Market Research for Small Businesses | Tory Burch Foundation

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Market Research for Small Businesses

A behavioral science expert offers an approach to market research that goes beyond demographics

An essential part of growing a business is understanding who your customers are and what they want. Matt Wallaert, head of behavioral science at frog, joined our small business webinar series to help our entrepreneurs think differently about how they get to know their customers and their industry through market research. Leveraging his behavioral science background, Wallaert focuses on getting companies to focus on customer behavior instead of customer sentiment or worse, viewing customers as just demographics.

Identify what you want to change. 

Wallaert explained that a behavioral science approach to market research is about conducting experiments based on data and insights. Before starting any kind of experiment, you have to have a hypothesis, or an educated guess at what the results will be. That hypothesis is indicated with a behavioral statement:

When [Target Audience] who [Limitations] want to [Motivation], they will [Behavior] (as measured by [Data]). 

  • Target audience: the people you want to reach
  • Limitations: the binary, necessary conditions a person must meet in order to use your product or service
  • Motivation: what is the problem you help this target audience with limitations solve?
  • Behavior: the action you want to take
  • Data: how you’ll define success for your experiment. This should be something measurable with a set timeframe. It’s also key that this metric benefits as many teams in your organization as possible and tells a true story.

“One of the reasons that we write behavioral statements, and one of the reasons we write these limitations down is they help us externalize,” explained Wallaert. “They help us be articulate about what must be true that we might not have thought of.”

Using Uber as an example, a behavioral statement might be:

When smartphone users who use electronic payment methods and live in major metro areas want to go from point A to point B, they will book and complete an Uber Ride (as measured by users completing rides of $15 or more.)

  • Target audience: smartphone users
  • Limitation: who use electronic payment methods and live in major metro areas
  • Motivation: want to go from point A to point B,
  • Behavior: they will book and complete an Uber ride
  • Data: as measured by users completing rides of $15 or more 

This level of detail is important, since it wouldn’t help Uber much if users booked lots of rides but canceled them (perhaps because the cars took too long to come). Nor would it help the bottom line if users took mostly short, low-cost rides. “So, really, within your business, you’re writing nested behavioral statements,” Wallaert went on. These nested statements can turn into concrete goals for different teams in your organization. For example, Uber’s CEO will have a statement driving toward increasing ridership. To ladder into that goal, the CMO will focus on getting new customers to download the app, whereas the team handling driver relations would focus on recruiting more drivers, making it even easier to serve more riders. 

Apply pressures.

With the behavioral statement set, it’s time to examine the things that affect whether your behavioral outcome actually happens. Factors that would encourage customers to use your product or service more often or get a potential customer to use your service are called promoting pressures. Sticking with the ridesharing space as an example, offering the best cars on the market would be a promoting pressure because it makes that company more attractive to the target audience. Conversely, factors that make your offering less attractive (such as high price or inconvenience) are called inhibiting pressures. Rather than offering customers rides in top-line sedans, as many of their less successful competitors did, Uber instead lowered the inhibiting pressures that kept users away. Uber is often faster, more convenient and less expensive than other car services. “They don’t make me want to take an Uber; they just [got] rid of all the reasons that I don’t take Ubers everywhere all the time,” Wallaert summarized. 

Remember, marketing is an important tool for letting customers know how you’re addressing the promoting or inhibiting pressures that affect how they engage with your company. 

Thinking strictly in terms of demographics means missing important behavior insights and potential customers.

Ditch the demographics when you set up your research.

Thinking strictly in terms of demographics means missing important behavioral insights and potential customers. Wallaert instead encouraged our community to bucket customers into “always use”, “sometimes use”, “never use” and “started then stopped use” to gain information entrepreneurs can use. “We don’t know if the problem between the always and the nevers is about promoting pressures, difference in the desire for people towards the thing, or inhibiting pressures, the things that keep them from acting on that desire, until we go out and do market research,” he said.  Broadening your research pool also means avoiding an echo chamber, where you hear only from people who are already loyal fans.

As far as research methodology, sometimes simply watching people is the best starting point for your investigation. This could mean seeing how they interact or move through your store, for example. You may also consider looking into your website’s metrics for information about what customers are responding to and how often they return to your site. Credit card receipts can also tell you about customer behavior (for example, whether people shop with you only during a promotion).

Another great tool is qualitative interviews. Ask customers questions about their behavior, rather than how they feel about your brand as well as about your industry more generally. “As a matter of fact, if your product or service comes up, you want to move away from it if you can,” Wallaert advised. “What you want to understand is what’s going on underneath that.” He recommended entrepreneurs talk to people in bars about their experiences for insight into how they deal with promoting or inhibiting pressures. Wallaert also suggested creating surveys using tools like Pollfish.

Test in a small way. 

All your research doesn’t help you if you don’t then apply it. “I don’t change behavior directly; I change pressures to change behavior,” Wallaert said, putting himself in the position of a business owner. “In order to do that, I have to bring my insights about the pressures along.” 

Use what you’ve found out from customers in the key groups to develop low-stakes pilots to test your findings. For example, a restaurant owner may have found through surveys that their “sometimes” diners don’t come in more often because they’re more likely to eat vegetarian meals. The restaurant can then try a few vegetarian options (printed on plain computer paper) and see if those new offerings change customer behavior, which they’ve decided to measure by an increase in dine-in orders per month. If that test succeeds, the restaurateur can then add vegetarian dishes for lunch and dinner service (now printed on a professionally-designed menu).

Though a single company can’t be everything to all customers, you should run multiple pilots to really drill down into what works.“You want this smooth continuum of higher and higher fidelity more and more investment over time as you gather more evidence,” If the pilots don’t work, that may mean your original insight is flawed. Ultimately, small business owners should always be doing research and making observations so that they never stop innovating.