It is a fundamental question of entrepreneurship: Who will buy the product or service? Many other questions arise from that initial inquiry about a customer base:
- Where are customers located?
- How can the company reach them?
- How loyal will they be?
- What is their income range?
- How much are they willing to pay for the goods or services offered?
- How do they make purchases?
These and other questions about customers must be answered on an ongoing basis, starting before the launch of the new business and carrying forward throughout its existence. The one thing a business owner can count on is that market conditions will change, and the defining characteristics of the customer base will change, too.
There you have one of the basic challenges of a business owner: How does one maintain updated knowledge about factors that could make or break a company?
The short answer is that all companies need to conduct thorough, in-depth market research to identify, connect with and nurture a customer base. Yet, even this answer leads to another question: How and where can this information be found?
Market Research Methods
Market research can be used to reveal many metrics, such as demand for a product or service, the economic conditions of a targeted region, and existing competition. All of these are important and can help discover the nature of the company’s potential customer base.
The U.S. Small Business Administration (SBA) says “market research blends consumer behavior and economic trends to confirm and improve” a business idea. To find the relevant statistics and identify trends, the SBA recommends these and other resources:
- The North American Industry Classification System (NAICS) – administered by the U.S. Census Bureau; the standard used to collect, analyze and publish general business statistics related to the U.S. economy
- American FactFinder – also administered by the Census Bureau; a searchable repository of demographic characteristics
- Bureau of Economic Analysis – a detailed, searchable website containing updated statistical information about the U.S. economy, including spending and personal consumption reports
- Earnings Report – administered by the U.S. Bureau of Labor Statistics; this overview of labor force characteristics is a regular report drawn from the Current Population Survey
- USA Trade Online – an overview of data related to current and cumulative U.S. important exports
All of these and other websites provide raw data to help business owners understand market conditions and find customers. The organization’s research department can be charged with keeping track of related data and preparing monthly or quarterly reports that help guide strategies and tactics for finding and retaining customers.
Another, perhaps simpler, method for business owners to stay on top of customer-related data is to hire a firm that specializes in market research. These firms use census data, economic indicators, demographic research, customer interviews, sales data, focus groups and surveys to unearth vital information that could give a company a competitive upper hand.
Keeping the Customers You Have
The SBA also recommends ways to nurture a customer base – beyond the obvious methods of providing a useful, affordable product or service and making sure that they know about it.
Once a customer has purchased a product or service, it is incumbent on the selling company to do everything possible to make sure that customer remains loyal. The customer life cycle or life value is a measurement of how much money the company can expect to make from a specific person during the tenure of the client relationship.
The six stages of the customer life cycle are:
- Awareness – the customer discovers the company or the product/service
- Engagement – the customer expresses an interest
- Purchase – the customer is ready to buy
- Retention – the customer buys the product or service again
- Growth – the customer is open to buying related products or services
- Bonding or advocacy – the customer is so enamored with the product or service that he or she is willing to influence others to buy it
It is in those three final stages where true customer value is found. How does a business owner encourage advocacy? Again, it begins with a product that solves a problem in an affordable, reliable, convenient way for the customer.
From there, it is more than wash-rinse-repeat. There is always a chance that someone will come along with a more reliable, less-expensive solution that draws the attention of an existing customer.
To supersede that possibility, the SBA provides a few customer-relations tips that could help a business owner build a client relationship that endures:
- Know your customer – Gather and analyze the demographic, economic and geographic information. Learn as much about who your customer is as possible. Really get to know her or him and find a way to connect on an emotional level.
- Give them something – This can be a loyalty rewards program or a special event. Customers are more likely to stay with you if they know you see them as more than potential sources of income. The personal touch can go a long way toward retention.
- Ask their opinion – Customers know things you don’t about your product or service, and many of them are happy to share what they know. If they feel like their opinion is valued, it will encourage a sense of ownership and create a bond with the company.
If you would like to learn more about how to use market research to develop and maintain a customer base, one sure path is to earn an online MBA from Jacksonville University’s Davis College of Business. This prestigious, 100% online degree gives you the flexibility you need to fit coursework into your busy schedule.