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Your customers are changing. Are you? PDF Print E-mail
Written by Alixe MacRae   
ImageRecently I've been a participant in a great (never believed I'd say this) government program that grooms prospective entrepreneurs. If you're not aware of the hard cold facts, 80 per cent of business start-ups fail within five years. The success rate for potential entrepreneurs who participate in this particular program is the exact reverse: over 80 per cent succeed.

The key to this success isn't a secret formula; it's a rigorous business plan that devotes fully half the time to in-depth market research.

You may have done significant market research when you opened your business or your latest location, but when was the last time you spent considerable effort knowing who your customer is? Who is buying what you want to sell, where are they, and what do they do?

Every retailer needs a multi-dimensional picture of his potential customer that includes, for a start: age, sex, income, education, family size, ethnicity, home and/or work location. Beyond that does she own or rent her home? Is it an apartment or single family dwelling? Is it a new home or well-established household? What are her estimated, average monthly occupancy costs? What are her and her family's basic behavioural traits? In other words, what are their hobbies (sports, gardening, the arts, among others), their cultural values and their belief system?

Start with a picture of your mother, wife or best friend. Go through this list when trying to find the perfect birthday gift. Then use the same level of analysis to determine the perfect product/service experience for your customer. The result should be a clear understanding of who she is and what she needs, wants and fears. You can't hit a target you can't see.

How do you get this information? There are two basic ways. Secondary information has already been gathered. Some is expensive, but most of it is free.

For example, Statistics Canada has a wealth of information, but takes time to find, collate and organize into something useful for planning. In Toronto, the information by ward is a great place to start.

Another great resource is the web site SuperDemographics - its web site can be found at www.superdemographics.com - which will provide basic information about your trading area without charging a fee. Other resources are industry associations, suppliers, elected representatives, and local organizations such as your own municipality's business improvement area committee or board of trade (sometimes called the chamber of commerce).

One resource you shouldn't neglect is your own customer list (if you don't have one, create one right now!). If you discover that most of the people on your list are over 50 and downsizing, but your market research shows that 80 per cent of your store's potential customers are under 50 and acquiring, it's time for a reality check.

The second type of information gathering is primary. You have to talk to the customer or potential customer. There is an office supply retailer that asks "Did you find everything you were looking for today?" Sadly, in most cases, the asker does not record the answer.

Talking to the customer requires the design of an open-ended script - no ‘yes' or ‘no' answers - that asks hard questions. You need to ask her what she wants. How does she research where to get it? What makes her happy? What is her primary concern? What are her five most important decision-making factors? What is her age? Where does she live? What are her hobbies? What charities does she support? What is she passionate about?

Yes, I'm using "she" because 92 per cent of the decision makers when it comes to purchasing furniture, mattresses and appliances are women.

You could find her in your store, but then you have a very narrow focus - the subject has already shown an interest in what's on your floor and more information than that is needed to complete a truly effective market research project.  Another well proven method would be to post the survey on your web site with a reasonable incentive for completion (a gift certificate often works best).

To get broader and deeper information consider strategic alliances. Partner with other local companies or associations likely share your target market. Ensure the exercise is mutually beneficial and cannot be interpreted as a conflict of interest. Good potential market research partners include real estate agents, restaurants, schools, home renovation companies, garden centres and other firms providing services in your local area.

Keep the number of questions short (ten is good) and leave the demographics to the end (age, income range and just the first part of her postal code). The contact information sought should be minimal as well - ideally, nothing more than either her e-mail address or phone number. The survey form should clearly state your store's privacy policy (only the winner will be contacted, other information will be destroyed unless the responder "opts in").

One more thing: the prize offered should be relevant to the market group being survey and should not require any further expense. For example, a $10 gift certificate for an upscale restaurant is not a prize, it's a small discount. Since the retailer is asking for something of value, offering something of value isn't unreasonable.

Once you've collated the first round of responses (100 is only a start), examine where you are; that is, what you know and determine where the gaps are; that is, what you don't know.

The old (but still valuable) methodology is SWOT (strengths, weaknesses, opportunities and threats). In this exercise, you take your store's offering, the insight you've gained from your survey and the profiles of your primary competitors - if they sell something similar to, or a replacement for, what you sell then they're a competitor - and create a chart. This will tell you what their SWOT is and give a sense of yours. This will allow you to see the differences between you and your competitors. This is the beginning of a plan to take advantage of the gaps.

Yes, there's a lot more. But, after you've completed these steps, you can see the target.

A regular contributor to Home Goods Online, Alixe MacRae is one of this country's best known merchandisers, having held senior positions at a variety of well-known Canadian retailers including Stoney Creek Furniture, Sears Canada and The Bay. She was also a long-time member of the Canadian Home Furnishings Awards jury.

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