Yet, while most businesses say that customer is an important part of their business, their actions do not support their words.

Many companies spend most of their marketing dollars trying to attract new customers, leaving their existing, loyal customers fending for themselves. Did you know it is five times more expensive to obtain a new customer than it is to satisfy your existing customer?

Worse still, some do not treat their customer complaints seriously enough.

To run a successful business, you must have in-depth knowledge of who your core customers are and their evolving wants and needs.

There are several key areas that need to be evaluated, in order to understand your customers.

What Benefits are your Customers Buying?

Customers do not purchase features or products, they purchase benefits. Consumers don’t buy laundry powder, they purchase goods that make their whites brighter, save them time in laundry and remove stains. Likewise, they don’t purchase televisions, but home entertainment boxes for family unity.

Similarly, people rarely make purchases based on rational, logical thought. Instead, they purchase products and services based on emotional reasons. Then, they rationalise their emotional desires with logic.

Interpreting buying behaviour can be complex due to myriad of emotional and rational factors that are used in purchase decision process. It is important to unravel this complexity in order to profit from it. You need to find out, from customer’s point of view, what exactly it is they are buying. This will enable you to sell emotional benefits to your current and potential customers and produce innovative products desired by your customers.

What Types of People are Buying your Products/Service?

Some crucial factors that affect purchasing behaviour are personal characteristics of consumer. These are demographics (eg: age, gender, occupational status) and psychographics (eg: preferred recreational activities, level of spending on clothes).

Market research is essential to fully understanding your consumers and competitors. To perform successfully, business owners and managers must know their markets, customer attitudes and needs, competitors and their competitive position. Inadequate knowledge about consumers puts a company at a distinct competitive disadvantage.

One of harsh truths in business is that few people have unfailing intuition or reliable ‘gut feelings’. Subjective thinking can be downfall of many entrepreneurs. Fortunately, you can use market research to verify your ‘gut feelings’ which leads to more accurate decision-making.

Spending money or time on professional market research is rarely wasted because it can mean difference between a successful venture or avoidable failure.

In fact, market research can actually save you money and identify opportunities to improve profits.

Listed below are four ways market research can be used to improve your bottom line and eliminate costly mistakes.

1. Determine your Target Market

Did you know that last year, 7115 patents were granted by Intellectual Property (IP) Australia? It is estimated that less than 50 of those patents will be successful. Why poor success rate? Sadly, while creators had talent to invent items, they lacked ability to research whether there was a market for their ‘baby’.

One of most prevalent traps in developing a new product or service is assuming it will fill a market need. Strangely enough, customers are finicky creatures and want products that suit them perfectly. Creating a product or service that you think people will want can spell disaster.

Before launching a new product or service, it is essential to know:

1. Who has a real need for product or service I intend to sell? 2. How many potential consumers are out there? 3. Where are my potential customers? 4. How much are my customers willing to spend on my product or service? 5. Does my product or service save my customer money or make them substantial amounts of money? 6. Why will they buy my product or service?

By identifying your target market, you will be able to evaluate viability of your new product and service and understand enhancements needed in order to increase sales.

Target market definitions also feed into development of your promotional and sales strategy. By understanding your market, you are less likely to waste your advertising dollars on promoting to wrong demographic. Further, by understanding your market you will know which benefits are conducive to sales, which will facilitate more effective selling strategies.

Once your target market is defined, further market segmentation can be undertaken which is foundation for marketing and advertising strategies.

Another common business trap is to have previously identified your market and assumed it was set in stone. The chances are your market will keep changing due to emerging industries, new technology or even changes in company decision-makers. Redefining and reviewing your market should be undertaken regularly.

By fully understanding your target audience you will have ability to develop a relationship with it. This relationship can bring mutual and substantial benefits to both parties. From your knowledge, you will be more capable of foreseeing market trends and identifying market opportunities. This will enable you to provide further products and services to fill market gaps.

Defining your target market can be achieved by undertaking either primary or secondary research (or both).

Primary research (or original sources) involves gathering actual data among those using or likely to use your product or service. Questionnaires, in-depth interviews, focus groups and observation are all used to uncover information. It usually involves commissioning a market research company or consultant to conduct research. Secondary research (or printed sources) involves data collected and produced by others such as trade associations, publications or Government (eg: census data). This method is less time consuming and more cost effective. However, data may not fit your product or service accurately enough, resulting in misleading analysis and bias. In untapped or niche markets, all of secondary data in world will be of no benefit to you.

Know your Customer Inside-Out