How to Learn About Your
Market
To be successful a business must
know its market. Marketing research is simply an orderly, objective way of
learning about people - the people who buy from you or might buy from you.
This Guide provides an overview of what market research is and how it's
done. It introduces inexpensive techniques that business owner-managers
can apply to gather facts about their customers and the people they'd like
to have for customers.
Trash and Peanuts
Some marketing research material is nothing but garbage. Marketing
research can be done for peanuts - even with peanuts. Shocking statements?
Perhaps, but both of them are literally true.
Take garbage, for instance. Inspection of outgoing waste has long been
a practice of many small restaurants. Initially, many people may order the
flounder a la marzipan because of the novelty of the dish; but if a
restauranteur finds most of leaving the tables uneaten, it better come off
the menu because it won't be in demand much longer.
You can use trash positively, too, to find out what people like. It may
not be very dignified to check trash cans for cartons and containers, but
they are direct indication of what consumers are buying. You could also
find out what competitors are selling (or at least ordering) by checking
their trash as well.
The point here isn't to turn you into a scavenger, but to suggest that
marketing research isn't done only by sophisticated staffs of statistical
technicians working with powerful computers grinding up figures from
elegant surveys. Marketing research doesn't have to be fancy and
expensive.
It can be done with peanuts, as one creative discount merchandiser
discovered. During a three-day promotion the merchant gave away free to
customers "... all the roasted peanuts you can eat while shopping at our
store." By the end of the promotion the merchant had "litter trails" that
provided information on the traffic pattern within the store. Trampled
peanut hulls littering the most heavily traveled store aisles and even
heaped up in front of displays of merchandise of special interest to
customers. In short, the merchant learned how they acted in the store and
what they wanted and observed their behavior.
What is Marketing Research?
Basically, marketing research is just what the merchant did with the
peanuts. Find out what catches customers' attention by observing their
actions and drawing conclusions from what you see. To put it more
formally, in the words of the American Marketing Association, marketing
research is "the systematic gathering, recording, and analyzing of data
about problems relating to the marketing of goods and services."
Marketing research is an organized way of finding objective answers to
questions every business must answer to succeed. Every business
owner-manager must ask:
- Who are my customers and potential customers?
- What kind of people are they?
- Where do they live?
- Can and will they buy?
- Am I offering the kinds of goods or services they want - at the best
place, at the best time, and in the right amounts?
- Are my prices consistent with what buyers view as the products'
values?
- Are my promotional programs working?
- What do customers think of my business?
- How does my business compare with my competitors?
Marketing research is not a perfect science; it deals with people and
their constantly changing likes and dislikes which can be affected by
hundreds of influences, many of which simply can't be identified.
Marketing research does, however, try to learn about markets
scientifically. That simply, is to gather facts in an orderly, objective
way; to find out how things are, not how you think they are or would like
them to be; what people want to buy, not just what you want to sell them.
Why Do It?
It's tough - impossible - to sell people what they don't want.
(Remember the Nehru jacket?) That's pretty obvious. Just as obvious is the
fact that nothing could be simpler than selling people what they do want.
Big business has to do market research to find that out. The same reason
holds for small business.
business owners often have a "feel" for their customers - their markets
- that comes from years of experience. Experience can be a two-edged
sword, though, since it comprises a tremendous mass of facts acquired at
random over a number of years. Information about markets gained from long
experience may no longer be timely enough to base selling decisions on. In
addition, some "facts" may be vague, misleading impressions or folk tales
of the "everybody knows that..." variety.
Marketing research focuses and organized marketing information. It
ensures that such information is timely. It provides what you need to:
- Reduce business risks,
- Spot problems and potential problems in your current market,
- Identify and profit from sales opportunities,
- Get basic facts about your market to help you make better decisions
and set up plans of action.
How Do You Go About It?
You probably do some market research every day in the course of your
routine management activities without being aware of it. You check
returned items to see if there's some pattern. You ask one of your old
customers, who has stopped coming to your shop, why he hasn't been in
lately when you run into him on the street. You look at a competitor's ad
to see what that store is charging for the same products you're selling.
Marketing research simply makes this process more orderly. It provides
a framework that lets you objectively judge the meaning of the information
you gather about your market. The following flow chart shows the steps in
the marketing research process:
- Define problem (limit and state clearly)
- Assess available information
- Assess additional information, if required:
- review internal records and files
- Interview employees
- Consult secondary sources of information
- Interview customers and suppliers
- Collect (or have collected) primary data
- Organize and interpret data
- Make decision
- Watch the results of the decision
Defining the Problem
This, the first step of the research process, is so obvious that it is
often overlooked. Yet, it is the most important step of the process.
You must be able to see beyond the symptoms of a problem to get at the
cause. Seeing the problem as a "sales decline" is not defining a cause;
it's listing a symptom.
In defining your problem list every possible influence that may have
caused it. Has there been a change in the areas your customers have
traditionally come from? Have their tastes changed? Put all the possible
caused down. Then set aside any that you don't think can be measured,
since you won't be able to take any action on them.
You must establish an idea of the problem with causes that can be
objectively measured and tested. Put your idea of the causes in writing.
Look at it frequently while you're gathering your facts to keep on track,
but don't let it get in the way of facts, either. (Incidentally, while
this Guide speaks of "problems," the same techniques can be used to
investigate potential opportunities too.)
Assessing Available Information
Once you've formally defined your problem, you should assess your
ability to solve it immediately. You may already have all the information
you need to determine if your hypothesis is correct, and solutions to the
problem may have become obvious in the process of defining it. Stop there.
You'll only be wasting your time and money if you do further marketing
research.
What if you aren't sure whether or not you need additional information
at this point? What if you'd feel more comfortable with additional data?
Here, you've got to make a subjective judgment to weigh the cost of more
information against its usefulness.
You're up against a dilemma similar to guessing in advance your return
on your advertising dollar. You don't know what return you'll get, or even
if you'll get a return. The best you can do is ask yourself how much
making a wrong decision will cost and to balance that against the cost of
gathering more data to make a better informed decision.
Gathering Additional Information
Think cheap and stay as close to home as possible. Before considering
anything fancy like surveys or field experiments, look at your own records
and files. Look at sales records, complaints, receipts, or any other
records that can show you where your customers live or work or how and
what they buy.
One business owner found that addresses on cash receipts allowed the
pinpointing of customers in his market area. with this kind of information
he could cross reference his customers' address and the products they
purchased. From this information he was able to check the effectiveness of
his advertising placement.
Your customer's addresses alone can tell you a lot about them.
Obviously you can pretty closely guess your customers' life-styles by
knowing what the neighborhoods they live in are like. Knowing how they
live can give you solid hints on what they can be expected to buy.
Credit records are an excellent source of information about your
markets, too. In addition to the always valuable addresses of real live
customers, they give you information about customers' jobs, income levels,
marital status. Granting credit, so it can be seen, is a multi-faceted
marketing tool - though one with well-known costs and risks.
When you've finished checking through your records, go to that other
valuable internal source of customer information - your employees.
Employees may be the best source of information about customer likes and
dislikes. They hear customers' minor gripes about your store or service -
the ones the customers don't think important enough to take to you
owner-manager. They are also aware of the items customers request that you
may not stock. Employees can probably also give you pretty good
seat-of-pants customers profile from their day-to-day contacts.
Going Outside for Marketing Research Data
Once you've exhausted the best sources for information about your
market, your internal data, where do you go? Well, the next steps in the
process are to do primary and secondary research on the outside.
Secondary research first
Naturally, since it's called secondary research, you do it before you
undertake any primary research. Secondary research simply involves going
to already published surveys, books, magazines and the like and applying
or rearranging the information in them to bear on your particular problem
or potential opportunity.
For example, say you sell tires. You might reasonably guess that sales
of new cars three years ago would have a strong effect on present retail
sales of tires. To test this idea you might compare new car sales of six
years ago with the replacement tires sales from three years ago.
Suppose you found that new tire sales three years ago were 10 percent
of the new car sales three years previous to that. Repeating this exercise
with car sales five years ago and so on, you might find that in each case
tire sales were about 10 percent of the new car sales made three years
before. You could logically conclude that the total market for replacement
tire sales in your area this year ought to be about 10 percent of the new
car sales in your locality three years ago.
Naturally, the more localized the figures you can find the better.
While, for instance, there may be a decline nationally in new housing
starts, if you sell new appliances in an area where new housing is
booming, you obviously would want to base your estimate of market
potential on local condition. Newspapers and local radio and TV stations
may be able to help you find this information.
There are many sources of such secondary research material. You can
find it in libraries, universities and colleges, trade and general
business publications, and newspapers. Trade associations and government
agencies are rich sources of information.
Primary research, the last step
Primary research on the outside can be as simple as your asking
customers or suppliers how they feel about your store or service firm or
as complex as the surveys done by the sophisticated professional marketing
research giants. It includes among its tools direct mail questionnaires,
telephone or "on the street" surveys, experiments, panel studies, test
marketing, behavior observation, and the like.
Primary research is often divided into "reactive" and "nonreactive"
research. The "peanut shell study" at the beginning of this Guide is an
example of nonreactive primary research: it was a way of seeing how real
people behaved in a real "market situation" (in this case how they moved
through the store and which displays attracted their attention) without
influencing that behavior even accidentally.
Reactive research (surveys, interviews, questionnaires) is probably
what most people think of when they hear the word "marketing research."
It's the kind best left to the experts, since you may not know the right
questions to ask. There's also the danger that either people won't want to
hurt your feelings when you ask them their opinions about your business or
they'll answer questions the way they think they are "expected" to answer,
rather than the way they really feel. If you feel you can't afford
high-priced marketing research services, ask nearby college or university
business schools for help.
What you can Do
Marketing research is limited only by your imagination. Much of it you
can do with very little cost except your time and mental effort. Here are
a few examples of techniques small business owner-managers have used to
gather information about their customers.
License plate analysis
In many states license plates give you information about where a car's
owner lives. You can generally get information from state agencies on how
to extract this information from license numbers. By taking down the
numbers of cars parked in your location you can estimate your trading
area. Knowing where your customers live can help you aim your advertising
for good effect. Or, how about tracing your competitors' customers using
the same approach to win them for your business.
Telephone number analysis
Like license numbers, telephone numbers can tell you the areas in which
people live. You can get customers' telephone numbers on sales slips, from
checks and credit slips, and the like. As noted before, knowing where your
customers live can give you an excellent idea of the way they live and
what they are like.
Coded coupons and "tell them Joe sent you" broadcast ads
You can check the relative effectiveness of your advertising media by
coding coupons and by including phrases customers must use to get a
discount on some sale item in your broadcast ads. This technique may also
reveal what areas your customers are drawn from. Where they read or heard
about the discount offered in your ads will also give you information
about their tastes.
People watching
You can learn a great deal about your customers just by looking at
them. How they dressed? How old do they appear to be? Are they married? Do
they have children with them? This technique is obvious and most
owner-managers get their feel for their clientele just this way. But how
about running a tally sheet for a week keeping track of what you're able
to tell about your customers from simple outward clues? It might just
confirm what you've thought obvious all the time, but it might also be
instructive.
Customer Survey
If you are a business owner, these questions are for you. Have you
conducted your own private interview of customers? Have you personally
talked to at least 50 to 60 customers to find out what they like or
dislike about your business, products and service?
A personalized business survey is a simple thing to prepare and
implement. If you do it regularly, you can find when and where things are
breaking down in your service.
Use a piece of 8.5 x 11 inch paper with the following types of yes and
no questions:
1. Is the service we provide meeting your highest expectations? If not,
what areas can we improve?
yes _____ no _____
1. ________________________
2. ________________________
3. ________________________
2. Are we providing the brands and lines you want and expect? If not,
please list what is needed. yes _____ no _____
1. ________________________
2. ________________________
3. ________________________
3. Is our business clean and pleasant to be in at all times? How can we
improve it?
yes _____ no _____
1. ________________________
2. ________________________
3. ________________________
4. Do you feel the business is truly a part of the community? yes _____
no _____
5. Is it a friendly place? yes _____ no _____
6. Are the prices competitive? yes _____ no _____
7. Do you feel you are getting good values? yes _____ no _____
You may want to include more specific questions, but the key is to keep
the survey short and to the point. Keep it personal by preparing and
signing it yourself. Leave room for written comments.
Questionnaires should not be stacked at the cash register for casual
distribution. Personally present them to customers along with a
self-addressed, stamped envelope.
What can you learn from this? Plenty. What can customers learn? Well,
it shows you care and that is always a sales plus.
Do, Don't Overdo
The key to effective marketing research is neither technique nor data -
it's useful information. That information must be timely; your customers'
likes and dislikes are shifting constantly. You'll never know everything
about a particular problem anyway. It's much better to get there on time
with a little, than too late with a lot. If you spend too much time
gathering too much data going for a sure thing, you may find your
marketing research is nothing but garbage.
Food For Thought
Think about the incredible
series of coincidences that have led you to where you are today.
Chances are, there have been many moments, seemingly insignificant at
the time, that ended up altering the course of your life in a major
way. Perhaps it was someone you met, who introduced you to someone
else, through whom you met your spouse. Or perhaps it was a party you
attended, and someone you talked to, who knew someone else, who was
responsible for your current job.
You never know what will come your way, or how it will come. Things
happen in the most unexpected ways. People come into your life, and
lead you to other people, who lead you to others, and so on. That
person standing in line behind you at the bank might just hold your
future in his hands.
That's why it's so important to be open to new ideas, new people, and
new experiences. If you sit in front of the TV all the time,
life-changing opportunities will rarely come your way. Get yourself
out, circulating among people, doing things, exchanging ideas and
participating in life. Opportunities come in abundance each day when
you are open to them.
Recently, I heard a young boy on television make the comment that "If
I were President, I'd give everybody enough money to buy whatever they
want."
As wonderful as this might sound at first blush, such a policy would
be a complete disaster. If everyone could receive all the money they
needed, without working, then there would be nothing to buy with that
money. No one would work to produce the goods and services. Money
would be meaningless.
The value of money, or of anything else, depends on the effort that
must be expended to get it. A diamond and a pebble are both rocks, but
diamonds are much more valuable because they are so hard to find. If
diamonds were as plentiful as common pebbles, they would be virtually
worthless.
There simply are no shortcuts. It is the effort needed to acquire a
diamond that makes it so valuable. It is the work necessary to acquire
it that gives money its value.
Life itself is that way, too. It is only worth what you put into it. A
life of value and fulfillment is possible only you are willing to put
forth an effort and give of yourself.
Don't cheat yourself out of life by trying to get "something for
nothing." Your life is worth exactly what you put into it.
If you want something out of life, it is challenging. Once you accept
the fact that life is difficult, you begin to transcend it.
It takes courage to stand up and make a difference. Believe in
yourself. What you have, what you are, is a result of what you believe
you deserve.
Get in the habit of giving more than you're paid for. Go the extra
mile. Don't go where the path may lead, but go where there is no path,
and leave a trail. When you have your own vision, you don't have any
competitors. Be your best, do your best and don't worry about the
rest.
Make the commitment to work on yourself. Many people never realize
their greatness because they get sidetracked. You deserve to get some
prime time from yourself.
Focus on the things you love and on your talents. Develop your gifts.
We all need an area of life in which we have a special competence. It
will give you confidence, and a larger vision of yourself. It takes
work, focus and a determined effort to make the best of what you have.
The reward is that you'll accomplish great things, and you'll always
be in control of your destiny.
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