A guide to using market research to understand who your customers are and what they want
If you don't know your customer, then you don't know your business. You won't know how to respond if you see changes in your sales patterns. And because it's so hard to hang on to customers you don't know intimately, you will forever be chasing new ones.
Unfortunately, though most business owners like to think they know their customers, many are really only guessing. And when it comes to forecasting sales -- in fact, when it comes to virtually every aspect of business planning -- an empirical understanding beats gut instinct almost every time. Now is the time to get the facts.
Professional market researchers generally divide their work into qualitative studies (interviews and focus groups, with free-flowing and open-ended discussions) and quantitative studies (usually surveys). In a perfect world, you would probably do both, using qualitative research to create a survey, the results of which might in turn be interpreted using another focus group. Given limited resources, though, it generally makes sense to go quantitative. After all, says Steve Sprague, a marketing consultant in Marion, Iowa, "some data -- any data -- is better than none."
Building a Better Survey
1. Define Your Survey Target
First, identify the customers to survey. In general, it makes sense to focus on your best customers. "You want to look at the upper 60 percent of your customers by sales," according to Sprague. Naturally, this is easiest for companies that track purchases and customers individually: Rank your customers by sales and lop off the bottom 40 percent. Alternatively, your sales or accounts receivable staff ought to know who your most reliable buyers are.
Retail shops and other establishments in which purchases are small and buyers tend to remain anonymous may have to settle for a smaller sample from a broader range of customers. But even these businesses can identify their best customers by encouraging customers to fill out a postage-paid postcard with very basic information or by asking them at the register for a Zip code, which can then be used to create a demographic profile. (See "Decoding Demographics.") You might also institute a frequent-customer program, in which you offer a discount or other incentive in exchange for a small amount of personal information and an opportunity to contact the customer later. Newsletters and e-mail updates are also an opportunity to identify whom to contact later; ditto the prize drawing that requires a business card to enter.
Sometimes you will want to study specific customers. If, say, sales are flagging, you might study lapsed customers. "Identifying characteristics of your attrition market may help you develop new customers and clients," notes Nancy Ulrich, a marketing research consultant in suburban Jacksonville, Florida.
2. Decide on a Format
There are basically three ways to administer a survey: by mail, by phone, or online. A highly personalized letter is best when the survey population is hard to reach (physicians, say, or senior executives). A phone interview serves well for complex and probing questions that demand interaction between interviewer and subject, but it normally requires professional assistance. Most businesses, though, will do very well with an online survey. Many survey companies (Zoomerang.com, for one) offer inexpensive tools and complex branched questions, in which a specific response to one query generates a specific follow-up. And they are fast -- you can see results in real time.
Experts say that a written survey should take from five to 15 minutes to complete. Divide your questions between customer satisfaction and customer demographics, weighted toward the former. And keep it short, says Sprague, who includes fewer than 10 questions when he writes surveys for his clients. "By limiting the number of questions, you improve the response rate," he says. "And it forces you to think about what's important."
Be personal, and begin by praising your customer and highlighting the importance of the survey. At the end of the survey, you should offer some sort of reward or incentive -- the longer the survey, the more generous the reward.
3. Probe Customer Satisfaction
When writing survey questions, take care to avoid introducing a bias that telegraphs the answers you hope to receive. Avoid trade jargon or abbreviations, or at least make sure they are well defined.
Ask open-ended questions. These let respondents ruminate about what they like about your company and what might improve the relationship. Be sure, says Ulrich, that the text boxes allow space for lengthy responses. Follow these with a multipart rating question and a corresponding multipoint scale to review your business's specific processes. Ulrich believes that respondents more easily understand descriptive words (excellent, fair, poor, etc.) than a numbered scale.
Calculate your net promoter score. Ask respondents how likely, on a scale from 0 to 10, they are to recommend your company, product, or service to others. The net promoter score is derived by subtracting the percentage of "detractors" (customers who rate the business from 0 to 6) from the percentage of "promoters" (who rate the company 9 or 10). The greater the difference, the more likely that your company can convert the enthusiasm of current customers into new customers. Sites like Net Promoter (netpromoter.com) offer more information about these scores and comparisons with leading companies. Or simply view your score as a useful general indicator of your customers' feelings about your product or service.
