High-tech marketing firm teaches engineers to sell
By Steve Kaufman, Mercury News Staff Writer

Patrick Merrill and David Schneer faced a conundrum when they decided to create a high-tech market research firm a decade ago: Was it a good or a bad time to kick off such a venture?

The sharp downturn in the computer industry in 1985 and 1986 was still depressing Silicon Valley. So companies, which until then had faced the sole challenge of satisfying exorbitant demand, found they had to market their wares. Still, they barely understood marketing and were leery of putting their futures in the hands of slick marketeers.

San Mateo-based Merrill Research & Associates found that taking on the risk and trouble of building a business in a weak market put them in a good position when the market revived.

"Prospective clients were asking questions they had never asked before," says Merrill, 43. "Why do revenues keep falling and how can we differentiate ourselves from a dozen other companies building the same products?"

It was one thing to attract interest and another to consummate a sale, however. For every 10 companies the pair visited, only two or three signed on-and then only after Merrill and Schneer spent roughly 40 hours preparing proposals, making presentations and meeting with executives. One of the biggest problems was that most of the "marketing managers" Merrill and Schneer dealt with had engineering, not marketing backgrounds, so they found it difficult to understand professional marketing.

"In reality, high-tech companies at the time knew more about exploring for life on Mars than they knew about legitimate marketing," recalls Schneer, 38.

To help survive, Merrill and Schneer recruited a third partner, Joe Wheeler, 49, the market research manager for Kentucky Fried Chicken, as the firm's head of consumer company market research. Then, in 1987, the computer industry slump ended, companies began strengthening their marketing departments and Merrill Research & Associates began handling all the consulting work it could accommodate.

Today, the firm occupies 6,000 square feet of office space atop a Charles Schwab & Co. office near downtown San Mateo-10 times the size of its original quarters, The firm has 71 full-time and part-time employees, collects more than $3 million a year in revenues and, counts companies such as Hewlett-Packard Co., Texas Instruments Inc. and PepsiCo among its more than two dozen Fortune 1,000 clients.

Most of the firm's clients have strong praise for Merrill and Schneer, who polished their research skills at Regis McKenna, Inc. in Palo Alto. High-technology clients, who account for about 80 percent of Merrill Research's revenues, say they especially appreciate the firm's understanding of high technology and flexibility in a rapidly changing field.

"The best market research requires a sharp intuitive sense," says Cindy Miller, a senior vice president at Young & Rubicam who worked extensively with Merrill Research in her former position at Hodskins, Simone & Searls, a Palo Alto advertising firm. "Pat and David are able to pick up on little gems and say, 'Tell me more.' Most of their competitors don't do that."

For Ed Colligan, vice president of marketing of Palm Computing Inc., Merrill Research's persistent questioning uncovered important pricing information. The Los Altos subsidiary of modem-maker US Robotics hired Merrill Research to assemble and interview focus groups to gauge their reaction to the simplicity and function of the company's new 5 1/2 - ounce handheld computer

Merrill decided to conduct the focus groups in Portland, Ore., which is technologically savvy but, unlike Silicon Valley, not driven by technology. Participants applauded Palm Computing's decision not to include two-way wireless communications in its product and to use a stylus for text entry rather than a tiny keyboard.

Persistent questions
They also liked the produces simplicity; software is limited to fulfilling basic electronic organizational needs. By continually asking questions, though, Merrill also learned that people were willing to spend only $300 to buy the product, piercing the conventional wisdom that consumer electronic products priced up to $500 could sell well.

"Pat probes more deeply and extracts more information from people than his competitors Colligan says. "That's crucial."

Merrill Research's work on behalf of consumer product companies has matched its success with technology companies. When it was hired to do a market segmentation study for Chateau St. Jean, a Sonoma Comity "ultra premium" winery, it initially thought most of the winery's customers would turn out to be knowledgeable wine connoisseurs. In fact, research unearthed several distinct consumer segments, including "romantics", "'traditional" European wine drinkers and "experimentalists" willing to sample Chateau St. Jean on a whim.

As a result, the winery tweaked its advertising and saw a significant increase in sales.

Copyright ©1996, San Jose Mercury News. All Rights Reserved. Reproduced with permission.