Market Research the Low-Cost (Or Free!) Way - dummies

Market Research the Low-Cost (Or Free!) Way

By Alexander Hiam

Knowledge is power in marketing. Power to make smart decisions that bring in customers and profits. Who wants what? Which markets are going to grow and be hot, and which aren’t? It’s amazing how many businesses and other entities lumber along, working hard but not stopping to gather enough information to know how to work smarter.

Observe your customers

Consumers are all around you, and they’re shopping for, buying, and using products. Observing consumers and finding something new and of value from doing so, isn’t hard. And even business-to-business marketers (who sell to other businesses rather than end-consumers) can find plenty of evidence about their customers at a glance.

For example, the number and direction of a company’s trucks on various roads can tell you where its business is heaviest and lightest.

Despite all the opportunities to observe, most marketers are guilty of Sherlock Holmes’s accusation: “You have not observed, and yet you have seen.” Observation is the most underrated of all research methods. For example, when managers from the Boston Aquarium wanted to find out which attractions were most popular, they hired a researcher to develop a survey, but the researcher told them not to bother.

Instead, he suggested that they examine the floors for wear and for tracks on wet days. The evidence pointed clearly to certain attractions as the most popular ones: The floors in front of those attractions had the most wear, and damp paths led to the attractions that visitors preferred to go to first. That was easy!

Ask customers questions

Customer satisfaction changes with each new interaction between customer and product. If your product makes customers happy, they come back. Recruiting new customers costs anywhere from 4 to 20 times as much as retaining old ones (depending on your industry), so you can’t afford to lose customers — which means you can’t afford to dissatisfy them.

You can gather input from your customers in a variety of easy ways, because your customers interact with your employees or firm. You can put a stamped postcard in shipments, statements, product packages, or other customer communications.

Include three or fewer simple, nonbiased survey questions, such as, “Are you satisfied with this purchase? no = 1 2 3 4 5 = yes.” Also, leave a few lines for comments in case your customers have something they want to tell you. You generally get low response rates with any such effort, but that’s okay.

If someone has something to tell you, he lets you hear about it. And even a 5 percent response rate gives you a steady stream of input you wouldn’t have otherwise.

Pose your questions

Survey research methods are the bread and butter of the market research industry and for good reason. You can often gain something of value just by asking people what they think. Of course, survey methods have their shortcomings: Customers don’t always know what they think or how they behave, and even when they do, getting them to tell you can be costly. Nonetheless, every marketer finds good uses for survey research on occasion.

Watch out for overly general questions or ratings. Any measure based on a survey that asks customers to “rate your overall satisfaction with our company on a scale of 1 to 10” isn’t much use. What does an average score of 8.76 mean? Sure, that’s pretty high, but are customers satisfied? You didn’t really ask them.

Instead, favor asking a series of more specific questions, such as, “Was it convenient to do business with us?” Then track progress on each specific measure in a repeat survey after you make changes to see whether you’ve improved in ways that customers notice.

Consider some sample questions

Your customer satisfaction must be high, relative to both customer expectations and competitors’ ratings, before that customer satisfaction has much of an effect on your customer-retention rates. Make sure you ask tough questions to find out whether you’re below or above customers’ current standards. You can ask customers revealing questions, similar to the following list:

  1. Which company (or product) is the bestright now?

    Give a long list with instructions to circle one, and give a write-in blank labeled Other as the final choice.

  2. Rate [your product] compared to its competitors:

            Far worse Same Far better
    1 2 3 4 5 6 7
  3. Rate [your product] compared to your expectations for it:

            Far worse Same Far better
    1 2 3 4 5 6 7

You can get helpful customer responses by breaking down customer satisfaction into its contributing elements, the specific aspects of service that customers notice and care about. (Focus groups or informal chats with customers can help you come up with your list of contributing elements.)

For example, you can ask the following questions about an overnight letter carrier:

  1. Rate Flash Deliveries compared to its competitors on speed of delivery.

            Far worse Same Far better
    1 2 3 4 5 6 7
  2. Rate Flash Deliveries compared to its competitors on reliability.

            Far worse Same Far better
    1 2 3 4 5 6 7
  3. Rate Flash Deliveries compared to its competitors on ease of use.

            Far worse Same Far better
    1 2 3 4 5 6 7
  4. Rate Flash Deliveries compared to its competitors on friendliness.

            Far worse Same Far better
    1 2 3 4 5 6 7
  5. How likely are you to recommend Flash Deliveries to an associate or friend?

            Not likely Neutral Likely
    1 2 3 4 5 6 7

The final question addresses word of mouth, what the customer is likely to tell other prospective customers about your service or product. If you do well on specific questions about attributes of importance to the customer, then the customer will likely recommend you to others, thereby helping you build your market share.