Editor's note: Owen Jenkins is CEO of Kadence Business Research - North America, Framingham, Mass.
I keep six honest serving men
They taught me all I knew
Their names are What and Why and When
And How and Where and Who.
-- Rudyard Kipling
The first part of any research project should be "What do I want to find out?" Working with many different businesses we have noticed that clients often ask similar questions even though the ultimate end user markets are different. For example, the questions asked by a pharmaceutical manufacturer with regard to the threat of generic drugs were similar to those posed by an auto manufacturer concerned about the use of non-OEM auto parts.
Having noticed this similarity we set about identifying the key questions that any client should ask of their market. This wasn't purely an academic exercise. We saw an opportunity to establish a frame of reference to guide all our business research projects. This in turn would help establish a focus for an individual research project and improve decision making by all involved. It would also allow us to offer interviewers insight into the broad direction of fieldwork without revealing details that may bias interviewing. As a final reward it would allow us to audit existing research and identify information gaps.
We arrived at six fundamental questions that should be asked of a market. We phrased them in the future tense (implying that research becomes before marketing activity) and used the term "product" to describe that which is marketed rather than the more cumbersome "product or service." We have also assumed that the client feels personal ownership for the product.
The six questions are:
1. Who will buy my product?
2. Why will they buy my product?
3. Where will they buy my product?
4. When will they buy my product?
5. How satisfied are they after buying my product?
6. What will they buy next year?
Who will buy my product?
Investigating this question requires unraveling two layers of the market: first, the type of organizations that buy the product and second, the specific individuals within the organization who are involved in the purchase.
Defining and quantifying at the organization level starts with secondary research. Organizations can be defined by size (employees or sales), market served (SIC), geographic location and possibly product usage. Primary research may uncover purchasing drivers that lead to need based segmentation.
The investigation of the decision-making process offers a wealth of opportunities for the skilled researcher to help a client. First he must identify all the individuals involved in the process. This may include among others, end users, line management, technical specifiers, designers, financial planners, purchasers and primary decision makers. Then he must understand the decision pathway and the relative roles of the individuals along the pathway.
He must also understand the things that are important to the individuals in the decision. That leads us to the next question.
Why will they buy my product?
All the rational and logical reasons for purchasing can be summarized in four words: quality, price, distribution and service. As a company we have undertaken research that investigated 13 aspects of service in ordering and delivering ceramic tile in one questionnaire.
The real breakthrough, however, comes from acknowledging that there is an equally strong emotional element in business purchasing. People buy something because they have a problem and they think that the product will alleviate the problem. In Chinese the same character signifies the words "crisis" and "opportunity."
Research into purchase drivers often centers on product features. These results can only be truly interpreted if you understand the relevant needs of the market. It is the debate of features versus benefits and, to a lesser extent, needs versus wants.
Overshadowing this entire process is the effect of the brand. Clients often include it as the fifth factor (along with quality, price, distribution and service) for rating purposes. Brand influence can be the sum of them all. It can deliver strong perceptions of price, quality distribution, and service as well as that quintessential element of emotional feeling.
Perhaps the value of a business brand has been underestimated in markets where the salesman is the brand. If more business purchasing moves toward impersonal channels such as the Internet the need for strong business brands increases.
Where will they buy the product?
Most companies rely on intermediaries to distribute or sell their product. Some of these distribution channels have enjoyed a type of limited monopoly through specialized knowledge or physical distribution. With today's "information age" and the growth of more efficient logistics, these limited monopolies are difficult to maintain and the search is on to differentiate themselves through adding value. Computer VARs (value added resellers) for example often sell basic computer equipment at cost, aiming to make money on installation, networking or warranties.
The objective of the researcher in this market is to understand the strategy of different resellers and identify those with similar goals to the client. One potential problem is that the margins on distribution are so tight that distribution channels are obsessed with price and can forget to develop a strategy based upon value. Many of our manufacturing clients are offering their own marketing expertise to their channel partners.
A second observation is that advanced logistics means that trading globally can be as easy as trading locally. This creates larger unified markets. Each geographic market can support a minimum of three and a maximum of six distributor channels for a type of product. Fifty years ago that market may have been a single city; 20 years ago that market was a single state; now that market is all 50 states; tomorrow that market is the world. The growth of category killers and the consolidation of smaller businesses into large groups continues. Perhaps all distribution channels will become global and dominated by a small number of large players. And how many of these will be American-owned?
And what of the role of the independents? We undertake a regular syndicated survey of independent retail pharmacies. It is true that the brand pharmaceuticals are more interested in distribution contracts with the major chains. However generic manufacturers continue to work hard to reduce their reliance on the central buyers. We have also seen the interest of home health care manufacturers in riding the trend toward home nursing.
The independents hold the singular advantage of the distribution channel. They have day-to-day contact with the customer. They conduct a customer satisfaction study every time they try to sell. They are also small and flexible. These are the tools that independents use to counter the buying power and marketing strength of the bigger competitor.
When do they buy?
This question is perhaps the least-researched of the six. It is more than recognizing the seasonal nature of cruise holidays. It is about understanding when a sale is made. That split second when a purchaser, sometimes with no further information, moves from consideration to decision - a time after which, any salesman will tell you, the sale is there to be lost not made.
There are underlying rhythms in business without which we could not use research to predict the future. This rhythm and timing can be also be tracked in a single sale. Those involved in larger business sales such as airplanes or printing presses understand the importance of timing. Sometimes a sale can seem to have a momentum of its own.
If you know the time of a sale then you can build a model of all the influencing factors and the individuals involved. With this information you can help a client design their sales strategy and supporting marketing communications.
How satisfied are they with my product after they buy?
With the cost of a new customer outweighing the cost of keeping an old one by a factor of five it is no wonder that so much money is spent on customer satisfaction research. Some statistics, however, indicate that 60 percent of defecting customers were either extremely or very satisfied according to customer satisfaction measures.
This is because satisfaction is a moving target and difficult to measure. It is heavily influenced by past experience and expectations. Also, once a product meets satisfaction, the level of required satisfaction is raised. Southwest Airlines regularly wins airline customer satisfaction awards because it manages customer expectations.
It is a scientific principle that by measuring something you change it. In all research the effect of the methodology must be taken into consideration when interpreting results. Nowhere is the effect more noticeable than in customer satisfaction. Can we separate the product experience into constituent parts? Further still can we then apply conjoint or trade-off analysis to measure importance and satisfaction with each part?
For a fuller discussion of measuring customer satisfaction I refer the reader to Terry Vavra's Improving Your Measurement of Customer Satisfaction. What I will say is that researchers can learn a lot by passive research, that is, watching and listening to customers and by talking to people in the organization who deal with customers on a daily basis.
What will they buy next year?
The answer lies in anticipating what problems our customers will have next year. The researcher should familiarize themselves with the manufacturing cycles within their industry and the dynamics of their customer market.
Overlaid onto these observations should be political, economic, social and technical influences. Some influences such as the Internet transcend all four. Others fit more easily into one, e.g., the aging Boomers, the eight-year economic expansion and globalization of trade. All, however, are interrelated.
Today's "growing problem" is tomorrow's business opportunity when coupled with a little lateral thinking. Does a gold rush mean a fortune from gold or the fortune Levi Strauss made from supplying denim? Does the IT age mean an increase in decentralized workplaces and telecommuting or does it signal the rebirth of large population centers where the density of businesses allows for optic fibers to be laid to every door?
It is a cliché to say that research is about asking the right questions. We hope that our questions can help frame others. If you have any suggestions or your own list of questions please send them to me (my only condition is that there must be more than three and less than 10!).