Running a business sounds simple enough: All you have to do is create value for customers in a unique and meaningful way that generates profit.
To do that, you know you must first understand your customer. Entrepreneurs and small business owners who don’t consult with target customers to validate the demand for an idea, product, or service before launching one risk failure.
What you may not realize is that the same validation is needed when making critical decisions — even after your successful business is up and operating.
Customers: the lifeblood of any business
Each year, about 400,000 new businesses are created, but 470,000 shut down, according to the U.S. Census Bureau.
Businesses fail for many reasons, of course. But with 66 percent of customers switching to a new company because they were unhappy with a service and 82 percent saying the business could have done something to retain them, customer satisfaction is a major factor.
This is why you should regularly assess your customers’ satisfaction, opinions, and loyalty and use those factors to help navigate your decision-making process. Many tools exist for gathering customer feedback, but market research — done correctly — is one of the most effective.
Getting to know your customer
Market research provides insight into your most valuable asset — your customer — allowing you to make precise and reliable decisions in several ways.
First, it helps you understand both your customer and your competition. It also identifies the level of interest in a product or service and what customers are willing to pay for it, effectively guiding the messaging needed to reach your target market.
Key steps in market research include:
· Choosing the questions that get the information you want.
· Figuring out what kind of data is needed.
· Determining how to collect information.
· Deciding how to analyze the information.
· Developing a plan for using that information.
Successful research and development, product management, branding, pricing, and marketing — all core business functions — depend on customer insight. And great entrepreneurial leaders in today’s ultracompetitive marketplace leverage this information to foster essential innovation.
Why market research works
Entrepreneurs begin with a vision. Market research can affirm the strength of that vision or identify needed tweaks; the success of an idea hinges on a firm understanding of customers’ buying behaviors — the functional, economic, and emotional reasons that customers make purchases. These insights shape product development, marketing, and the ways businesses reach target customers.
You need to know how and where a product fits within a market, what your customer expects, product and market strengths and weaknesses, and what kinds of similar products already exist. This information is impossible to intuit without performing market research.
Market research also helps you develop a cost plan (e.g., pricing models, investments, and resources) and create a marketing strategy (e.g., types of campaigns and channels, how to reach customers, and how to deal with competitors’ reactions).
A good example of business owners putting this into practice involves Kevin Systrom and Mike Krieger, founders of a locational iPhone app called Burbn. After spending a year developing Burbn and releasing it, the pair re-evaluated the market and identified some issues with their product — it had too many features and seemed cluttered, making it difficult to compete with market giant Foursquare.
Systrom and Krieger chose to remove many of the features, except for photos, commenting, and liking, and rebrand their app as Instagram. Only by examining the market, customers, and competitors did they find their way onto that new, incredibly successful path.
4 paths to quick, affordable market research
Many entrepreneurs incorrectly believe conducting market research is too time-consuming, too expensive, and too intimidating. However, today’s digital world provides several quick and affordable ways to gather information to help you make smart business decisions.
Here are four methods small business owners and entrepreneurs can use to gauge customer sentiment through market research.
#1. Focus groups
Focus groups capture in-depth, qualitative feedback, but they come with a few challenges. Focus groups take time to organize, and they require an experienced moderator to avoid bias and keep the conversation focused.
Bias is a focus group caveat, which makes selecting a qualified moderator so important. Experienced moderators know how to ask questions to gather data while eliminating bias. Qualitative research depends on valid and reliable data. If bias exists in a focus group, the results will be skewed, potentially swaying your business decisions in the wrong direction.
If you choose to organize a focus group, asking 8-10 questions would be ideal, but definitely limit the number to a maximum of 12. And be sure to over invite to ensure an adequate number participate, as 10-20 percent of those invited will, on average, be no-shows.
#2. One-on-one interviews
One-on-one interviews can be conducted quickly and affordably to uncover great feedback about products and services, but limitations exist. Reach is often limited because it’s difficult to access a large group of people due to time and geographical constraints.
While interviews can be conducted via phone or face-to-face, many business owners report better results with phone interviews. People tend to be more open to sharing opinions over the phone because they’re in their own environments — and phone interviews are cheaper because no travel is required.
#3. Online research
Online research allows entrepreneurs and business owners to connect with a large number of potential customers in a quick, affordable way. To successfully conduct online research, first decide whether the audience you want to reach consists of new or existing customers. Then, develop questions to ask and decide how to reach those people — through your email subscriber list or social media, for example.
Always reach out to people in the way that’s most convenient for them in order to create more potential for open, honest, and bias-free feedback. If you can, locate similar surveys your competitors may be conducting to make sure you don’t end up over surveying any one group. And pay close attention to the timing of your online survey — avoid sending them out around holidays or on weekends, for example.
Keep them short and simple. People often avoid surveys that take longer than 5 or 10 minutes to complete. If the survey must be longer, use page breaks, allow respondents to take the survey in stages, or split it into a few separate surveys.
#4. Mobile surveys
Mobile surveys combine the principles of traditional market research with the scale, reach, and affordability of the smartphone-enabled economy. While customers enjoy interacting with brands online, only 17 percent of researchers use mobile surveys as part of their strategy.
This presents a huge opportunity for you to get ahead of the curve by using mobile to gather customer feedback. Many people prefer to use smartphones as their main tool of communication. Consequently, 60 percent of the world’s population should have internet access by 2020, thanks to the increasing ubiquity of smartphones.
What’s more, people are more likely to respond when they can do so quickly on a mobile device. Plus, mobile’s unique features, such as geolocation, allow for more accurate data collection.
Customer feedback is absolutely paramount to your business’s success throughout its lifetime, and market research is the best way to solicit their input. Using one or more of these four methods of market research, you can validate a new product, service, or business idea, guide your internal decision-making, ensure that your existing customers are happy, and create strategies for attracting new ones.