When you’re launching a product or considering new markets, do you perform market research before moving ahead? If you do, then are you really listening to the results, or just looking for results that support what you’ve already decided to do?
“Companies that I have seen that conduct their own research sometimes get caught looking for data points to support what they want to do rather than looking for data points to validate their ideas,” says John Moore, managing director — strategic marketing programs, with Skoda Minotti’s Strategic Marketing Group. “Market leaders truly embrace market research, and when they do get results that don’t support their position, they change their strategic direction.”
Smart Business spoke with Moore about the market research process and the times when it is critical to engage in it.
When are key times to conduct market research?
Before you start a business, you need to look at total strategy development, with research as a component of the plan. You need to know your markets, who your customers are, who the competition is, what price points you can use to position your product, and what sales channel you should use. Answers to these questions are all gained through market research, by digging into data, using industry reports, accessing online data, using government information, conducting face-to-face focus groups and phone surveys, and attending industry trade shows.
Market research provides you with the base to develop the strategy and provides direction for moving forward. But as you continue, you may find that you need to change your strategy. For example, you may find a business similar to the one you want to start so you may decide an acquisition is a better path than a startup.
Although there are ways to ‘mine’ the data yourself, it’s sometimes better to have an outside party involved to validate your plan and help you develop a strategy. Having that outside research partner gives you input from someone who may see something you are overlooking because of a bias. An outside research partner may minimize ‘group’ think and may provide a different view when looking at the same data.
How can market research help with the launch of a new product?
Before developing a new product, a market researcher should be involved from the development of the idea through all the stages of the product development cycle. This includes from design to marketing to sales. For example, if a company has an idea, market research can help validate and define market potential. Basic questions will be answered. Will anyone buy the product? How will it be used? What features should be included that benefit the customer? How should it be priced? How will it get to market?
In fact, in the initial research, you may find the product isn’t needed. For example, a sales group suggested a new product, but the company wasn’t sure it could allocate the engineering design resources. In this instance, the marketing partner surveyed customers regarding the features and functions of the new product. In the end, the customers said they didn’t need the features. This research saved the business a significant amount of money in engineering resources, freeing those people to perfect products the company already had. This is what the customers wanted.
Another example of market researching being used to validate a new product involves a product being developed for the fire industry. Focus groups helped to shape the idea for the product and then broader population of fire chiefs evaluated it. From that research, a prototype was developed and sent to fire departments for beta testing, and it was then sent to a university to test according to established industry criteria. After each step, the process was stopped and evaluated to determine if it should continue. The product launch was successful. Had it not gone through all of those stages, the company could have gone to the considerable expense of developing a new product that nobody wanted.
How can market research assist in determining a new market?
You should know where your competition and your customers are located. You should map where your customer base and potential customers are. Then you need to ask: Do I have the proper support? Do I need channel partners to sell to this new area? Do I have the direct sales team to support this new area? You also need to consider regional pricing issues. Take the time to look at the strategy you want to implement, find additional data, and if it’s a significant opportunity, go to the area to look around and talk to local officials and the chamber of commerce.
How can partnering with a market research professional improve the process?
A market research professional can help you determine possible results before you even get started. A research professional can also help you establish your objectives. Are you looking to grow sales revenue, reduce costs, increase brand awareness and recognition, or take market share from a competitor?
They will help you dig in to what you do well and what needs improvement. They should provide a collaborative environment and work closely with you, treating every decision as if it was a decision they had to make themselves for their own business. At the end of the day, that person is telling a story to your business. It may not be a story that you want to hear, but it includes all the facts, allowing you to make an informed decision to grow your business.
John C. Moore is managing director – strategic marketing programs, with Skoda Minotti’s Strategic Marketing Group. Reach him at (440) 449-6800 or firstname.lastname@example.org.
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A realistic and in-depth understanding of who a company’s customers and prospects are is the foundation on which all business and marketing strategy is built.
“Many times entrepreneurs have an intuitive sense of who their customers are — and this should not be discounted; however, as a company grows, that perception can become detached from reality,” says Wes Phillips, agency principal at Orange Label Art + Advertising. “Therefore, companies need a system in place that not only identifies the quantitative and qualitative profiles of prospective customers but also identifies the types of messages they will respond to.”
“This understanding helps a company develop powerful messages that reach the right people and motivates them to take action so you can increase sales and generate greater profits and more market share,” adds Rochelle Reiter, also an agency principal at Orange Label Art + Advertising.
Smart Business asked Phillips and Reiter how companies can better understand their customers and prospects and leverage this knowledge to increase the bottom line.
How does a company go about gathering market research?
Depending on the size of the company and resources available, there are many ways to obtain this information. The main types available include formal market research, focus groups, online market research and informal research. The first step is to determine which method is most appropriate for the specific business and current circumstance. This can be done by meeting with various market research companies and or marketing firms to get a sense for what is available.
What are the main forms of market research?
The traditional approach, which requires a significant budget, is to conduct formal market research. This approach requires investment in terms of time and money. It will take 3 to 12 months to gather the data and incorporate the findings into a marketing plan. It also will require a commitment from the senior management team to support the research, because many times the findings will be contrary to preconceived notions they may have.
Another faster, more economical way to gather information is to use focus groups. Focus groups should be facilitated by an outside resource. The data may not be statistically valid, but it is still highly relevant and actionable and the results can be known quickly.
Online market research is another option. The advantage is that the research can be completed very quickly. Companies should take caution with this approach, though, as there is some uncertainty regarding the validity of the responses. Or the questions may be so objective that subjective issues, which can surface when using a more one-to-one approach, may be overlooked.
Small and medium-size businesses often find it difficult to implement formalized and statistically valid studies and/or focus groups. Another approach is to interview 20 to 30 existing customers and 20 to 30 prospects, asking the two groups the same set of questions. This method is commonly known as informal market research. Two questions that every company should ask existing customers are ‘What would you never change?’ and ‘What would you change if you could?’ Respondents will give real-time responses, in their own words, regarding what they like about the product or service, why it’s working for them and the benefits they’re experiencing. They’ll also reveal what’s not working, why it’s not working and the missing benefits. From this information, a company’s marketing and/or creative director will be able to identify the words or phrases that are being used over and over, the way benefits are being described and the recurring themes and messages, and take that information to creatively position the emotional selling message and select the right types of media.
What should the company do when the research is finalized?
The research needs to be incorporated into the company’s strategic marketing plan, which can be produced by the internal marketing department or an outside advertising/marketing firm. The strategic marketing plan includes a communication strategy that defines the creative messaging, the media vehicles used to deliver the messages, the frequency for delivery and the desired results.
How will the data impact strategic marketing decisions?
The data acts as a catalyst for the messaging — so it impacts the entire communication strategy. It also informs how the messages are developed, guides and directs the words and images that are used, influences the media that will be used to communicate the messages and helps to determine how much budget should be allocated to achieve successful results.
What is the impact on the bottom line when businesses understand their prospects and customers?
Research will provide information that, if used, will make a company more successful. Sometimes research surfaces insights that are unexpected and may initially appear to be negative. It may reveal that a product’s real benefits are not what were initially believed. This is powerful information because it provides insight into areas that can be managed before it’s too late (e.g., perhaps the R&D budget needs to be increased or the sales department requires additional resources). This insight allows a company to go back and revisit a product or service to evolve or enhance it and improve its competitive edge. Other times, conversations with customers and prospects may provide entirely new insights to evolve messaging to stay relevant and competitive.
Ultimately, the goal is to achieve a higher ROI on marketing investments (i.e., obtain more leads that convert to sales at higher profit margins). Higher margins mean a company can afford a better sales team and better distribution channels and can provide better returns to shareholders.
WES PHILLIPS and ROCHELLE REITER are the agency principals of Orange Label Art + Advertising. Reach them at (949) 631-9900 or email@example.com or firstname.lastname@example.org.
Armed with the knowledge of a financial analyst, Charles Chanaratsopon knows what makes a successful business and how to manage that success. In 2004, he took that knowledge and applied it to an advantageous investment market and founded Charming Charlie, a women’s boutique and accessories store.
“I saw an opportunity, not only in an operating store but also in the realty business,” says Chanaratsopon, founder and CEO. “The capital or investment market was very frothy. So you could quickly develop shopping centers on leverage and build quickly.”
Deciding to break into the market for women’s accessories, Chanaratsopon saw an opportunity for big growth with little competition, and his plan has worked. Since 2008, Charming Charlie has been opening new stores at a furious pace, and today, it is one of the fastest-growing private companies in the country.
“The operating business had a lot of demand,” Chanaratsopon says. “A lot of customers were coming in and buying product from us. We had lines outside every day before the stores opened. People just loved the product. I wanted to figure out a way to grow even faster.”
For the last six years, that’s exactly what he has gone out and accomplished. He knew that with the right mix of employees, strategy and innovation, Charming Charlie could be big.
“From the very beginning, when we had three stores, I always thought we had the potential to be all over the country,” he says. “People always talked about how I had big aspirations and thought I was crazy, when at three stores, I thought we could be all over the country. Now we are all over the country, and I think we could be all over the globe.”
Listen to the consumer
Chanaratsopon saw an opening in the market for women’s accessories, due to a lack of stores that strictly focused on accessory needs instead of clothing. Only large department stores offered those products to women.
“Once we saw what the market looked like, we knew we had an opportunity to create a specialty store around it,” Chanaratsopon says. “We saw it as an opportunity that we could exploit, so we did.”
As Charming Charlie took off in the Houston area, Chanaratsopon knew he could grow the business quickly if he continued to offer what customers were looking for and wanted to see in the store.
“That thesis worked out and held very well for the first two or three years,” Chanaratsopon says. “As we opened stores, stores were very busy and business picked up. We went out and built another center and then another center and went out and did it again and again. As we focused on listening to the customer and building our team out, that was basically the steps for our success.
“The key thing is, you need to listen to your customers before you break into a market,” he says. “You can’t really go until you do a market feasibility or market study about what they need. Does it make sense for Charming Charlie to come; do they like the concept? We always explore to see what opportunities are out there before we do a big push. We test the different markets to see if the concept will work. Our concept is very portable, so we are able to now move quickly through the different markets.”
It’s all about making sure there is a net demand for what you sell, before you go out and start something.
“I think that is just moral hazard,” he says. “Whatever you plan, plan on not meeting it. Have a worst-case, base-case and an upside-case plan, because most of the time, it’s very unpredictable in the beginning. You have to mitigate the downside and make sure that you have contingency plans if things don’t go well in the beginning, because capital will be a constraint.
“In our first year or two as we solidified our playbook, we had a lot of key takeaways in ‘learnings’ and mistakes. So before we could go out and do a cookie-cutter approach, it took us a few years to make sure we had the right recipe for success.”
Everything starts and ends with the customer.
“My best advice is to go out and learn the customers, and make sure there is a need before you go out and build anything,” he says. “You survey your current customers and your noncustomers, and you ask them questions about what you can do better to improve. At the end of the day, our boss is the ultimate shopper. We just listen — that’s what we do. I don’t mean to make it sound so simple, but it is. We listen to what they need, and we do it, often. We spend a lot of money listening to their needs, and we try to give them what they want.
“We are not a tech company or a research group. We sell on experience and what we do is listen to our customer and make sure we deliver the best that we can, and that’s our mantra.”
Innovate and adapt
Growth in any industry naturally causes issues that must be overcome. The higher the rate of growth, the quicker a company has to adapt to that growth in order to succeed.
“You’re running at red line all the time,” Chanaratsopon says. “What I mean is when your car is running at 6,000 rpm, to get everybody used to running at that speed and understand what you’re doing is challenging. Not many companies grow this quickly, and that’s evidence that shows the percentage of retailers that can actually go out and do what we’re doing [is small].”
Charming Charlie has seen revenue grow from $9.2 million in 2006 to $51.9 million in 2009, a three-year growth rate of 463 percent. Chanaratsopon expects 2010 revenue to be around $140 million, and he realizes just how special his success has been.
“The odds are against you,” he says. “Five percent of businesses make it, and 5 percent of businesses only make it to $5 million. A very low percentage of businesses make it to a critical mass. So it’s very challenging to move at the current pace we are doing. It’s also very hard to change the mindset of your team when you’re managing three stores to now managing 100 stores. Your management team has to be open to change. When you don’t innovate and adapt to the business, I view it as binary. Either you innovate and you win, or you lose. There’s no common ground these days.”
In today’s economy, innovation and adaptation are very important to a company’s success. Chanaratsopon pointed to the examples of Linens ‘N Things and Circuit City, both of which went out of business within the last few years.
“That’s one of the great things about American capitalism,” he says. “You’ve got to be very sharp and very on, or there’s no room for you. You have to have the mindset to implement your information technology ahead of time and to plan for that is very challenging.
“You need an ability to split up what’s needed during your day-to-day part of the business. You also need to be cognizant of planning for the future and future roadblocks. You need to be able to set up radar or a systematic view for upcoming issues and be ahead of the curve. Have a cognizant view of how you spend your time between your short- and long-term strategy. Depending on what your long-term strategy is, set a blueprint to that plan and measure yourself constantly so you hold yourself accountable to your own business and personal plan.”
Hire smart, build smart
Since the founding of Charming Charlie in 2004, the company has grown to roughly 3,600 employees and has stores in 23 states. Continued success and the ability to keep opening stores in new markets, takes hiring more employees — and good ones at that. Chanaratsopon says the hardest part about getting the business up and running was finding the right people.
“This is a people business,” he says. “It’s hard finding the right team members to help you facilitate growth. There are a few things that are very challenging. No. 1 is finding the right people to help build a team. Whatever you do, be creative in the way you find people.
“We have gone through different people in the organization, and most businesses are team businesses, and without the right team, you can’t do it. You should overhire. If you think you have conviction in that your product or business will succeed, go out and get the best people that you can. Don’t be cheap on it.”
Start by focusing on attitude.
“You need to have people with good attitudes, specifically in a growing business. Attitude is half the battle. You also want people who have the same set of core values. A lot of people undermine that. When you have a small business that’s growing, you have to do many different things that you’re not accustomed to coming from a big retailer. People have to be able to adapt, and hiring on ability alone is not enough.
“My focus is trying to hire experts that are smarter than me in their specific function. I try to find people who are passionate about what they do and the business. I try to just give them the tools and support to help grow the business.”
A fast growth rate and an equally fast hire rate caused Chanaratsopon to adapt once more and create ways for his team to focus on common goals and visions.
“As you get more people, there’s a lot more people to build, as we call it, an ACA model with,” Chanaratsopon says. “That’s alignment, commitment and accountability. What we try to do now to achieve one goal is to find a team dynamic.”
In order to get his management team all on the same path and chasing after the same goal, Charming Charlie holds weekly one-on-one meetings and they build a company goal.
“That’s our road map to success or our blueprint to our business,” Chanaratsopon says. “That gets us all aligned and committed to the business, and we build accountability by having published goals that we need to achieve. It’s during these types of meetings that you need to follow up on your company goals. You need to make sure that people are executing to your goal. If I said, ‘Hey, I want to meet you in Florida.’ I’m sure you’ll get there. But if I said, ‘Hey, I want to meet you in Florida, and here’s a map.’ I’m sure you’ll get there faster. You need to have something mapped out. It may not be a perfect map, but you can change it along the way.”
One way that Chanaratsopon maps out his company’s future is by hiring ahead of time in order to acclimate new employees to the company and the goals it has set moving forward.
“Growth is challenging, but we weather through it by planning ahead,” Chanaratsopon says. “I invest in the future knowing that we are going to grow. I try to put our team players on early so that we can jell before we grow fast. A lot of people talk about what’s your capital budget plan. I talk about what’s my human capital budget plan. I need all these different team members to do this if we are going to open another 100 stores next year. I’m going to hire the overhead or infrastructure today, so we don’t have to do it last minute.”
Chanaratsopon emphasized that having fun and recognizing when employees do a good job are valuable aspects of creating a good rapport within your team. It also helps company culture to provide employees with ways to give feedback.
“Have a good feedback system,” Chanaratsopon says. “Your company is your customer. You want to survey about how your management team is doing. The same way you listen to customers, listen to employees.”
How to reach: Charming Charlie, (713) 579-1936 or www.charmingcharlie.com
The Chanaratsopon file
founder and CEO
Born: Houston, Texas
Education: I attended Loyola Marymount University in Los Angeles and received my MBA from Columbia University in New York City.
What was your first job out of college, and what did you learn from it?
I was a financial analyst at a bank, and I learned how to access money, how to put capital together, and how to understand a balance sheet and the ins and outs of financing businesses. I also learned about what makes a business work and what makes a business fail and the different metrics and how to measure against it.
If you could have a superpower, what would it be and why?
I wish I could fly. I always had dreams of flying as a kid. It felt pretty real in my dreams, so it would be pretty interesting to be able to fly around like Iron Man or Superman.
If you could invite any three people you wanted, living or not, to a dinner party, whom would you invite?
Rodger Federer, Warren Buffett and Barack Obama. I would be curious about how they think.