Successful entrepreneurs use market research to keep up with trends, make better business decisions and maintain their company’s competitive edge. Regardless of whether you’re starting or expanding your business, research is vital to understanding your target markets and increasing sales.
According to Vikas Mittal, in Marketing News, the top 50 marketing research firms in the U.S. earned more that $11.5 billion in 2016. Surveys, social media monitoring, CRM, customer satisfaction, dashboard – it adds up! Moreover, now, as many executives are fighting the annual budget battles, it’s no wonder that many of them begin to question whether spending money on marketing research and analytics deliver the ROI. Marketing researchers have long struggled to answer this question, but there are three ways that marketing research impacts the bottom line:
- Marketing research increases sales. Mittal offers this example: “ A 2017 study of 7,513 customers of a large North American automotive dealership examined the financial benefits of customer satisfaction surveys. Customers who completed a satisfaction survey purchased more than those who did not, even after accounting for the satisfaction rating. On average, sales per visit were $12.18 greater among those who filled out the satisfaction survey. With an average of seven visits per customer, this amounts to roughly $85 per customer. Even if a relatively high average cost of $10 per customer is assumed for the survey, there is a 750% return on the survey investment.” Well-designed, short, and infrequent surveys remind your customer that you care about their opinions and can deepen customer engagement with your brand.
- Marketing research increases firm value. Businesses invest billions annually in strategic initiatives without any capability of determining the impact and outcomes. This leads to the initiatives being continued (whether or not they positively impact profit) or discontinued for lack of evidence of success (also whether or not they positively impact profit). In either case, the lack of ability to quantify results can hurt. By using research-based models, companies can identify successful initiatives, and plan for their growth and continuation, increasing firm value.
- Analytics Increase ROI, Sales, and Profitability. Whether you are a fan of marketing analytics, or just think they slow everything down, there is research to show that they drive benefit to the bottom line. “In A 2013 study of 212 executives from Fortune 1,000 firms, … Executives rated analytics deployment in their company on a scale from one to seven, and the authors linked their ratings to return on assets using stock market data. A one-point improvement in analytics deployment was associated with an 8% increase in return on assets or a $70 million increase in net income for the average Fortune 1,000 firm.
Here are five ways that marketing research can help you improve your bottom line and build business value:
- Understand your customers better. The better a business knows and understands its customers, the better they can align to meet customer needs. Beyond the basic demographics (age, household composition, income, education, ethnicity and gender, marketing research can help you understand customer motivations, attitudes, and perceptions.
- Strengthen your brand. What is a brand? A brand is how the marketplace views you, your products and services, and your company. It is impossible for a company to know what their brand stands for and how it compares to competitor brands without asking their customers, and that is done through marketing research.
- Improve marketing effectiveness. Department store magnate John Wannamaker famously said, “Half the money I spend on advertising is wasted; the trouble is, I don’t know which half.” Stop wasting your marketing budget on marketing efforts that don’t work by using marketing research to evaluate media and messages.
- Find new opportunities. There are four ways you can grow your business. You can develop new products and services for your existing customers, you can find new customers for your existing products and services, you can increase the amount of frequency your existing customers purchase your existing products and services, or you can enter a new market with new products and services. Which is the best strategy? Use marketing research to find out!
- Better product development. Whether you want to optimize existing products or successfully develop new products, marketing research can help you identify the optimal mix of features for your products. What combination of features and price will be most attractive to the target audience? To create the best go-to-market strategy, marketing research will lead the way.
There is no way to build your company without marketing research and related information. Start looking at every research project to see how it contributes to the bottom line and company value. The next time an executive asks you what marketing research does for the company, you’ll be ready with an answer.
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