on home sales slowing down and that sort of thing to sort of keep themselves top of mind? If you were in that business, what kinds of activities might you be considering?

26:37

GED: I think there's still tons of upside for those people in those businesses because there's still not enough labor to go around. It's still hard to get somebody to help you. And I think if you develop that relationship right now and deliver good work, you're going to have work for as long as you want. So, who do you call to do a light kitchen remodel? Most people don't know the answer or even any of the little services HVAC, any of it.  And so, I think if you're consistent and you're good at sharing information, I think it's another thing that's often overlooked. Don't send me a bill for $6,000 and you did eleven things. Explain to me what eleven things you did and then send me the bill for $6,000. So, I feel like I have some control, I think is really important too. But just showing up and doing good work is probably 80, 90% of the bow.

27:35

TOM: You're right. Just showing up and doing what you promised to do.  It's a little sad in a way that it puts you actually head and shoulders, ahead of the masses than maybe ever before.

27:44

GED:  Yeah, I'm sure you see that also. It's just old-fashioned stuff.

27:55

TOM: Hey, I wanted to ask you about some of your favorite success stories. You talk to one of our producers about a project you did in 2010 for Home Depot that had to do with bath fans that ended up in a pretty interesting observation and learning moment for you can talk about that.

28:09

GED: Yeah, there's a lot of different kinds of learnings that occurred on that project. We were a much smaller business. We were almost all men in the company, and we were way better at research than we are today than we were then. So, there's a lot that's happened and that was a moment in time that really helped us get there. But Depot asked us to come in and they were struggling in a little tiny category, bath fans, but a little category for Home Depot is over $100 million. So, it's a lot of money. And they were losing to Lowes. Lowe's had more share in bath fans than Depot did. And you know about the industry. Depot's got 200 more stores, they have more pros. There's no reason they should be losing. So, they figured they had some sort of systemic problem. So., they brought us in and me and the research team worked together, and we did six rounds of research in under six weeks. And we had to do this iterative research because every time we did something, we realized we forgot to ask a question and we would learn something else. We'd want to learn more about it. So, we kept doing it. It wasn't the most efficient project plan. But at the end of the day, well, in the beginning we learned that brand didn't matter. And I'll be nice to the incumbent brands, but they just don't matter. Nobody wakes up and goes, I want an XYZ brand bath fan. And so that didn't matter. We learned that the instructions weren't very good. We learned that a lot of people didn't even know what a bath fan was. You have to tell people it's the thing in the bathroom that takes the steam out. Oh, that thing? Yeah. I never thought about even though everyone has one category, awareness was pretty low. So, these are all little things we can fix and make better. But that wasn't what mattered. What mattered was the primary use of bath fan for 67% of women was to COVID up bathroom noises. And once we learned that it really changed the entire category because bath fans back then and still to some extent today, the really, really expensive that fans were silent. And the really cheap bath fans, I'm talking like $400 versus $30, the $30 fans were noisy. And after we learned this, we started observing that women were buying ugly, loud, crummy fans.  And once we could actually make the fan create white noise as opposed to being a rattling mess, they would go up market and buy nicer looking fans that had other features. And so that was a big, giant find. And the learning is, if you have a team that's not diverse at all working on research, it's going to be really hard to find really good insights from people that aren't like you. So, we set out from that point to make sure that our company had women on our team. That was a big change. So now we're 65% women. So that change actually worked. So that was probably one of the most eye opening, simple little observations that changed an entire category. And by the way, we got paid a bonus for three years off of that work because it changed Depot's business.

31:29

TOM:  Ged King, CEO of Sales Factory thank you so much for being a part of the Profiles podcast. If you'd like to learn more, go to Salesfactory.com and I highly recommend that you sign up for the Home Retail Monitor. If you care about your business. If you are an observer of what is happening in the marketplace and in our country, you're going to learn a lot by becoming a regular consumer of the Home Retail Monitor. And if you are a brand that needs to grow, there's no better place to go than to talk with Ged King's team at Sales Factory. Jed, thank you so much for being a part of the show.

32:05

GED: I appreciate you having me on.

TOM:  Hey guys, shortly after we recorded this interview with Ged, Sales Factory was named to the Inc. Best in Business list, making them one of only 240 companies across the nation recognized for making an extraordinary impact in their fields and on society. Inc specifically recognized their Home Retail Monitor for helping companies navigate an endless set of challenges, including consumer response to national elections, supply chain disruptions, the housing market, inflation, and the threat of a recession.   If you’re not receiving the Home Retail Monitor, you can subscribe for no cost at SalesFactory.com.