If your approach to market research is casual or haphazard, you’ll probably get a matching result. Rob Hall explains how well-designed and targeted research is valuable but not necessarily expensive.
Successful retailers don’t get there by accident or luck, they are successful because they study and understand the needs of their customers. This has been true throughout recorded history. Ancient records tell tales of Chinese jade dealers watching their customer’s eyes to see which pieces of jade made the customer’s pupils enlarge most. This told them which pieces were exciting the customer, and this gave an edge in the negotiation over price.
These days, we call the process of studying customers ‘market research’, and major companies regularly spend large amounts of money on researching their customers. Recent press articles report how Wrigleys, for example, used market research to shape an advertising campaign that brought the old Juicy Fruit brand back from a catastrophically rapid decline in sales.
But it’s not just big retailers who can benefit from thoughtfully conducted market research. Thoughtful research involves answering the right questions and it does so in a systematic and scientific way, so it can be a great help to small and medium businesses as well.
A starting point is asking yourself: ‘What do I need to know about my customers that would help me make decisions about how I run my business?’. A list of things will come to mind. The trick is to find the single most important piece of information that, if you had it, would assist you in running your business. One way of trimming the list and finding the most important item is to ask of each item on your list, ‘what would I actually do tomorrow if I had the answer to that question?’ Often the answer is nothing, and you can see that that item was one of the ‘nice to know’ rather than ‘need to know’ aspects of business intelligence.
Once you have worked out what question you need to answer, the next step is to work out how to get the answer in the most time and cost efficient way. After all, you are running a retail business not a market research agency. Often, when people think of researching their customers, they think surveys and interviews. However, the answers you need are often already available and it is wise to seek this information before spending time and energy planning surveys and interviews.
Market research professionals tend to divide information sources into two categories: secondary and primary data. Secondary data is information that has already been collected for some purpose and can be pressed into use for your needs. For example, a bookstore specialising in children’s books was interested in doing a leaflet drop into home letterboxes to promote sales. The store-owner noticed a relatively large volume of sales came from older people rather than people who were obviously parents. In addition, the older people tended to buy more expensive books. The ‘aha!’ for the proprietor was that doting grandparents were the core market. He knew, too, that the Australian Bureau of Statistics (ABS) could provide information collected in the census to show where there were high concentrations of older people in the local area. In this way, he was able to optimise the leaflet drop and keep costs to a minimum.
Census information and a range of other useful sets of secondary data can be accessed from the local library or relevant websites, often at no greater charge than the time you spend collecting it. For a fee, organisations such as the ABS will run customised analysis for you to answer particular questions for which the answers are not already available. Often the fees are quite modest. However, the key is always knowing which answers will be worth the research time and money.
Primary data is information you collect for yourself. Again, this need not be time consuming or expensive to collect. If you have been to an attraction like a museum, zoo or fun park, you were probably asked for your postcode when you bought the ticket. This is because management understands that knowing where their visitors come from—or don’t come from—is a particularly useful piece of information for planning their marketing activities. It is also cheap to collect, and if the ticketing system is adapted to store postcode along with the size of sale, high value residential areas can be identified.
Many small and medium business accounting or point-of-sale systems can be used to collect and analyse customer data in a similar way. Major retailers often use their accounting system to provide information about the sales per square metre in the store and in this way try to adjust the store layout to maximise overall sales.
Talking to customers is also an important part of market research. Despite this, there are always SMEs who don’t make use of the opportunity. Comedian, John Cleese made a very funny training film, It’s Alright, it’s Only a Customer, which made the point that for some retailers the customer is seen as an intrusion on an otherwise pleasant day spent dusting stock and tidying the store. More typically, we find retailers are keen to talk to their customers but they often do so in an unsystematic way. The conversation is usually focussed on building a relationship with customers and tends to miss the opportunity to collect information in a systematic way. It’s better to achieve both goals.