Market Research as a Business Tool

The article below was written by Corona Research to help our current and future clients understand how market research can be used to increase their business's revenues. While this is only an overview, we invite you to learn more about how research can benefit your company or organization by contacting us.

As a business owner or manager, you probably know that it is important to constantly attract new customers. This is certainly true if you want your business to grow, but you must also constantly attract new customers just to maintain your business. No matter how loyal your customers are, some will move away, others’ tastes and needs will evolve until they no longer need you, and a few will get enamored with one of your competitors. You need to replace those losses as they occur, and most likely you would like to bring in more new customers as well.

The ultimate goal of market research is to help you attract the new customers that you need to survive and thrive, and to help you do so in the most efficient and cost-effective manner. All business owners practice market research to some extent, based on their acquired knowledge of their industry and their customers. In most cases, their insights are correct - they advertise in the local newspaper instead of the London Times, or they send out coupons to only those households within a one-mile radius. But there’s an additional level of research that would be valuable to them, one that relies on objective research rather than acquired knowledge. This research gathers the information that customers don’t provide during their visits, and pinpoints where – and how – to reach people who would become customers if only they knew about your business.

MARKET RESEARCH STRATEGIES

There are three basic ways to increase your customer base and revenues:

1. Get your current customers to patronize your business more often (or spend more when they come). See Strategy 1 below.
2. Find (and market to) people who are demographically similar to your customers, but who do not frequent your business. They will presumably have similar tastes and interests, and will be more inclined to respond to your marketing. See Strategy 2 below.
3. Expand the demographics of your customer base by changing your product or service mix to appeal to the types of people that don’t normally frequent your business. See Strategy 3 below.

Regardless of which approach you pursue, you’ll need to accomplish three tasks:

1. Know who you’re trying to reach with your marketing, and where to reach them.
2. Know what message they want to hear.
3. Learn the best way to deliver that message to them.

In summary, then, market research will help you identify the best potential market to target, and will assist you in identifying the most efficient and profitable way to reach them. Depending on the group that you’re targeting, the approach to market research will differ. We discuss the basics of the three approaches on the following pages.

STRATEGY 1. PROTECTING YOUR FLOCK

One priority of your business strategy should be the maintenance of your current group of customers. While some attrition is unavoidable in the modern marketplace, a business’s most efficient marketing expenditures are aimed at keeping those current customers. Simply put, it’s easier to convince someone to maintain their habit of patronizing your business than it is to convince someone else to change their habit of patronizing your competitor.

The keys to keeping your customers are many fold. The questions that customers ask each time that they decide to patronize your establishment are the same questions that you need to answer for yourself. These questions include, but are not limited to:

• Does this business provide the product or service that I want?
• Am I paying a fair price for that product, in light of the overall buying experience (product, service, ambiance, etc.)?
• Overall, is this business meeting my needs? Do I enjoy coming here?
• Why should I patronize this business as opposed to the others that sell the same thing?
• Is it easy, convenient, and pleasant to visit this business?
• How can this business improve its chances of keeping me as a long-term customer?

MARKET RESEARCH PLAN

Most of the questions above can be answered in two ways. We can briefly ask a large number of customers (i.e., do a survey of current customers), or we can discuss them in detail with a small number of customers via focus groups or even one-on-one interviews. Ideally, we will do both: the survey will provide us with hard facts about your customers and their opinions, while the focus groups will provide detailed insight into why they hold certain opinions, and how they developed them. If budgets are limited, the best approach is often to conduct focus groups with randomly selected customers. The survey is often a more useful tool for Strategy 2, described next.

In exchange for payment, gift certificates, or merchandise, we entice randomly selected customers to discuss various aspects of their customer experience at your establishment. We will gather not only suggestions for improvements that can increase customer loyalty, but we can also identify potential advertising or marketing vehicles, or marketing themes, that can be used to reach other potential customers. Corona Research has conducted numerous focus groups, and is familiar with the rules, customs, and protocols surrounding focus group research. We can recruit the group members, design a focus group guide, conduct the groups, video record the sessions, and provide a report of key findings and conclusions.

STRATEGY 2. FINDING LIKE-MINDED SOULS

Most likely, you’ve noticed some patterns about your customers, relative to the general population. Often, this is related to the specific product or service that you sell. If you own a drug store, you have probably noticed that an unusual proportion of your customers are senior citizens. If you own a music arena, you can’t help but notice the tattooed and pierced young people that show up for some concerts, and the Docker-clad baby boomers that show up for others.

You may not notice some of the more subtle differences, though. Those baby boomers may be predominantly white-collar professionals, for instance, and they live in a different world than others in their age group. They live in different neighborhoods, read different magazines, and listen to different radio stations. If you can identify those neighborhoods, those magazines, and those radio stations, you’ll be able to advertise your next concert (or sale or new product…) to the exact group that is most likely to buy it. And that group may include people who, at this moment, are not aware that your business exists.

MARKET RESEARCH PLAN

This type of analysis, a “geodemographic” analysis, has two components. First, we identify who your customers are: what demographic characteristics separate them from everyone else in the world. We analyze these factors via a survey of customers (which can simultaneously be used to gather other data for use in Strategy 1). Second, after we’ve identified the core demographic traits of your customers, we identify neighborhoods where the prevailing demographics match those profiles. Corona Research can provide you with Zip Codes or even smaller areas where your prospects for advertising and marketing are most promising. We can also provide an analysis of competition by location, so you can avoid areas that are over serviced and concentrate on more promising locales.

Part of the customer demographic profile is the development of a geographic market radius for the business. In this analysis, we provide information about the geographic dispersion of the business’s customers. At this point, it is often worthwhile for a business to conduct a competitive assessment of rivals that are located within that market radius. Corona Research can conduct price and service audits to better identify the competitive advantages and disadvantages of your business in comparison to these rivals.

Another valuable augment to this analysis is focus groups of people who are demographically inclined to use your business, but don’t. These people are similar to your customers in terms of age, income, interests, and other demographic identifiers – why are they avoiding your business? A focus group of non-customers can be quite useful, in combination with focus groups of customers, in determining how to better capture your most attractive prospects.

STRATEGY 3. THE REST OF THE WORLD

In the large scheme of things, your business probably captures a miniscule portion of the population that lives and works in your company’s market area. So why can’t you capture more of those people as customers?

The truth, most likely, is that you don’t have anything they want. They’re aware of your business, they see it on a daily basis, and they know about the products that you offer. They simply don’t want to (or can’t) buy what you’re selling. By learning the reasons behind their apathy, you can perhaps make minor changes in your business to develop an entirely new market of customers.

Examples of such changes occur constantly. McDonald’s restaurants, for instance, added salads to their menus to cater to health-conscious diners who would otherwise reject the company’s traditional menu. (As a side benefit, they can now also capture larger groups where, for instance, three of the four members wanted to eat at McDonald’s, while the fourth would veto the selection.) Bed & breakfast establishments have also learned a similar lesson; by adding data ports and fax machines, they can now lure business travelers who would otherwise migrate to large hotels.

MARKET RESEARCH PLAN

Many insights about the “greater market” can be gleaned from studying the business’s current customers and demographic target markets (Strategies 1 and 2). In other words, understanding why some people are customers also helps one to understand why others are not customers.

Of course, it is also worthwhile to speak with non-customers directly, to confirm theories and develop ideas for product or service improvements. In these cases, it is often valuable to identify “markets” that would appear to be promising, and target the people who represent those markets for focus groups. For example, a business services establishment might target the “at home” telecommuters or one-person businesses as a promising, but untapped, market. We would then conduct interviews or focus groups of people in these categories to identify how to position the business to tap those markets, or to test your own ideas or new products.

Another valuable tool to support this strategy is a survey of random households, via telephone or mail. By doing so, you can develop both an estimate of your firm’s “market share” among available customers, and you can estimate the overall size of the market (both overall and for various market segments). A random survey has a number of other uses as well; for example, you can prepare demographic profiles of your competitors’ customers and use that information in concert with a competitor assessment (see Strategy 2) to better determine how (or whether) to adjust your products and services to capture your competition’s customers. For example, a survey may show that younger people are more likely to visit your competitors, and focus groups and competitor assessment may show that they do so because of a particular feature or service that is easy for you to add.