You might think that your product or service is the best in the world, but you might also need your head read. Market research is one of the best ways to get into the minds of customers. And it’s no longer the expensive and exclusive domain of big corporates. Hell, you don’t even need a clipboard! Jodie O’Keeffe reports.
YOUR CUSTOMER IS ALWAYS RIGHT
With over six billion customers in the world, some are inevitably more right than others. Of course, every entrepreneur would love to have a target market of six billion (not even Bill Gates has managed that), but the harsh reality is that your product will never be the best fit for everyone.
So, how do you find out which punters, in particular, will part with their hard earned cash to buy your product or service? And just how much would they be willing to pay before the value-for-money threshold is crossed? How can you make sure your research and development is directed at a market heaving with potential customers? In short, how do you find out what your customers really want?
Gut feel alone won’t do it; neither will a straw poll of friends, family and fools. You need some proper market research.
When marketing guru Philip Kotler defined his five steps of marketing management, step one was market research. According to Kotler, without research a company enters a market like a blind man.
Do your homework, however, and the rest of the marketing strategy falls into place. Market research will reveal segments – groups of buyers with similar needs, attitudes or values. A business must decide which segments to target, because you can’t please all the people all the time. Nor would you want to. The larger the target market, the more diverse the customer requirements. Then, a more complex offering is needed to satisfy the customer, increasing costs and causing ‘feature bloat’ (the all-in-one printer/copier/scanner/fax comes to mind). A carefully selected target market simplifies the product development and launch process.
TALK IS CHEAP
The savvy entrepreneur will develop a product or service in response to market need, not the other way around. This may involve a new product being introduced to a new market, a new product for an existing market or the enhancement of an existing product for an existing market. In any case, the foundation for a successful offering is laid in solid market knowledge.
“Entrepreneurs typically select a target market without much prior research,” says Martin Hirons, Director at Sweeney Research, “but as you do your diligence and planning it’s important to at least do some secondary research to see what is out there. Call it part of a scoping study or call it market research, you need to spend some time thinking about these issues – they will contribute to the product’s success or failure.”
Market research need not be prohibitively expensive. Primary research refers to the collection of information specifically for your company, usually via survey projects, focus groups and in-depth interviews, which can be costly. However, in essence, any time you engage your customer you are researching your market and secondary research – accessing existing market intelligence – comes cheap.
“Talk informally to customers or potential customers, without presenting them with an idea that they can run off with. Even going out and doing your own in-depth interviews can help you understand how things are perceived or portrayed in the marketplace,” says Hirons.
There are plenty of ‘low cost, high value’ market research opportunities out there. Rajarshi Ray, Head of Small Business Services for American Express Australia, leads by example with a ‘think global, act local’ approach.
“Every couple of months we select a street in a capital city and we walk down that street and visit every small business there,” says Ray. “We’ve done Oxford St and Willoughby Rd in Sydney, Brunswick St and Acland St in Melbourne and the main strip at Fremantle. It gives us local insight into what small business needs.”
This kind of research reveals that, even in a relatively small market like Australia, different segments have different pressures.
“For Victorian small businesses, the number one issue relates to stamp duty, while on the Sunshine Coast, business owners want access to reasonably priced rental space and support services for their families,” says Ray.
Some of the most valuable customer insights could be hidden among the data collected whenever a transaction takes place.
“You have a whole history of sales activity,” says Ray, “you can dump these figures into a spreadsheet to discover trends. It could be as simple as seasonal factors, days of the week or times of the day. Most small businesses don’t need a customer relationship management tool, they just need to listen to their customers, engage them and understand some of their drivers. A good way to do that is to mine the data you already have.”
Engaging in secondary research is an effective way to snoop around the market without spending a fortune. Take advantage of someone else’s hard work by looking up industry-specific market intelligence reports. A wealth of information can be found online, on sectors as diverse and specific as away-from-home disposable paper products or smoking cessation aids. The Australian Bureau of Statistics (ABS) also provides a range of data on economic and social trends. A little creative analysis can go a long way towards market understanding.
“The ABS is an underutilised source. For us, it’s often a first port of call in getting an understanding of how markets sit,” says Hirons. “The Fairfax and News Limited sources act as a great secondary database. Use all your resources; ask your patent attorney or lawyer. They will have seen a whole range of things that aren’t necessarily in the public domain.”
Hirons also recommends picking the brains of the people who research markets for a living.
“Early on, have a discussion with a reputable market research organisation, not necessarily to commission anything, but to find out what sources are available.”
Feedback is an important aspect of market research, from customers and employees. Customer comment cards provide a direct communication channel, while sales staff are an excellent resource for first-hand customer opinions on products and services.
Not all feedback is useful, though, according to Jordan Louviere, Professor of Marketing at the University of Technology in Sydney.
“The worst mistake you can make is to listen to your family, friends and employees instead of those at the coal-face. Twenty-five years worth of research shows that they have very little understanding of markets,” he says.
“We’ve done studies where we have modeled how consumers make choices and then asked the people responsible for managing the products and services and companies to predict how the consumers did and there’s absolutely no relationship.”
IT’S A NUMBERS GAME
If you feel the need for some solid quantitative research, online survey operators offer various levels of service. You can design and administrate your own surveys, or opt for a fully managed service including data analysis. The next step up is engaging a market research firm to assess your needs and design and deliver a research project accordingly. An in-depth project takes between six to eight weeks and costs vary depending on the service provided.
“It’s often difficult to justify spending a lot of money on primary market research, but at times you do need it,” says Hirons. “We understand the business aspects of what we deliver, and help you understand – that’s critical. We see all sorts of mistakes made in business and it’s important that you rely on some of our experience, as well.”
They are also au fait with the latest research technology, with recent years seeing a major shift away from the annoying dinnertime telephone survey to online survey panels, virtual product development and simulated shopping.
“Ninety to 95 percent of the research we do is online,” says Robin Gillmore, Director of Quantitative Research for Sydney-based strategy and research firm Galileo Kaleidoscope. “We get much better response rates online. Phone survey response rates have been dropping over time – people just don’t want to be called.”
With web panels, people register their details and agree to take part in market research, usually with the incentive of a small cash payment, entry into a prize draw or the like.
“There are a number of online panels operating in Australia and there are tens of thousands of people on them,” says Gillmore. “We’ve done studies where we have modeled how consumers make choices and then asked the people responsible for managing the products and services and companies to predict how the consumers did and there’s absolutely no relationship.”
LET’S GO SHOPPING
Researchers can create a virtual store for respondents and invite them on simulated shopping trips.
“In the past we’d build shelving in a room and get people to shop that way, or try to get permission from a store,” says Gillmore, “but being able to build a virtual store has made it much quicker and cheaper.”
Online video technology, like FUSEAirplay (featured in AA14), also gives consumers a say in product and package design. Respondents are presented with a three dimensional version of a product and invited to mix and match different elements to optimise the packaging in terms of appeal and functionality.
Of course, when working with product simulation technology, the customer can’t feel, smell or taste the product. Hirons recommends using the simulation technology to refine the design and then have some product prototypes made for real world test runs.
“It’s very important to get that tangible feel of a product – being able to interact with it and get a feel of its texture and how it sits in your hand,” he says.
If your product is more intangible, like a software service for example, you could do like the big players and issue a beta version ad infinitum, inviting user feedback and implicitly excusing any bugs or issues.
Hirons says that, in an ideal world, you’d do research all the time to enhance your decision-making and the development of your product. There comes a point, however, where you just have to go for it. Deciding what market research to carry out and how much to spend is subjective; it depends on the budget, time constraints, the product or service and business philosophy and culture.
“It’s based on a hunch and experience and that gut feel that you can never take away from any business decision,” says Hirons.
While we love the legend of the entrepreneurial gut feel, add a little creative market research and confidently offer the right customer the right product at the right price. With a satisfied customer and a successful product, everybody’s right.
CHOOSE YOUR SHARE OF THE MARKET
The problem with understanding shopper behaviour is that shoppers themselves just can’t explain it. Consumer choices are often made at a subconscious level, with inexplicable trade-offs affecting the customer’s willingness to pay a certain price for a particular product.
Consumer choice modelling (CCM) is a research technique that attempts to overcome this problem, says Robin Gillmore, Director of Quantitative Research for Galileo Kaleidoscope.
“For example, you might offer different prices and services for Qantas and Singapore Airlines flights and ask people to choose from the alternatives,” he says.
“If you offer enough alternatives you come to understand the trade-off, their thinking and the dynamics of how they make choices. You’re not asking people why they do it, you’re just asking them to make the choice, which is relatively easy. Then, you apply sophisticated mathematical analyses to understand how those trade-offs work against each other, to come up with a piece of software that allows you to pick market share.”
CCM relies on people understanding exactly what the product or service is, as well the alternatives. So, for new or potentially disruptive products, a variation on this methodology is being developed by the Centre for the Study of Choice (CenSoC) at the University of Technology in Sydney.
Dubbed Future ChoiceTM, this platform aims to combine accelerated customer learning methods with choice modelling to predict future markets, at a price within reach of SMEs.
“This kind of technology was developed at MIT 20 years ago, but cost around a million US dollars per application,” says Professor Jordan Louviere, CenSoC co-director. “It was used on large-scale applications, predicting the broadband demand for the entire country of France, for example, whereas it could be used on millions of smaller applications worldwide.”
Makes sense, doesn’t it? Before finalising product features or price, find out how much your customers are willing to pay for which features, resulting in a predictable (and optimal) market share.
MARKET RESEARCH ON THE MOVE
The clipboard, the survey in the mail, the hasty introduction at the other end of the phone asking for just a few minutes of your time – these aspects of market research are set to become history. Emerging technologies and philosophical changes are transforming the face of market research.
Here is the view from the edge:
A beverage company launches a new alcoholic drink amid a blizzard of publicity. To measure its success, they text a couple of quick questions to mobile phones and PDAs. Minutes later, they have a snapshot of market penetration.
A car manufacturer develops a prototype for a new model. Potential drivers explore the car while being filmed Big Brother-style (with permission, of course). Every frown, flinch and smile is recorded and analysed. The prototype is refined.
A movie studio tests film trailers for effectiveness by inviting panellists to watch trailers online and deliver feedback using a ‘worm like’ sliding approval scale.
A mobile phone company offers users the chance to interactively design their ideal handset, mixing and matching colour, shape, size and appearance in a three-dimensional online model.
Three options for space tourism are presented in detail, describing the adventure sport of the future. Combinations of prices and features are presented and potential customers issue preferences. Consumer choice modeling techniques predict demand for a market that doesn’t yet exist.
Sure, market research is vital to the success of my business,
BUT WHAT CAN I GET FOR A THOUSAND BUCKS?
Get on the web: look up news sites, universities, the Australian Bureau of Statistics, industry associations and see what you can glean for free
Some stats and industry reports can be purchased for a few hundred dollars
Lean on your network. Get friends to trawl through their database resources
Design a survey and engage an online survey provider to execute it
Doorknock – talking to customers and potential customers will only cost you time
Dump your existing sales data into a spreadsheet and start slicing
Meet with a research firm, discuss your needs, get some free advice and politely leave