Raleigh’s L&E Research finds success expanding into new markets

Belinda Watkins. L&E Research
Belinda Watkins. L&E Research

The successful expansion strategy that focus group company L&E Research has executed over the past several years started out as Plan B.

The Raleigh company’s original plan was to develop software to boost its overall efficiency, and especially its ability to recruit focus group participants that it could use for its own business as well as license to other focus group companies nationwide.

That strategy was torpedoed by the recession, which put some focus group companies out of business and undercut the ability of others to invest in new technology. In addition, L&E discovered that there was little standardization in the industry, so it would have had to do an inordinate amount of customization to fit other companies’ needs.

“The bad idea was mine and mine alone,” said Brett Watkins, the company’s president.

So L&E regrouped and decided to capitalize on its new software by expanding to other markets. It tested the waters by expanding to Tampa, Fla., in 2010, in space previously occupied by a focus group company that had shut its doors. It followed up by adding offices – some through acquisitions and others from scratch – in Charlotte and St. Louis last year. So far this year, it has moved into Baltimore, Cincinnati and Columbus, Ohio.

Today L&E, which is celebrating its 30th anniversary this year, has about 30 full-time and more than 160 part-time employees, including about 40 who are based in Raleigh.

“We’re not done yet,” said Watkins, 45. “There’s definitely other markets we are looking at that fit our business model. ... I’m a big believer of, you either grow or you die, personally and professionally.”

The proliferation of L&E offices helped boost the company’s revenue 606 percent over the past three years – earning it the No. 753 ranking on Inc. magazine’s latest list of the nation’s fastest-growing private companies.

Inc. also reported that L&E’s revenue last year $4.7 million. Watkins said that number is slightly off but declined to provide an accurate number for what he said are competitive reasons. Still, he confirmed that Inc.’s revenue growth numbers were accurate.

This year, Watkins said, L&E’s revenue is on track to rise 80 percent.

Watkins has a succinct explanation for L&E’s success: “Talent and technology. We have a very great team that has really bought into our vision and our culture.”

Companies like L&E provide facilities where focus groups are conducted and recruit the participants who are paid to give opinions on a variety of topics – such as a new product prototype or possible extensions of a popular brand. Focus groups are a cornerstone of qualitative research that, according to the Marketing Research Association, aim to go beyond the superficial to ferret out consumer attitudes and opinions. That involves not only taking note of the opinions expressed but also interpreting facial expressions and body language.

“I tell people that I have the greatest job in the world,” Watkins said. “All I do is pay people for their opinions.”

L&E typically pays $75 to $100 for two hours of a participant’s time – although it can be much more when clients need to hear from groups such as doctors or business owners.

The company’s 5,800-square-foot Raleigh facility off of Creedmoor Road features four conference rooms outfitted with one-way mirrors so clients can unobtrusively watch discussions from an adjoining room. Video cameras record the proceedings so clients can “go home and study it and better understand,” Watkins said.

There are no offices at the Raleigh facility. That’s because the company’s employees work from home – something Watkins views as a big plus for the company’s workforce, which is largely moms with children still living at home.

“I’m one of eight males here at this company,” Watkins said.

Talented recruiters

Although Fortune 500 companies occasionally hire L&E themselves, typically they hire a marketing research firm. That firm, in turn, hires focus group facilities – often several facilities in different parts of the country to achieve geographic diversity – and supplies the moderator for the group discussions.

Beth Powers of Consumer Power Research in Cincinnati, which specializes in qualitative research, is a longtime L&E customer.

“Their recruiting is superb,” Powers said. “I have never had a respondent that they’ve recruited that didn’t completely qualify to all the specifications that I set for them.” She added that L&E also makes sure that the people it recruits show up for the session – or finds replacements.

In both instances, that’s not always the case with some of L&E’s competitors, Powers said.

She was especially impressed that L&E was able to recruit the people she needed for a focus group on a sensitive subject “having to do with a bodily function that people don’t want to talk about.” That would be accidental bowel leakage.

The criteria for participants was especially rigorous, including people who used particular products to cope with the malady, weren’t wheelchair-bound, represented a range of age groups and included both the employed and the unemployed. They also had to be mild or moderate sufferers rather than having severe problems.

Not only did L&E manage to fill the focus group, but the hostess who greeted the participants when they arrived was gracious and “made everybody feel comfortable,” Powers said.

That professionalism contrasted with the attitude of a focus group company she contacted in the Midwest.

“They said, no thank you, we don’t want to deal with that research,” Powers said.

David Nerz, a partner at Raleigh-based MLN Research, which conducts focus groups for clients nationwide, said he has been delighted by L&E’s expansion to other cities because it gives him more opportunities to work with the company.

Nerz said he is “highly selective” about the focus group companies he works with because, if they fall down on the job, it makes him look bad in front of his client.

“L&E is really a shining example of how to do it right,” he said.

“One of the things that Brett has done is ... he has really worked hard to develop a great research participant database,” Nerz said. “Don’t ask me how he gets it done. I judge it on the basis of the results – what L&E delivers.”

That includes, Nerz said, ferreting out “professional respondents” – that is, people who repeatedly sign up for focus groups and even resort to lying to meet the client’s specifications. Such participants undercut the validity of the research.

Indeed, L&E boasts that in the second quarter of this year, 40 percent of the people it recruited for focus groups had never participated in one before – a rate Watkins said is far above the industry norm.

Family business

In addition to its technology, L&E contends its ability to find fresh participants is also enhanced by operating in “secondary markets” such as Raleigh and Columbus where market research is less prevalent.

The credit for the company’s technology, Watkins said, goes to L&E’s director of information technology: his wife, Belinda.

“People around here like to say Brett’s the idea guy,” he said, “but Belinda is the one who knows, as far as technology is related, how to put it to paper and put code behind it and run with it and make (it) better.”

As Watkins tells it, he learned the business “as an SOB – son of boss.”

His father, the late John Watkins – who also conceived the giant acorn sculpture in downtown Raleigh that is dropped from a crane on New Year’s Eve – had a research consulting firm, Management Research and Planning.

“I got the opportunity to learn from the consulting side,” Watkins said.

In 2004, Brad and Belinda Watkins bought L&E Research from Lynne and Ed Eggers, who had founded the business 20 years earlier. At the time, L&E had five full-time employees and more than 20 part-time employees.

“My wife and I liquidated every last dime we had and then some,” Brett Watkins said. But Belinda Watkins didn’t join the business until 2009; before that, she was a software developer at Allscripts.

Mining information

From the day the Watkinses bought the business, the vision was to use technology to make the company more efficient and differentiate it from competitors.

Today L&E has a database of about 400,000 people nationwide willing to participate in focus groups, as well as detailed information about them. When L&E contacts them to ask additional questions pertinent to a specific study, the responses are plugged into the data. At the same time, the recruits can log into their online accounts and update their profiles as needed.

That’s especially important, Watkins said, because clients have become more and more specific about the type of participants they need for a particular focus group.

“We’re able to mine that information so we can be more efficient, we can be smarter about our recruiting process,” Watkins said. “Which also makes us less intrusive to our database members. There is a better chance when we call you that we are actually going to be able to recruit you for that study, as opposed to having to call you a myriad of times and possibly have to ask the same questions over and over again.”

L&E took pains to ensure that the online accounts for those database members, which also lets them log in and learn whether they have been chosen for a particular focus group, were designed to meet their needs and wants.

They managed that by convening focus groups.