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80% Of Your Research Should Be With Your Customers

Most market research, for most brands, most of the time, should focus on customers. I believe that this customer focus is one of the key reasons why insight communities are currently so popular.



By Ray Poynter

When I joined the market research industry in the 1970s, most market research was conducted with the whole market, i.e. with nationally representative samples. But that approach reflected the times. There were fewer products, fewer brands, and fewer channels for advertising. Markets were less mature, brands were establishing themselves, they often had genuine product differences, and market researchers were like explorers, mapping an unfamiliar land.

The later 1980s and the 1990s saw a shift to researching target groups and customers. Ad and brand tracking focused on target groups and customer satisfaction focused almost exclusively on customers. Concept and product testing, which had previously used whole market samples, started to focus on heavy users versus light users versus non-users – i.e. most of the sample were users, even for brands with say a 10% share. This change in focus represented changes in the market place, the number of brands and lines had grown, product advantages were proving to be illusory or temporary, and the battleground was shifting to logistics, sourcing, and image based advertising.

Since 2000 the focus in marketing has moved on again. Most brands manage to achieve product, service and advertising parity. Organisations have become much smarter about calculating the cost of customer acquisition, lifetime value, and the problem of churn. For many brands the issue has become increasing share of throat, size of shopping basket, and total usage, ahead of growing the customer base.

Over the last 15 years the focus in much of the business literature has focused on the use of customers, and co-creation, as a key source of competitive advantage. The writings of authors such as Mark Earls (Herd) and Rijn Vogelaar (The Superpromoter) have highlighted that brands tend to succeed through social copying, rather than through non-users being ‘persuaded’ by marketing or advertising.

In many cases, perhaps most cases, the best way to grow a brand is to increase the number of customers who ‘love’ it, because these people will recommend it, use it ostentatiously, and offer it in group settings. In most cases, a new line, a new campaign, a new service will only succeed if existing customers respond positively to it.

According to reports such as the GreenBook GRIT study the fastest growing major new research methodology is the use of research communities, such as insight communities and MROCs. Given the shift from the whole market to customers in the wider research world, it is not surprising that most research communities focus on customers. There is a community of interest between a brand and its customers, they all benefit if the products and services are improved. Customers know about the strengths and the weaknesses of the brand, they are in a position to give insight into where the brand should go next.

What proportion of research should be with customers?

For most brands and services (I will mention some exceptions in a moment) my research has led me to suggest that about 80% of research budgets should be spent researching customers. This would include measuring satisfaction, usage, the largest part of the ad and brand tracking sample, testing product and service concepts, product and service refinements, and co-creating the future.

The 20% conducted with the wider market would include market sizing, mapping needs in the market, and competitive intelligence (for example why do users of competitive brands use those brands).

This 80:20 prediction is based on two key points:

  1. The brand is most likely to grow through social copying/recommendation/word of mouth.
  2. Most good ideas for the brand will be seen as good ideas by customers.

The exceptions?

The main exception to the 80:20 rule is where the main focus is to massively grow the number of users, either from a zero start (a product launch) or from a very small base. Examples of this situation would include Apple when it launched the iPod, iPhone, and iPad. When these products were launched Apple had no customers in these segments, and the users of existing MP3 players, smartphones, and tablets were not their primary target – so researching customers was not a viable strategy.

Sometimes a brand tries to re-gain customers, a sugar-loaded soft drink launches a diet version, a popular beer tries an alcohol free option, and a coffee brand tries a decaff option. In these sorts of cases there is scope to research non-users, particularly lapsed users, but success tends to occur (when it occurs) by appealing to current users who are considering defecting. For example, Diet Coke is mostly drunk by people who moved from regular Coke to Diet Coke, not people who moved from not drinking Coke to Diet Coke.

In summary

Most brands and services focus on customer retention, providing the right products and services to delight their customers. The thinking behind Fred Reichheld’s Net Promoter Score is based on data that shows that brands that do well have more people who recommend them. A key finding from Andrew Ehrenberg’s double-jeopardy model is that dominant brands have customers who are more loyal.

Most market research, for most brands, most of the time, should focus on customers. I believe that this customer focus is one of the key reasons why insight communities are currently so popular. Insight communities are not pushing brands to focus on customers; the focus on customers is pushing brands and organisations to use communities in order to get closer to their customers.

So, what are your thoughts?

I’d love to hear your comments, or perhaps you can vote on the poll below.



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7 responses to “80% Of Your Research Should Be With Your Customers

  1. I agree that total market surveys are required for sizing, needs mapping, and understanding your competitive strengths/weaknesses. Perhaps I’m influenced by my company’s tendency to focus on strategic research studies, but surely these types of broader initiatives represent more than 20% of your research efforts (in dollar terms, at least). It is certainly true that retaining a customer is less costly than acquiring a new one. But even world class retention results in a shrinking pie of customers as people defect or die, so delegating all acquisition responsibilities to the efforts of your advocates is short-sighted. Communities tend to be comprised of brand loyalists who can provide little insight into your real weaknesses; research with them is primarily a disaster check to make sure you don’t drive away your highest value customers. If you want to focus on your customers for tactical studies around copy points, packaging tweaks, flavor varieties, and so-forth…please do so with a REPRESENTATIVE sample of customers, not a community you have assembled to keep your costs down. And, if you want to make really important decisions, consider talking to a broader sample of category users.

  2. Ah Mr Poynter for provocation you take the biscuit!

    If we’re following the money then I would agree with you. A book like All customers are not equal has fascinating stats about FMCG brands for whom 80% of their profits come from 20% of the customers. And no question customers are the engine of profit.

    But they aren’t enough to keep a brand stable and growing. If you do the math on the cost of sales you will discover that the cost of winning a new customer is 20-30 times the cost of reselling to an existing one. When shown those kinds of numbers marketers are inclined to curl up in a ball and shout for a loyalty programme. But you have to bite the bullet. New customers are fearsomely expensive – they don’t pay much attention to your promotional efforts and they are incompetent – they don’t understand your product and they don’t think they need it even when they do. Overcoming those barriers is a huge hurdle and though you may not need many new customers as a proportion of the whole – you probably need to invest more than 20% of your budget in them. Because you can’t progress without them. And you will note that well over 20% of the marketing budget is spent on prospects whether you are spending your budgets on customers or not.

    There’s a missing group. And that is the clients themselves. If markets are conversations then it is bizarre that we spend research budgets understanding only one half of the conversation. Now any good researcher worth their salt does interrogate the marketing team and their assumptions but it would be good to formalise that process more – so stakeholder research – research around different parts of the organisation – these should be put on the slab. It shouldn’t take even 10% of the budget. But if your understanding of your own market is flawed then it might be more cost effective to research the culture which is producing those assumptions. The customers may not be able to help you with that! This is research which is more cultural and anthropological. Management consultants do it all the time and charge big bucks for it. Researchers don’t which is silly of us. This is barefoot insighter thinking – budgets aside spend as much time understanding the client culture and the wider category of competitors as you do your external stakeholders – customers and prospects.

    This seems to me an overlooked role that MROCS and the community panels can play. Plug in your wider client stakeholders. I know they’re terribly busy but that is all the more reason why you need to understand them.

  3. Jeffrey Henning has asked, on Twitter, whether the poll at the end of my post is a good example of a leading question? At one level it clearly is. However, it can also be seen in a qualitative light as seeking confirming and disconfirming evidence.

    If most people had agreed, in the poll, that 80% with customers was the right amount, I would taken the information as meaning that at the very least people found my proposition tenable. If most people had voted for the other end of the scale I would have taken the inference that my proposition had flopped.

    As it is, I look at responses and note that 42% say 60% with customers, and 38% say 80% with customers. This suggests, to me, that most people found the argument to have some merit, particularly when broadened to imply a large amount of research should be with customers. The current result indicates, to me, that most people did not find my proposition completely bonkers – which is not the same as people actually supporting it.

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