Marketing Research
January 10, 2010 | market selection / focus / target
Putting the customer needs or market needs before the company needs is the surest way of developing best practice products for the market. Understanding the voice of the customer (VOC) is crucial and companies that place the customer as the most important member of their team have demonstrated huge successes and revolutionised industries; examples include: APPLE, IBM, EBAY, YAHOO!, MYMUESLI.COM.
A wide range of approaches to market research are available and implementation can be via an external agency, an internal department or some combination of these. While there are important considerations including Political to the resourcing choices, of critical importance to the success of any research initiative is the application of the Scientific Method.
- Define the problem
- Agree the research objective and method with stakeholders (crucial to ensure they accept the results)
- Develop the research plan
- Collect the information
- Analyse the information
- Present findings back to the stakeholders
- Make decisions
Good marketing research takes place within an environment where there is an emphasis on reliable research, creativity, use of several different approaches(triangulation), financial modelling, cost modelling, business modelling, benefit analysis and a healthy does of sarcasm and scepticism, along with an ethical focus.
Secondary data analysis can also be a very valuable source of information, in the UK – the office of national statistics is a free source of information, along with a myriad of third party agencies such as Forrester, Gartner, Mintel, The American Customer Satisfaction Index
Market research without the business model is useless so it is very important to combine the market research workstream with demand forecasting. The process of understanding the likely market demand for a given product or service is known as demand forecasting.
As a commercial enterprise the company is looking for a best practice model that allows the company to deliver value to the customer at a cost to them that delivers an acceptable profit. Not necessarily on each purchase but when looking at customer lifetime value, the return needs to be present.
Customer lifetime value is a very important concept and car sales showrooms often ascribe a CLV – customer lifetime value of several hundred thousand pounds / dollars to a candidate customer when they walk through the door because of the large number of potential new car purchases. Similarly with lower price goods such as hamburgers or newspapers, the lifetime value can still be quite significant and emphasis the important of avoiding supplier churn. Even a simple newspaper for 50p per day such as the Daily Mail, has a customer lifetime value of approximately 50p * 7 days * 52 weeks * 50 years = £9100, this excludes the higher price for weekend issues.
Few companies understand the full cost of delivery and some organisations do apply a costing model to understand the total cost of product delivery, this includes not only the manufacture but also the costs of service visits, telephone queries etc. Sometimes this type of analysis will demonstrate that a large percentage of the company profit is derived from a very small number of customers.
In order to understand the demand for a product or service one must model the market demand, the total possible market and then the demand this company may be able to achieve as a percentage. Referring back to Michael Porter’s model of competitive forces, a company in order to be successful in the market must find a competitive advantage and be able to use its structure to deliver that in a cost effective manner, ideally at a lower cost to themselves than their competitors. In fast moving markets the challenge is that others copy very quickly and it is very hard to find a competitive advantage that others cannot copy easily. Ebay is a good example where many other sites have developed auction systems but few have been able to develop such a large community with such a strong degree of trust that enables transactions to occur between strangers.
The estimation of market and company demand is very hard but surveys of potential customers and collection of forward sales projections and pipeline from the sales team can be very useful although there is no fully reliable method.
