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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.

Need To Know

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.

Information Sources

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.

Question Time

Sometimes you may need information from more people and in a shorter time period than chance conversations allow. Or, you may want information from people who are not yet your customers. There are two market research tools that large organisations use in these circumstances, and both can be tailored for use by small business. The first is to survey a carefully chosen sample of people using a list of questions (usually called a questionnaire). A survey can provide a good broad snapshot of the market and can answer questions about how many, how often, and how much.

In contrast, in-depth interviews with individuals or with a small group of people (usually called a focus group) can provide a detailed picture of how people think about products or services. For example, a local furniture manufacturer was eager to know what people thought of a particular style of chair he was planning to make. He asked a friend to invite a small group of their friends home for drinks and nibbles. He took the prototype chair to the gathering and encouraged people to try it, to imagine it their own homes and give feedback that could help him assess the appeal of the product.

Surveys and interviews need to be carefully designed if they are to be worth your investment in time and money. The sample of people who respond to a survey is critical in determining the value of the information. Printing a stack of questionnaires and leaving them for people to pick off the counter if they feel like it, is a waste of time and paper. The people who do take the trouble to fill one out are not likely to be representative of customers as a whole. On the other hand, if every 10th customer, for example, is invited to complete a short questionnaire, the results will be much more typical of the total customer base. In the same way, in-depth interviews and group discussions are usually best carried out by professionals who know what questions to ask and are not emotionally involved with the product or the service. The furniture maker mentioned previously may have heard more positive than negative comments because people didn’t want to appear rude or hurt his feelings.

To know more about how to plan and carry out your own market research you can consult books from the library, attend short courses run by TAFE or universities, or contact the
Australian Market and Social Research Society (AMSRS). At the AMSRS website (www.amsrs.com.au)  you will find a wealth of detail about market research and the contact list for accredited market research organisations, many of whom are happy to assist small and medium businesses.

* Dr Rob Hall is director of social and market research company Environmetrics, and can be contacted on (02) 9954 0455.

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