Customer research: know your customer

Whether you sell beauty products or build company websites, you need customers to buy your product or service. Customer research will help you identify your target group. That is, your current and/or future customers. With research you can avoid, for example, starting a young people's nightclub in a region where mainly elderly people live. Or giving your customers discounts when what they want is better quality products. Market research expert Hans de Jong explains how to get to know your customers.

Customer research is part of your market research. First you research the market and look at the statistics of, for instance, the number of companies in your branch or the number of people in the region where you operate. Then you look at the opportunities for your business. Then you do customer research, also called target group analysis, target group research, customer analysis, or buyer analysis. You do research on your (potential) customers. What exactly you research depends on what you want to achieve. For instance, you can map out your customers’ buying behaviour, or find out how a customer views your company. You can also measure customer satisfaction.

Step-by-step guide to customer research

Knowing who your customer is and what your customer wants is relevant for any kind of business, whether you sell to consumers or businesses.  And whether you are offering services or products. Hans De Jong has a step-by-step plan to help you get started. 

1. Decide why you will do customer research

Establish your reason. In other words: determine the 'why' for customer research. De Jong mentions a number of examples:

  • You are just starting up and want to get to know your target group
  • You want to know why customers buy from you less often
  • You want to improve or expand your product range
  • You want to know whether customers are satisfied with your service or product
  • You want to know how your customers view your business

"The trigger is where the friction is,” explains De Jong, “where growth or shrinkage is present or desired. You can find this trigger in your figures, such as declining turnover, but you can also experience it during customer conversations that show that customers expect a different service or a new product range.”

2. Formulate SMART objectives

Describe what you want to achieve. De Jong recommends always making your research goals SMART before you get started. SMART stands for specific, measurable, acceptable, realistic, and time bound. SMART objectives give you direction and delineate your research. They ensure that you keep the desired outcome in sight and can adjust when necessary.

A SMART objective for customer research might be: ‘I want to survey the customer satisfaction of current customers in North Holland within a 3-month period’. Based on the outcome of that survey, you then formulate objectives to improve your service.

Another SMART goal could be to compile a top 10 of the outlets most visited by your customers over the past 2 years. This will help you reduce your outlets and save rental costs. “Your objectives should be in line with your business goals so that your research contributes to achieving them," says De Jong. ‘So, grab your mission, vision, and marketing plan."

3. Make a plan of action

The final preparatory step is, make your research as precise as possible. “Be clear about what you will and will not research", De Jong explains. "Wanting to investigate too much is a well-known pitfall. The more precise your research, the more concrete the results." Apply focus by drawing up an action plan. In it, you include the results of steps 1 and 2, and supplement them with the following points:

Target group description

Describe your target audience. “Are you targeting your existing target group, part of it, or just a new target group? Note information you already have that is relevant to your main question, such as age, place of residence, income, or key behavioural elements. You may also want to check an expectation your target group may have.” 

Central question

Formulate your central question. “The central question guides the research method,” says De Jong. “It is the main question you want your research to answer. The question could be ‘Which marketing channels are effective for my target group?’ Or ‘How do I reach new customers in North Holland?’ Then define what issues you need to research to answer your main question. These are your sub-questions or subtopics."

Research method

Choose your research method. “You can start with this in a low-threshold way. You do not have to incur costs or hire a research agency right away.” De Jong recommends starting with an internal analysis (see step 4) and looking at what data already exists (step 5). “If these steps do not provide enough information, you can decide to do additional research,” he says. 

4. Research internal customer information

As an entrepreneur, you are sitting on a data goldmine. Information such as sales data, average purchase amount, most common postcodes, and the rate of repeat purchases offer you insight into your customers and their behaviour. Answer the following 3 questions to determine how, and how often, you can reach your customer:

1. Who is buying your product or service?

Are these mainly businesses or consumers? What demographics can you uncover, such as place of residence? For this, look at your invoices or CRM system, for example. Be sure you comply with GDPR, the EU privacy law. You can only store and use data that is necessary for your business operations. You need to know a customer's place of residence to ship orders.

2. How often do these customers buy from your company?

Do you deal with a customer group that buys your products, say, once every 5 years (like a furniture shop). Or a customer group that shops every day (like a supermarket)? Check your invoices or loyalty programme for this, for example.

3. Why do your customers buy your product or service?

Are they buying something they need, such as food or business supplies? Or is your product or service mainly a luxury or leisure item, such as jewellery or a holiday? During the sales process, ask about the reason for purchase. In the case of an online order or service request, you can ask for the reason for purchase in the purchase confirmation.

5. Search externally for customer information

There is a lot of data online and offline that you can use for your customer research. “This data, such as demographics, market figures, or public surveys, provides additional insight that you can use for your research,” says De Jong. He gives 3 examples:

  • If you are going to develop a product for factories, do research on these factories. Check online where factories are located and which ones are within your region.
  • If you want to open a local bakery, focus mainly on the area around your shop. What is the average disposable income in this area? Are there a lot of passers-by? When do they do their shopping? For this information, you can contact your municipality or a business association in your shopping area. For example, look at a ‘shopping flow survey’  (in Dutch) for your city or town. In it you will find consumers' online and offline buying behaviour, including their experience.
  • Do you have a travel agency for extreme adventure travel? Then you have a clear target group, and you can look for data in a targeted way. What spending pattern does your target group have and how often do they go on holiday? You can find this information through official bodies such as Statistics Netherlands (CBS) and the The Netherlands Institute for Social Research (SCP).

Need more information? Do your own research

Have you followed these 5 steps, but still do not have enough information to answer your central research question? Note what information you are still missing and do more research. "You can start small: call a customer and ask some questions or send out a survey," says De Jong. He suggests the following possibilities:

  • Ask 10 of your customers about their wants or needs with your product or service.
  • Conduct a customer satisfaction survey. Do something with the feedback you collect and repeat the survey after a certain period of time to determine whether customer satisfaction has increased.
  • Invite customers to your shop or showroom and observe their behaviour. Or use quantitative research to find out which product features encourage purchase, and which do not.
  • For product launches, use a test panel or an experiment where you analyse customer reaction and opinion.

Need help? Call in an expert

Doing customer research becomes easier the more experience and knowledge you have. Do you not have the time to do this? Or would you rather spend your time on other work? “A research agency or market expert can help you get started quickly and thoroughly,” says De Jong. “The big advantage of this is that you can be sure of the quality, and that a researcher goes into the research with no assumptions or personal preferences. You can quickly recoup the research costs. Say your research costs €2,000 euros, but it ensures that you approach your customer in a more targeted way. As a result, you bring in 20 extra customers every month who spend an average of €50 euros. Then the payback period is only two months. And you can carry on working in the meantime.”