For years, market research has focused on trying to understand the potential market for a given brand rather than trying to understand the brand’s current customers – what they want and what they need. On the surface, it makes sense – if you want to grow your business, you need more customers. And you already know what your customers want, as they are buying your products, right? But if we delve deeper, we find that we may be barking up the wrong tree.
Growth of private companies in 2013 was only 5.4%. The Nasdaq and S&P 500 grew by a much healthier 34.5% and 28.39% respectively in the same time period. But unless your brand is acquiring at least 50% new customers per annum (and congratulations if you are), does this mean that your current customers, who represent the majority of your revenue, are more important? The trouble is that if your brand is gaining 50% new customers per annum, the chances are that unless you’re a start-up, you are also losing a lot of customers each year. Whether or not the rule of 80% revenue comes from 20% of customers is true or not, it is hard to argue against the need to be talking with your customers in order to retain them. The cost of acquisition has to be significantly lower than the cost of retention to make it an attractive option, and even then, every market has a finite size. So why aren’t brands doing this? Some are. There are a number of brands undertaking conversations with their customers, with various degrees of success. Success mostly relies on the technology, the methodology utilised, and the skill of the people managing the process.
However, ongoing discussions with your current customers as a retention technique is only the tip of the iceberg in terms of benefits. The opportunity to move from a defensive position to actively growing revenue from current customers is significant and, when done correctly, should have a much lower cost-per-sale than new customers. Existing customers already understand your value proposition, love your products, and, hopefully, believe in your values.
Even products perceived as being mundane can demonstrate the impact that a brand can achieve by having two-way communications with their customers. For example, retirement funds are generally ignored by the younger generation and seen as something not relevant to their needs at that point in time. However, key finance brands have shown that by understanding the individual motivations of these younger customers and helping them understand the impact of their decisions today, both parties are in a position to benefit. Even tightly fought businesses, such as those in commodities (think energy), understand that being able to differentiate themselves from their competitors is key to winning. Is it more important to your customer to have cheaper prices, or green energy? Does cheaper energy mean dropping prices or helping customers to reduce their energy consumption? If dropping energy consumption is your customers’ goal, is it about helping them create a more energy-efficient home through better insulation, or simply telling them that using the heating or air conditioning at certain times is unnecessary? This is just one example of how continuous conversation trumps one-time surveys where opinions are captured once and only in a moment in time. Additionally, ad-hoc surveys lack engagement – no feedback circle exists to build stronger relations with customers.
Of course, as a business, every customer has only a limited amount of resources to distribute to your brand. You always need to attract new customers. Almost every business wants a greater market share. So what are your options? You can go out to the broader market to ask these questions, and sometimes it’s the most appropriate method. But what if you started out by using your current customers to innovate with you? By doing this, you avoid having to go to them after months of work and large sums of money spent to double check that your new product is not going to jeopardise your relationship with them. Collaborating, or co-creating with customers recognises that there are more smart people outside your organisation than inside and offers the opportunity to leverage customers as advocates, using the amplification of word-of-mouth marketing.
What about bias? Customers are fans, and their views are going to be positive and biased. Not really. What customers offer is constructive criticism. Why? Because they are smart enough to know that no one wins by applying false praise to a brand that they buy. Customers and brands have a shared community of interest in making genuine improvements to their product/service.
Remember, customers are not always fans. Sometimes people count on a brand because they have no other choice (think telecommunication or airline providers in regional or rural areas). Customers may not love the brand, but they do have a vested interest in helping drive improvements. If you think about a lot of market-based research, brands are asking people who are probably not affiliated in some way with the brand to take an interest, completing surveys that are longer than the equivalent you would have with a customer in an ongoing manner. People willing to do long, non-engaging surveys about a brand they have no interest in are unlikely to be representative or connected.
Not all projects are best researched mainly with existing customers. Sometimes a new product, service, or communication you are developing is not for your current market, which is why market-wide research exists. But the effort put into customer intelligence through secure online communities instead of traditional market research should be proportional to the revenue and growth it offers. This will allow for stability so that you can take calculated risks for that extra growth.