In
today's highly competitive world, business success depends heavily on
your ability to make well-informed, knowledgeable and strategic decisions.
As an entrepreneur and/or a business manager, you need reliable information
to develop effective marketing strategies.
Market research is essential to fully understanding your customers and
competitors. To perform successfully, you must know your market, your
customer's attitudes and needs, and what your competitors are doing. Without
this information, your business is at a distinct disadvantage.
One of the harsh truths in business is that few people have unfailing
intuition or reliable 'gut feelings'. Subjective thinking has been the
downfall of many entrepreneurs. Fortunately you can use market research
to verify your gut feelings and make better decisions.
Spending time or money on professional market research can mean the difference
between a successful venture and an avoidable failure. Market research
can actually save you money and identify opportunities to improve profits.
Here are four ways to use market research constructively:
1. Determine your target market
Last year, Intellectual Property Australia granted 7,115 patents. It estimates
that less than 50 of those patents will result in successful products.
Why the poor success rate? Sadly, while the creators had the talent to
invent the items, they did not research whether there was a market for
their 'baby'.
One of the most common traps in developing a new product or service
is assuming it will fulfil a market need. Customers are finicky creatures
and want products that suit them perfectly. Creating a product or service
you think people will want can spell disaster.
Before launching a new product or service, it is essential to know:
- Who has a real need for the product or service I intend to sell?
- How many potential consumers are out there?
- Where are my potential customers located?
- How much would they be willing to spend on my product or service?
- Will my product or service save money or make money for customers?
- Why will they buy my product or service?
By identifying your target market, you will be able to evaluate the viability
of your venture and make the necessary enhancements to increase sales.
Target market definitions also feed into the development of your promotional
and sales strategy. By understanding your market, you are less likely
to waste your advertising dollars on promoting to the wrong demographic.
And by understanding your market you will know which benefits are conducive
to sales and which will facilitate more effective selling strategies.
Once your target market is defined, further market segmentation can be
undertaken which is the foundation for marketing and advertising strategies.
Regularly redefine and review your market
Another common business trap is to have previously identified your market
and assumed it was set in stone. Chances are your market will keep changing
due to emerging industries, new technologies or even changes in company
decision makers. Redefining and reviewing your market should be undertaken
regularly.
By fully understanding your target audience you will have the ability
to develop a relationship with it. This relationship can bring mutual
and substantial benefits to both parties. From your knowledge, you will
be more capable of foreseeing market trends and identifying market opportunities.
This will enable you to provide further products and services to fill
market gaps.
Undertake either primary or secondary research, or both
Primary research (from original sources) involves gathering actual data
among those using or likely to use your product or service. Questionnaires,
in-depth interviews, focus groups and observation are all used to uncover
information. This usually involves commissioning a market research company
or consultant to conduct research.
Secondary research (from printed sources) is data collected and produced
by others such as trade associations, publications or the Government (e.g.
census data). This method is less time consuming and more cost effective.
However, the data may not fit your product or service accurately enough,
resulting in misleading analysis and bias. In untapped or niche markets,
all the secondary data in the world will be of no benefit to you.
2. Know your customer inside out
Research has found that it is five times more expensive to win a new customer
than keep an old one. Typically, repeat and referral business accounts
for 60-90 per cent of revenues. With this in mind, it is imperative that
you spend time and energy uncovering what your customers think about your
product or service (as opposed to what you believe they think).
Evaluate customer expectations
There are two separate elements that exist in your product or service.
The tangible product features (positives, negatives, benefits etc) and
the intangibles such as the standard of customer service and after-sales
care. Ensuring that what you offer exceeds your customers' expectations
in both of these elements is imperative to your success.
Customers can be a tough lot to please. The modern consumer is demanding
and makes purchase choice not just on product benefits, but also on the
way they are treated. Providing the best product in the marketplace will
not guarantee success if your service is poor.
If you are not in regular contact with your customers, market research
is essential in evaluating their perceptions, expectations and satisfaction
with your product. These factors are the heartbeat of your business.
The more you know about your customers, the better off you will be
The most crucial time to undertake this research is during an economic
downturn when competition for the customer's dollar is high. If you want
to stay ahead of the competition, conduct some valuable market research.
Your competitors will no doubt be curtailing their market research effort,
so the more you know about what your customers (and your competitors'
customers) think, the better off you will be.
The most appropriate research to understand your customer is a 'customer
satisfaction study' that uncovers attitudes to both your product and service.
3. Know thy competition
It sounds obvious, but it is vital to know what your competition is doing
or planning to do. Competitive analysis is the only way to gather competitor
intelligence, yet few businesses undertake competitive analysis on a regular
basis. Competitive data is usually collected during business and marketing
plan development or before the launch of a new product or service.
To be competitive, you must focus on what you do better than your competitors
(such as better product quality, better price, better distribution). By
sharpening your edge, you can exploit your most marketable advantage.
Competitive analysis should be regularly monitored
This does not necessarily mean big dollars. The Internet is a great resource
for information. For example, the Australian Stock Exchange website (www.asx.com.au)
has a company research search engine for listed Australian companies.
The Dun & Bradstreet website also offers company information, both fee-based
and free at www.dnb.com.au
If you need more detailed research such as what your customers like or
dislike about your competitors' products or services, you will need to
implement a market research study.
4. Manage your database
As a market researcher, the most surprising thing to learn when working
with companies, no matter how big or small, is how little emphasis is
placed on maintaining customer databases.
Databases are a goldmine of customer information The collection of data
is vital to understanding your customer profile. By using your customer
data more effectively, new products can be developed more efficiently
and a more cost effective direct marketing campaign can be achieved.
A comprehensive database will even end up saving money as you will not
have to commission a market research agency to unearth the information
for you.
If market research is needed, you can reduce the costs of recruiting
participants for focus groups or interviews if you have up to date contact
details for your customers. Having to find your customers by randomly
ringing phone numbers from the phone book is costly.
Concluding thoughts
Many businesses avoid undertaking market research because of the perceived
difficulty and expense. But research does not have to be expensive. There
are many ways you can research your market in-house and you can outsource
major projects to research companies or consultants.
Market research is a worthwhile venture that, if done properly, brings
financial rewards and reduces costs. The cost of the research is often
surpassed many times over by increased revenue from sales.
So what are you waiting for? Get those databases working, research your
competition, define your market and understand your customer. Remember:
what gets measured, gets managed.
But be warned. There is one main downside to consider - accepting harsh
market feedback. While this is an unpleasant outcome, by welcoming and
addressing criticism, your business will find success.
Marie-Claire Ross is the Principal Consultant of Astute Research,
a market research firm dedicated to providing strategic, cost effective
and innovative market research services.
