Our Two Cents on Market Research
“We have to be customer-oriented!” That’s the theme of the day, at every company’s strategy meeting nowadays.
I remember being invited to a client’s strategy meeting, and that’s how of their manager kicked it off. Sounds great! We were going to formulate customer profiles for the upcoming launch of a new product. However, about thirty minutes in, I realized that we were going to do all of that without a hint of market research. I voiced my concerns regarding the futility of trying to guess market realities in the isolation of a corporate office, but I was overruled. The client gets what the clients wants, but at the end of the day the customer votes with his hard-earned cash, and the results were predictable.
Out of the top five reasons for start-up failure, at least two (No Market Need and Pricing/Cost Issue) can be in some way attributed to poor market research. New big-business projects are just startups with a corporate roof and are exposed to some of the same risks.
Guessing what the market wants and needs without doing the proper legwork rarely leads to success and is extremely costly. This relates to product development, price changes, marketing campaigns and more.
So, before you spend a lot of money on your exciting new idea, see what the market thinks. Here is how!
This is the most basic approach as it does not require anything besides an internet-connected device. You can find data and reports on your target market, see what the competition is doing, and even read about customer pain-points on forums and social media. Additionally, you should reach out to industry experts to validate your hypothesis.
What you will get:
· A sense of the size and competitive nature of the market;
· An idea of the customer sentiment; · Price points, and an expectation for profitability;
· An idea of the potential growth trajectory.
In today’s world data is king, and it comes from different sources and in many forms. Often times companies sit on treasure troves of information and simply don’t know how to properly use it. For example, data from receipts and loyalty programs can tell a lot about user behavior. External data sources, such as macro indexes or sales data from business offering products that are complementary to yours can serve as leading indicators for changing market conditions. Social media allows companies to study and segment their users and potential customers by a multitude of characteristics enabling the development of tailored offerings.
What you will get:
· Statistics on customer behavior and spending patterns;
· Customer profiles; · Understanding of the revenue and cost drivers;
· Ability to forecast revenue and costs;
· Understanding of the drivers of growth and churn.
Surveys and Focus Groups
One of the most useful ways to understand the market is to talk to it. However, it is important to conduct you research properly and to be able to interpret the results in a meaningful way. Surveys and discussions must be constructed in such a fashion, that they obtain a representative sample. Additionally, the output needs to be standardized, preferably in a quantitative way, so as to allow for comparisons, statistical analysis, and tracking through time.
What you will get:
· An idea of the market sentiment;
· Customer’s/user’s profiles and opinions;
· Customer’s/user’s behavior and patterns;
· An idea about how and why the customer/user chooses your product or your competitor product;
· An ability to forecast macro patterns and customer/user demand.
Why is this important?
Proper market research enables companies to:
· Articulate customer needs and priorities;
· Quantify market demand;
· Identify different customer groups and offer a tailored approach to each;
· Manage churn;
· Forecast macro changes in the market.
This in turn enables companies to choose projects and campaigns that are most relevant for the market, build and maintain customer loyalty and maximize profit. Market research enables company leaders to make informed decisions, and that can often be the difference between success and failure.
By: Ilya Abugov