Who are you selling to: How knowing your target can save your business!
In a recent conversation with Stirling Murray, CEO of The Red Tree Consultancy we discussed success criteria for businesses who wish to expand into new beauty markets. They may wish to enter the UK or Europe or grow by developing their brand portfolio or adding something new and different to their marketing strategy. One of the reasons for failure we concluded is a lack of knowledge of who the business actually wanted to attract.
Consumer or customer research is the art of knowing your target’s habits and preferences; it is not just a one off activity you do when you start up and then forget. You have to maintain your understanding of your customer’s behaviours as their moods and tastes change and evolve.
Reasons you should carry out consumer research include:
- Identifying potential customers
- Understanding the needs of your existing customers
- Setting realistic targets for the introduction and growth of new products
- Developing and selecting effective strategies in pricing and distribution
- Solving business problems (e.g. why customers aren’t buying your products anymore?)
- Preparing for business expansion (testing a new location to see if there is a big enough market for your product or service.)
- Identifying opportunities.
A study by the Harvard Business Review found that brand managers and entrepreneurs launching ‘revolutionary’ products always seek help of one kind or another. But when questioned about what research they had done to support the production and release of their products they found that many of them hadn’t done any Market Research because they believed they ‘knew what works and was safe.’
More than 50% of new start-ups fail within their first year and the attrition rate continues at a similar level for 3 years. And even major global business’s -who should know better – report that around 75% of retail products fail to achieve the $7.5 million mark with the first year of launching and less than 3% of new consumer packaged goods exceed first-year sales of $50 million—considered the benchmark of a highly successful fully invested global launch.
The same research states that many families repeatedly buy the same 150 items which constitutes 85% of their household goods. So in order to break this routine and make them buy ‘your’ product a detailed understanding of your consumer target group is absolutely essential.
Is there a place in the market for it?
In 2002 Coca-Cola released a drink – C2 – with a $50 Million advertising campaign. C2 was designed to be a hybrid between the original Coca-Cola and Diet Coke with the same taste as the original Coke and half the calories and carbohydrates like Diet Coke.
However, customers within the target market of 20-40 year old males didn’t think the benefits were significant enough to warrant purchasing it and the product was soon rejected and removed from store shelves. An expensive failure and avoidable failure for one of the worlds biggest company’s
Can the consumer easily see how to use the product?
In 2004 P&G launched a scent “player” that looked like a CD player and emitted scents every half an hour. In an attempt to increase initial sales through endorsements they hired Shania Twain to advertise the product.
This unknowingly confused customers into thinking the product was a music player, an air freshener or some horrifying combination of the two. As a result the product named ‘ScentStories’ failed.
If they had completed market research with prototypes trialled and tested on the public they would have realised that it was confusing. They could have created a better marketing strategy that was less ambiguous and more appealing.
The importance of carrying out research is to produce items that customers actually want rather than producing items that you want to sell with unfounded hope that someone, somewhere will buy them. You can avoid an immense amount of risk just by studying what your customers want.
Without undertaking proper market research it is not possible to establish whether there is a place in the market for your business. Questions to ask include: has somebody beaten you to it and launched something similar? Did that work? And if there is enough demand for it, do you know exactly how to find those who are interested in it?
Importantly, market research can help you find out exactly what price you should be putting your products or services at. If you make it too expensive you won’t sell enough, make it too cheap and at best you will run out of stock and at worse find your product in a low price positioning that’s impossible to change.
Market research will help make your business everything it deserves to be.
As the marketing genius David Ogilvy said:
“Advertising people who ignore research are as dangerous as generals who ignore decoded enemy signals.”
Sabine Lohmann, Director of InsightsResearch at Sabinelohmann@insightsresearch.eu
Stirling Murray, CEO of The Red Tree at email@example.com