Understanding the customer is easy to do

Many entrepreneurs are intimidated by the thought of doing consumer research because of the false notion that it is an expensive proposition and requires the hiring of additional talent and people. Not so, according to our AIM student-entrepreneurs who have learned that understanding the customer is easy to do.

Here are some of the simple rules they follow:

First Rule: Look at the customer when the customer is not looking. Do not let the customer know or feel that he/she is the subject of a customer study. Otherwise, the customer acts differently and the wrong conclusion may be drawn.

The operative process is the observation of the customer. This allows the entrepreneur to discover buying behavior and to create a hypothesis.

For example, when young Filipinos are invited to dinner and are asked for their preferred restaurant, the usual response in the vernacular would be "kahit saan" or "any place will do". And when further asked about what they want to eat, the answer would be "kahit ano" or "anything will do".

What does this mean? One can hypothesize (and subject this to further study) that the response is due to the hiya syndrome, believed to be common among the more traditional Filipinos, i.e., they would not declare up front what they really think or want.

Another method is to simply engage the customer in small talk. The receptionist can very well ask innocent research questions such as: "Is this your first visit to our place? Where did you hear about us? Why did you choose our place? When did you decide on us?" These questions can be subtly asked while leading the customer to his/her table. In the process, the reason why first-timers come around may be discovered and, subsequently, new marketing strategies can be formulated to increase the number of first-timers.

If a repeat customer is involved, a different set of questions may be asked. The reason/s why they come back may be discovered and, again, new marketing strategies can be made to increase such repeat customers.

This was actually done by one of my Masters in Entrepreneurship (ME) students and he was able to get new insights into his customers’ behavior and used these to define a new marketing strategy for the store.

Second Rule: Ask the negative. The negative type of questions will get more specific responses and, thus, specific actions can also be pursued. For example, if one were to ask another person what he/she liked about his/her spouse, the normal answers would be such general statements as "sweet, loving, caring" and so on. However, if the negative was asked instead, chances are that more specific statements would ensue such as "snoring loudly, not taking a bath before sleeping" and so on.

Going back to the example of the restaurant, the negative question can also be asked. If the customer is a first-timer, this could go: "Which other place did you consider? Why did you not choose that?" The answer to this will give insights as to who the real competitors are and the value of the store to the customer. Clearly, this is the value that can be the foundation of a revenue increasing marketing strategy.

Third Rule: Stop asking when the answers are no longer changing. This answers the question of how many samples one must take in order to make a valid conclusion.

The fundamental basis of this rule is the statistical measure of standard deviation. What governs sample size is the deviation among the samples. The smaller the deviation, the smaller the sample required. The wider the deviation, the larger the sample required. While there are other variables involved, such as confidence and accuracy, we can set this aside for now so as not to complicate matters too much. What is important is to stop getting samples when the samples are saying the same thing.

If the samples continue to be different and no singular pattern is clear, stop getting samples and look for the number of patterns that may exist in the samples. Stratify the data into clusters that have common patterns. There may be less deviation if the data were segmented or clustered into some logical category like the time of day, weekday vs. weekend, month, gender, age, first-timers, and returnees.

There may be a pattern if the samples were desegregated and re-sampled. One will find that the finer the segmentation, the smaller the sample required.

Fourth Rule: Make use of each encounter with the customer and seize the opportunity to do customer research. Every time a product or service is sold or when a customer has completed a transaction with the firm, use it to understand the customer better. Use the first three simple rules on a daily basis. The person who makes the transaction with the company is the customer. Do not just deliver the product or service and get the economic exchange over with. Use the encounter to learn more about the customer and your competitors. Do not waste the opportunity. It is better to ask a person who is really a customer than someone who is thought to be a possible customer.

Also use a rejection situation to understand the customer. If a person looks and/or touches the product but does not buy it, ask why? What was looked for and not found? What was taken instead? This negative encounter will also give insights about the customer.

Fifth Rule: Make customer research everybody’s regular function. Do not leave it to external researchers, nor to the marketing research department, nor to the marketing organization, nor to yourself as the entrepreneur to understand and research the customer. It is everybody’s concern.

Being sensitive to every encounter with the customer even after office hours is an opportunity to understand the customer better. Have the sales people make it part of their report. Encourage even your non-marketing and non-sales people to be observant and report observations during the office meeting. Each office meeting must always discuss topics like: "Is there anything new that has been observed?"and "Are all the things we know of the customer still valid?"

The foundation of customer intimacy is customer knowledge. The more one knows, the more one can get intimate. Intimacy is the foundation of a long and lasting relationship. It is not price, nor is it economics.

(Alejandrino Ferreria is the dean of the Asian Center for Entrepreneurship of the Asian Institute of Management. For further comments and inquiries, you may contact him at: [email protected]. Published "Entrepreneur’s Helpline" columns can be viewed on the AIM website at http//: www.aim.edu.ph).