Approach Market Segmentation The Customer-Driven Way  

Most of the business world embraces the concept of market segmentation, the strategy of identifying and targeting the best, most promising parts of your general market.  That, of course, implies choices.

Like Rodney Dangerfield, market research all too often just "don't get no respect."  Managers dismiss it with an assortment of rationalizations:

"Research just adds expense and wastes precious time in getting to market."  (Would you really prefer to risk bringing the wrong product to the wrong market with the wrong messages just to save a relatively small amount of money and time?)

"We've been in our markets for years and already know our customers."  (Perhaps you know who they are, but do you really know what they are currently thinking, planning, needing, and why?)

"We conduct mail surveys and have analyst reports that tell us what we need to know."  (But just how specific, objective, relevant and, most of all, actionable is the information they provide?)

Properly designed and executed market research can be an invaluable tool to help launch or re-energize your business, no matter how modest.  It enables business strategy to reflect a thorough understanding of the current needs, issues and perceptions behind individual customer behavior.

But what makes for "good" market research – information that can be reliably acted upon?  Research first must deliver information that is current, in-depth and customer-centric.  Only qualitative, not quantitative, research can achieve that.

Quantitative research, by its very nature, looks superficially at large sample sizes.  Whether conducted by publications or market research firms, such research examines past market activity to extrapolate future sales.  It solicits choices from simple menus to create relative rankings and subjective evaluations.  Such published studies are useful for coarse market sizing and confirming popular market trends statistically.  But no matter how large, they are too generalized and shallow to get at the root of issues, perceptions and purchase behavior.

Qualitative research, by contrast, explores in narrative fashion the perceptions, preferences and reasoning of individual customers and those who influence them -- the "whys" behind their market views and decisions.  It also focuses more on future market activity as a function of customer-expressed needs and priorities, identifying market issues and opportunities in the process.  Most important, it's truly actionable.  Yet it cannot replace quantitative research as a basis for sizing market potential or making pro forma projections.

The takeaway is simple.  Successful marketing is like intercepting a target – you aim where the target is going to be, not where it is now.  Only qualitative research provides that invaluable sense of market direction.

But "good" market research must also be accurate and objective.  That means not only must research questions and methodology be free of bias, but so must the interviewer.

To save time and money, many companies have employees, especially sales representatives, conduct research.   But that almost always destroys objectivity and generates flawed information.  Sales people by nature want to sell -- talking rather than listening, trying to influence customers and overcome objections.  For their part, customers and other interviewees predictably react in subdued fashion to perceived sales calls, becoming more guarded and less complete in their responses.

Companies can promote objectivity by having a "disinterested" third party conduct market interviews using sound procedures and a carefully designed questionnaire or discussion guide.  This third party might be some informed individual outside the company, a market research firm, or at the very least, an employee totally removed from the business unit and markets in question.

Done properly, qualitative market research remains one of the most powerful, yet underused strategic weapons in your company's arsenal.  Just know what to expect of it:  Research can't predict the future – that is, which technologies and products will win in the marketplace, since that depends on many factors.  But research can reveal the customer values, priorities and decision-making process that will determine the winners.

by James R. Helbig as published in ICCB

9/19/2000