Market research for Dollar Stores and other Retail
Saturday March 13, 2010
Market research for Dollar Stores and other Retail
RESEARCHING YOUR MARKET
TABLE OF CONTENTS
INTRODUCTION
TRASH AND PEANUTS
WHAT IS MARKETING RESEARCH?
WHY DO IT?
HOW TO DO IT
Define the
Problem (or Opportunity)
Assess Available
Information
Gather Additional
Information
Outside Data
Organize and
Interpret Data
Make a Decision
and Take Action
Assess the
Results of the Action
What You Can do
Do, Don't Overdo
INTRODUCTION
To be successful, a small business must know its market.
Marketing research is simply an orderly, objective way of
learning about people -- the people who buy from you or might buy
From you.
This publication provides an overview of what market research is
and how it's done. It introduces inexpensive techniques that
small business owner-managers can apply to gather facts about
their customers and the people they'd like to have for customers.
TRASH AND PEANUTS
Some marketing research material is nothing but trash. Marketing
research can be done for peanuts -- even with peanuts. Shocking
statements? Perhaps, but both of them are literally true.
Take trash, for instance. Inspection of outgoing waste is a
practice at many small restaurants. People may order the Flounder
a la Marzipan because of the novelty of the dish; but if a
restaurateur finds most of it leaving the table uneaten, it had
better come off the menu because it won't be in demand much
longer.
You can use trash positively, too, to find out what people like.
It may not be very dignified to check trash cans for cartons and
containers, but they are a direct indication of what consumers
are buying. You could also find out what competitors are selling
(or at least ordering) by checking their trash
The point here isn't to turn you into a scavenger, but to suggest
that marketing research isn't necessarily only done by
sophisticated staffs of statistical technicians working with
powerful computers and grinding up figures from elegant surveys.
Marketing research doesn't have to be fancy and expensive.
It can be done with peanuts, as one creative discount
merchandiser discovered. During a three-day promotion the
merchant offered customers . . . all the roasted peanuts you can
eat while shopping in our store. By the end of the promotion the
merchant had litter trails that provided information on the
traffic pattern in the store. Trampled peanut hulls littered the
most heavily traveled store aisles and heaped up in front of
merchandise displays of special interest to customers. By
studying the trails, the merchant learned where customers went in
the store and what they wanted.
WHAT IS MARKETING RESEARCH?
Basically, marketing research is just what the merchant did with
the peanuts. Find out what catches customers' attention by
observing their actions and drawing conclusions from what you
see. To put it more formally, in the words of the American
Marketing Association, marketing research is the systematic
gathering, recording, and analyzing of data about problems
relating to the marketing of goods and services.
Marketing research is an organized way of finding objective
answers to questions every business must answer to succeed. Every
small business owner-manager must ask
*Who are my customers and potential
customers?
*What kind of people are they?
*Where do they live?
*Can and will they buy?
Am I offering the kinds of goods or services
they want
--at the best place, at the best time
and in the right amounts? Are my prices consistent with what buyers
view as the product's value?
*Are my promotional programs working?
*What do customers think of my business?
*How does my business compare with my
competitors? Marketing research is not a perfect science; it deals with people
and their constantly changing likes, dislikes and behaviors,
which can be affected by hundreds of influences, many of which
cannot be identified. Marketing research does, however, try to
learn about markets scientifically: to gather facts and opinions
in an orderly, objective way; to find out how things are, not how
you think they are or would like them to be; to find out what
people want to buy, not just what you want to sell them.
WHY DO IT? It's tough -- impossible -- to sell people what they don't want.
(Remember the New Coke problem?) That's pretty obvious. Just as
obvious is the fact that nothing could be simpler than selling
people what they do want. Big business does marketing research to
find out what consumers want. Small business needs market
research too.
For once, small business holds an edge. The giants hire experts
to define the mass market in which they sell. Owner-managers of a
small business are close to their customers; they can learn much
more quickly about customers' likes and dislikes and buying
habits.
Small business owners often have a feel for their customers
--their markets -- that comes from years of experience. But
experience can be a two-edged sword, as it includes a tremendous
mass of information acquired at random over a number of years,
information that may no longer be timely or relevant to making
selling decisions. In addition, some facts may be vague,
misleading impressions or folk tales of the everybody knows that
variety.
Marketing research focuses and organizes marketing information.
It ensures that such information is timely. It provides what you
need to Reduce business risks.Spot problems and potential problems in your
current market.
Identify and profit from sales opportunities.
*Get basic facts about your market to help
you make better ecisions and set up plans of
action.
HOW TO DO IT
You probably do some market research every day, without being
aware of it, in the course of your routine management activities.
You check returned items to see if there's some pattern. You run
into one of your old customers and ask her why she hasn't been in
lately. You look at a competitor's ad to see what that store is
charging for the same products you're selling.
Marketing research simply makes this process more orderly. It
provides a framework that lets you objectively judge the meaning
of the information you gather about your market. The flowchart
shows the steps in the marketing research process.
Market Research: The Process
Define the problem (or opportunity).
Assess available information.
Gather additional information, if required.
Review internal records and files; interview employees.
Collect outside data (secondary and primary).Organize
and interpret data. Make a decision and take action.Assess the
results of the action.
Define the Problem (or Opportunity)
Defining the problem (or opportunity), the first step of the
research process, is so obvious that it is often overlooked, yet
it is the most important step. You must be able to see beyond the
symptoms of a problem to get at the cause. Seeing the problem as
a sales decline is not defining a cause, it's listing a symptom.
To define your problem, list every possible influence that may
have caused it. Have your customers changed? Have their tastes
changed? List the possible causes. Eliminate any that you don't
think can be measured, because you won't be able to take any
action on them.
You must establish an idea of the problem, with causes that can
be objectively measured and tested. Look at your list of possible
causes frequently while you're gathering your facts, but don't
let it get in the way of the facts. (Incidentally, although this
publication speaks of problems, the same techniques can be used
to investigate potential opportunities.)
Assess Available Information
Once you've formally defined your problem, assess the information
that is immediately available. You may already have all the
information you need to determine if your hypothesis is correct,
and solutions to the problem may have become obvious in the
process of defining it. Stop there. You'll be wasting time and
money if you do further marketing research.
What if you aren't sure whether or not you need additional
information at this point? What if you'd feel more comfortable
with additional data? Here you must weigh the cost of more
information against its usefulness. You're up against a dilemma
similar to guessing in advance your return on your advertising
dollar. You don't know what return you'll get, or even if you'll
get a return. The best you can do is to balance that against the
cost of gathering more data to make a better informed decision.
Gather Additional Information
In gathering information, think cheap and stay as close to home
as possible. Before considering anything fancy, such as surveys
or field experiments, look at your own records and files. Look at
sales records, complaints, receipts and any other records that
can show you where you customers live and work, and how and what
they buy.
One small business owner found that addresses on cash receipts
allowed him to pinpoint customers in his market area. With this
kind of information he could cross-reference his customers'
addresses and the products they purchased, to check the
effectiveness of his advertising.
Your customers' addresses can tell you a lot about them. You can
pretty closely guess their life-styles by knowing their
neighborhoods. Knowing how they live can give you solid hints on
what they can be expected to buy.
Credit records are an excellent source of information about your
markets. In addition to customers' addresses, they give you
information about their jobs, income levels and marital status.
Offering credit is a multifaceted marketing tool, although one
with well-known costs and risks.
When you've finished checking through your records, turn to that
other valuable internal source of customer information: your
employees. Employees may be the best source of information about
customer likes and dislikes. They hear customers' minor gripes
about the store or service -- the ones the customers don't think
important enough to take to you as owner-manager. Employees are
aware of the items customers request that you may not stock. They
can probably supply good customer profiles from their day-to-day
contacts.
Outside Data Once you've exhausted your internal sources for information about
your market, the next steps in the process are to do primary and
secondary research outside.
Secondary Research
Secondary research involves going to already published surveys,
books, magazines and the like and applying or rearranging the
information in them to bear on your particular problem or
potential opportunity.
Say, for example, that you sell tires. You might guess that sales
of new cars three years ago would have a strong effect on present
retail sales of tires. To test this idea you might compare new
car sales of six years ago with replacement tire sales from three
years ago.
Suppose you found that new tire sales three years ago were
10 percent of the new car sales three years before that.
Repeating this exercise with car sales five years ago and tire
sales two years ago, and so on, you might find that in each case
tire sales were about 10 percent of new car sales made three
years before. You could then logically conclude that the total
market for replacement tire sales in your area this year should
be about 10 percent of new car sales in your locality three years
ago.
Naturally, the more localized the figures you can find, the
better. For instance, there may be a national decline in new
housing starts, but if you sell new appliances in an area in
which new housing is booming, you obviously would want to base
your estimate of market potential on local conditions. Newspapers
and local radio and TV stations may be able to help you find this
information.
There are many sources of secondary research material. You can
find it in libraries, universities and colleges, trade and
general business publications, and newspapers. Trade associations
and government agencies are rich sources of information. Go to
your public library and ask for a copy of GALES' Directory.
Primary Research
Primary research on the outside can be as simple as asking
customers or suppliers how they feel about your store or service
firm or as complex as the surveys conducted by sophisticated
professional marketing research firms. Primary research includes
among its tools direct mail questionnaires, telephone or
on-the-street surveys, experiments, panel studies, test
marketing, behavior observation and so on.
Primary research is often divided into reactive and nonreactive
research. The peanut shell study at the beginning of this
publication is an example of nonreactive primary research: it was
a way to see how real people behaved in a real market situation
(in this case, how they moved through the store and which
displays attracted their attention) without influencing that
behavior even accidentally.
Reactive research (surveys, interviews, questionnaires) is what
most people think of when they hear the words marketing research.
It is best left to the experts, as you may not know the right
questions to ask. There's also the danger that people won't want
to hurt your feelings when you ask their opinions about your
business, or they'll answer questions the way they think they are
expected to answer rather than telling you how they really feel.
If you can't afford high-priced marketing research services, ask
nearby college or university business schools for help.
Organize and Interpret Data
After collecting the data you must organize it into meaningful
information. Go back to your definition of the problem and
compare it with your findings. Prioritize the data with the most
significant at the top.
What strategies are suggested?
*How can they be accomplished?
*How are they different from what I am doing
now?
*What current activities should be increased?
*What current activities must I drop or
decrease in order to devote adequate resources to new
strategies?
Make a Decision and Take Action
Prioritize each possible strategy from the standpoint of
*Immediate goal to be achieved
*Cost to implement
*Time to accomplish
*Measurement of success Your research may have suggested ten possible strategies.
Select
the two or three that appear to have the greatest impact
potential or are most easily achievable.
For each strategy, develop tactics.
*Staff responsibility
*Steps necessary
*Budget allocation
*Time line with deadlines for accomplishing
strategy steps
*Progress measures For example, if a company newsletter on industry trends is
selected as a strategy, the tactics would include
*Appointment of an editor
*Product decisions Frequency (monthly, quarterly, annual)
-- Format (size, number of pages, design, paper, ink,graphics/illustrations)
Production (in-house desktop publishing or commercial printer)
-- Distribution (mailing lists -- customers, suppliers,
chamber of commerce, trade groups -- or piggybacking on
other publications such as newspapers)
*Budget allocation
*Controls (content and accuracy approval)
*Time lines (for implementing each tactic;
for completing each edition)
*Progress measures (return survey with first
edition, mailed survey following first edition, telephoned survey)
Make a final decision on the strategies and go to work on the
tactics.
Assess the Results of the Action
Analyze your progress measures. If adjustments are appropriate,
make them. At the conclusion of the time you have allotted for
accomplishing your goal, take a hard look at the results.
*Did you achieve your goal?
*Should the decision be renewed on a larger
scale?
If you are disappointed in the results, determine why the plan went awry.What You Can Do
Marketing research is limited only by your imagination. Much of
it you can do with very little cost except your time and mental
effort. Here are a few examples of techniques small business
owner-managers have used to gather information about their
customers.
Discover Your Local Library
Large companies generally have a wealth of data available on many
business problems. Smaller companies often ignore such data
because they are unaware of its existence, although it may be as
close as next door.
License Plate Analysis
In many states license plates provide information about where the
car's owner lives. You can generally get information from state
agencies on how to extract this information from license numbers.
By taking down the numbers of cars parked in your location you
can estimate your trading area. Knowing where your customers live
can help you aim your advertising for good effect. Or you might
analyze your competitors' customers and direct your advertising
to try to win them for your business.
Telephone Number Analysis
Like license numbers, telephone numbers can tell you the areas in
which people live. You can get customers' telephone numbers on
sales slips, from checks and credit slips and the like.
Coded Coupons and Tell Them Joe Sent You Broadcast Ads
You can check the relative effectiveness of your advertising
media by coding coupons and by including phrases in you
broadcast ads that customers must use to get a discount on a sale
item. This technique may reveal what areas your customers are
drawn from. Where they read or heard about the discount offered
in your ads will also give you information about their tastes.
People Watching
You can learn a great deal about your customers just by looking
at them. How are they dressed? How old do they appear to be? Are
they married? Do they have children with them? Most
owner-managers get a feel for their clientele in just this way.
Run a tally sheet for a week that keeps track of what you're able
to tell about your customers from simple outward clues. It might
confirm what you've assumed, or there might be surprises.
Customer Comment Cards
Give cards to your customers that solicit their opinions about
your business. Ask customers to drop the cards off before they
leave or mail them to you. Analysis of this information can help
you spot potential problems and identify opportunities to
increase customer satisfaction.
Do, Don't Overdo
The key to effective marketing research is neither technique nor
data -- it's useful information. That information must be timely;
your customers' likes and dislikes shift constantly. You'll never
know everything about a particular problem anyway. It's much
better to get there on time with a little than too late with a
lot. If you spend too much time gathering too much data, going
for a sure thing, you may find your marketing research is nothing
but trash.