The suggestion that you do not listen to your customers sounds like spectacularly bad advice and at first, glance appears to advocate poor customer service but bear with me. Both textbook and informal approaches to market research place value in the feedback that both present and potential customers can provide. This article is not a call to completely abandon this kind of market research or turn a deaf ear on your customers but rather cautions against the overreliance on what they say when you are making business decisions.
People don’t know what they want
As Steve Jobs once said, “People don’t know what they want until you show it to them”. He recognized that the kind of market research that relies too heavily on asking customers about their wants, preferences, opinions etc. may have a lot of limitations. If you strongly believe that conducting surveys, questionnaires and other similar activities is the only way you can get a glimpse of what customers want and what would succeed on the market then you may be severely be limiting yourself as a business person.
People liking your product is not enough to make it popular or for it to enjoy any commercial success. Many people wishing to get into business have conducted such interviews only to discover that even the same people who claimed willingness to buy the product before will baulk when asked to part with actual money. It then becomes important when you are launching a relatively new product or service that you prepare yourself to test its appeal in the real world by asking people to fork out the money instead of just accepting their sentiments.
Limitations of market research
Some of the most commonly prescribed rudimentary approaches to market research appear to completely ignore the existence of marketing despite there being many products out there whose success came not from people instantly falling in love with them but rather from great marketing and branding. There is market research which mostly involves shoving your product in people’s faces and asking how much they like it and whether they will be willing to buy it. Unfortunately, most responses you will get for these kinds of questions will not be very useful.
Coca-cola once invested millions in a product called New Coke after blind tests revealed that people preferred its taste over both that of Pepsi Cola and Classic Coke. However, the product was a miserable commercial failure and cost the company a lot of money. In contrast, the energy drink Red Bull was universally hated by early tasters. The drink that was described as “disgusting” by focus groups later went on to become a massive success anyway.
We underestimate our reservation prices
Recently when Econet raised its data prices, there was widespread uproar and the hashtag #EconetMustFall briefly trended on Twitter. Within the space of a few days, the noise had all but died down and Econet’s competitors had followed suit. Despite the public and very loud complaints, I do not think Econet and its fellow network operators suffered any significant loss of business due to these increases.
People are seldom happy about price increases but this unhappiness does not necessarily mean that you will lose customers if you bump up prices—within reason. A reserve price is the cost of your product at which the customer’s price sensitivity reaches its peak and the desire to buy from you fades away. Do not expect the customer to share this figure with you, most of the time they do not know it. I am not advising that you completely ignore your customers when they bemoan your prices but in a lot of cases, the complaints will start way before the business starts slowing down.
Unless you are employing some exotic kind of business model that demands otherwise, do not give your customers too much control in how you decide your prices. Businesses can start getting more customers after raising prices. This is usually due to the assumption that a high price is a sign of quality and vice versa. Again, this is not a call for you to start exploiting your customers.
Beware of loud social media audiences
Nowadays as more local brands embrace social media, many are falling victim to what statisticians call sampling errors. Due to the level of feedback and engagement that brands can get on social media, sometimes these companies fixate on their online audiences and start believing that these are fairly representative of their customer bases. This is problematic since these online communities have become especially adept at bending entire companies to their collective wills.
Granted there indeed are a lot of businesses for which an audience on Twitter can be a representative sample of the markets that they serve. For such businesses the feedback they get is useful. However for businesses where this is not the case, relying on social media audiences to gauge customer attitudes and sentiments towards the company can be counterproductive. Can you imagine Delta succumbing to pressure on Twitter to change the formula of their opaque beer? Since most people who drink this kind of beer are past middle age and belong to a certain income bracket their opinions are unlikely to be well represented on social media.