How much of your research should be with customers?

Posted 9 May 2013

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One of the questions I am frequently asked about insight communities is ‘Why are most of them composed solely of customers?’ ‘Surely’, some people ask, ‘we should be conducting market research with the whole market?’ My feeling is that this question fails to recognise how much market research has changed over time.
Over the thirty-five years I have been in the research industry there have been quite a few changes, in terms of technology, organisation, methods etc. One of these changes has been a major shift from researching whole markets to focusing research on customers.

If we look back at the 1970s and early 1980s, most market research was conducted with the whole market. But that approach reflected the times. There were fewer products, fewer brands, and fewer channels for advertising. Markets were less mature, brands were establishing themselves, they often had genuine product differences, and market researchers were like explorers, mapping an unfamiliar land.

Moving to the later 1980s and the 1990s we see a shift to researching target groups and customers. Ad and brand tracking focused on target groups, customer satisfaction focused on customers. Concept and product testing, which had previously used whole market samples, started to focus on heavy users versus light users versus non-users. In the market place, the number of brands and lines had grown, product advantages were proving to be illusory or temporary, and the battleground was shifting to logistics, sourcing, and image based advertising.

Since 2000 the focus in marketing has moved on again. Most brands manage to achieve product and service and advertising parity. Organisations have become much smarter about calculating the cost of customer acquisition, lifetime value, and the problem of churn. For many brands the issue has become increasing share of throat, size of shopping basket, and total usage. The focus in much of the business literature is to use customers, and co-creation, as a key source of competitive advantage. Forrester has even been advocating the customer obsessed organisation.

The writings of authors such as Mark Earls (Herd) and Rijn Vogelaar (The Superpromoter) have highlighted that brands tend to succeed through social copying, rather than through non-users being ‘persuaded’ by marketing or advertising. In many cases the best way to grow a brand is to increase the number of customers who ‘love’ it, because these people will recommend it, use it ostentatiously, and offer it in group settings. In most cases, a new line, a new campaign, a new service will only succeed if existing customers respond positively to it.

Given the shift from the whole market to customers in the wider research world, it is not surprising that most insight communities focus on customers. There is a community of interest between a brand and its customers, they all benefit if the products and services are improved. Customers know about the strengths and the weaknesses of the brand, they are in a position to give insight into where the brand should go next.

What proportion of research should be with customers?

For most brands and services (I will mention some exceptions in a moment) my feeling is that about 80% of research should be with customers. This would include measuring satisfaction, usage, testing product and service concepts, product and service refinements, and co-creating the future.

The 20% conducted with the wider market would include market sizing, mapping needs in the market, and competitive intelligence (for example why do users of competitive brands use that brand).

This 80:20 prediction is based on two key points:

1. The brand is most likely to grow through social copying/recommendation/word of mouth.
2. Most good ideas for the brand will be seen as good ideas by customers.

The exceptions?

The main exception to the 80:20 rule is where the main focus is to massively grow the number of users, either from a zero start (a product launch) or from a very small base. Examples of this situation would include Apple when it launched the iPod, iPhone, and iPad. When these products were launched Apple had no customers in these segments, and the users of existing MP3 players, smartphones, and tablets were not their primary target – so researching customers was not a viable strategy.

In summary

Most brands and services focus on customer retention, providing the right products and services to delight their customers. The thinking behind Fred Reichheld’s Net Promoter Score is based on data that shows that brands that do well have more people who recommend them. A key finding from Andrew Ehrenberg’s double-jeopardy model is that dominant brands have customers who are more loyal.

Most market research, for most brands, most of the time, should focus on customers. This customer focus is one of the key reasons why insight communities are currently so popular. Insight communities are not pushing brands to focus on customers; the focus on customers is pushing brands and organisations to use communities.