Understanding Your Customers, Industry and Competition

By Trina Newby 

Company names such as McDonalds, Star Bucks, Lillian Vernon, and Avon bring to mind such words as success, great customer service, popular and well-branded.  These businesses are successful and rank among America’s top companies, because they know about one important practice in business that can never be overlooked and that is the practice of market research.  Their success has been very dependent on how much they understand their market and they spend millions of dollars each year researching their customers, industries and competitors making sure they stay on top of the latest trends.  If larger companies know the importance of this needed system, small business owners should become just as savvy in learning it as well. 

Market research is the system of gathering and analyzing information about your business industry, target customer and competition.  The results of this market data can be extremely useful in helping a small business owner to make marketing decisions, which can result in consistent sales and growth. 

Many new business owners have a tendency to ignore this vital step, because they are intimidated by the process and /or don’t understand its importance.  Sometimes market research can also cause disappointment, because it can actually let an individual know whether or not a business idea is worth developing, if a particular price for an item is too high or if new competition is around the corner.  I believe for this very reason, many small business owners stay away from it, but learn their lesson of not doing it later on.    

Let’s take a look at the case scenario of Joann who opened a boutique for women in the 90’s and was doing very well.  However, in 2002 she noticed that her sales were beginning to drop and she didn’t see some of her repeat customers as often.   Joann continued to market her boutique in the usual way with sales flyers being mailed to current customers. She often purchased clothing in bulk thinking she could save money in the long run; however she was still trying to move suits and dresses she purchased over three years ago. 

Joann was puzzled and didn’t quite understand why her revenue was continually decreasing and so she decided to increase the number of boutique sales per month and also increase the mailings of her sales flyers to current customers.  Joann figured that she was not doing enough to bring the customers in and that she needed to just increase what she was already doing.  However, it never dawned on Joann that she needed to get in touch with her industry and her customers.

If Joann would have done her market research, she would have learned that there was a new women’s boutique less than 5 miles away that boasted of name brand designer clothes for 50-75% less than most retail stores and that they created a personal profile for each customer alerting them when they had their favorite designer items in the store.  In addition, one Saturday out of the month this new boutique held VIP openings early in the morning for customers who purchased $200 or more the previous month.  This VIP event was becoming quite popular.