Consumer Spending Research Methods in a Recession


Hi, it’s Victor Cheng from Today, I’m bored, to be honest. I’ve been cooped up at home with this whole coronavirus social distancing thing. I haven’t been outside in quite some time. I’m just thinking of something to do, to be honest. So, I thought I’d talk about consumer market research methods. Why not? Right? I’m trying to amuse myself here. One of the challenges in a recession for a lot of businesses, including SaaS businesses, is to figure out where the market shifted to. We talked about the market changes: spending is still there, it just moved somewhere else. How do you figure that out?

I want to share a couple of tried-and-true, classic market research methods that are really product-management-type skills at the strategic level to help you figure that out. There are a few things. Win-loss analysis: When the environment has changed and you are still winning deals, you need to talk to your buyers to figure out why they bought. Call them up. If you can, visit them in person. If you’re involved in the sale, that’s even better. “Why did you buy?” When you lose a deal, you want to ask, “Why did you lose?” even if this is normal practice for you, which it should be, incidentally, as a CEO of any kind of business. You especially need to do it and repeat it when the market and the external environment has changed, for two reasons. One is that the reasons people are buying may have changed. That’s useful to know. If the reasons for buying have not changed, that’s also useful to know because then you get greater confidence and conviction that you’ve made the right decision. Either way, you get the conviction that you have to stay the same, or you get the conviction and confidence that you need to change and in what direction to start looking. Those are the basics: win-loss ratios, doing a win-loss analysis, calling people up trying to figure out why you won and why did you lose.

Okay, next is that you want to be talking to customers, ideally face-to-face, in-person, in their place of business. If you’re selling B2B enterprise software, you want to meet at their business. If it’s a consumer application, you want to meet wherever they happen to use that application. What you want you to do is try to figure out what their world looks like. What does their day look like? What are they worried about? Do they have whiteboards? Do they have war rooms? Do they have charts up on the walls? Do they not care about any of that stuff? Are they on a mobile device? Are they on a pad like an iPad? Are they on a laptop? Are they on a tower computer? Who are they interacting with during the day? Why? Where does your product fit into what they care about? Or does it not (which would be concerning)? You want to ask them, “How are you using it? Who is using it? Why are you using it? Do you like it? If so, why? If not, why?” You really want to understand what makes them tick. I give the same advice to people who sell consumer goods to enterprise software. The process is the same.

It’s super important that you do this. I’ll give you a quick story. I forget what year it was, but a few years ago, Procter & Gamble had a new CEO. He came in running a, I don’t know, $20-, $30-billion-a-year P&L, I forget how big Procter & Gamble is. On his very first week at work, here’s what the CEO of a Fortune 500 company does. He figures out which countries are his growth markets, and Russia, actually, was one of them, and he did a trip to go visit customers. And so, he flew to Russia. Most of the customers in Russia are women buying some of the consumer goods that Procter & Gamble sells. He arranges home visits to visit these customers who are buying laundry detergent, soap, and whatnot from Procter & Gamble. CEO of Fortune 500 company, right? He goes in. He says hi. Introduces himself, asks a bunch of questions like I talked about earlier, and asks if he could see where his products are being used. The women are like, “Well, I use them in the bathroom. I use them in the kitchen. Do you want to look under the sink?” He’s like, “Yes, please, if you wouldn’t mind.”

Here is the CEO of a Fortune 500 company on his hands and knees in Russia crawling under the kitchen sink of a customer’s home, and then the same with the bathroom sink. He wants to see, “Did you buy the small bottle or would you buy the big bottle? If so, why? Did you buy the liquid? Or did you buy the tablet? If so, why? Which of my competitor products are also there, and why?” He’s trying to understand this customer to understand how this marketplace works. Now, keep in mind that Procter & Gamble spends hundreds of millions of dollars doing advanced focus groups and consumer research, yet the CEO wanted to personally go look at his customers using his products.

It’s important. It’s important to grasp, conceptually and intuitively, what makes your customer tick. I have never had a CEO and a client who’s done this who hasn’t walked away with some kind of insight. Even if you do this regularly, you have to do it a lot more when the market changes because you don’t know if what you used to know is still true or not. You either need confirmation, “Yep, true, hasn’t changed,” or, “Whoa, it’s really changed a lot, and this is going to have a big impact on the numbers in a few months here.” Those are the kinds of things you want to try to figure out. I like doing face-to-face consumer or customer interviews. It’s my favorite, by far favorite, research method. I know all kinds of statistical methods and how to do regression analysis, cluster analysis, statistical techniques I know, conjoint analysis, focus groups. I’ve run focus groups before when I was at McKinsey, and I still like to interview. Just eyeball-to-eyeball, “What makes you tick? I want to know.”

There are a few things you want to do while you’re there. You want to ask them the questions I asked earlier, and you also want to try out new ideas. I call this the concept test. Here’s how it goes. You say, “What if I could deliver that product offering with a different financing package? Would that be interesting to you?” “What if, instead of buying that product, I could rent it to you?” “What if, instead of buying new equipment, I could sell you a service contract to make sure your existing equipment works?” And you just do, “What if I could do this?” You’re testing out ideas. What you’re looking for is to see what idea piques the other person’s interest. I’ll give you my million-dollar, this is ridiculous, but my million-dollar customer-research technique. It is two things and they’re nonverbal signals. When you say, “What if I could do extra for you?” And the customer says, “Oh, I didn’t know that was possible.” Or something like that. “Oh.” They always say “oh,” for some reason. And then when they say, “Oh,” their eyebrows move up. Watch the eyebrows. Every time I’ve seen this eyebrow go up, it’s been a multimillion-dollar opportunity. I’ve only seen it maybe a handful of times in my career. To say, “Hey, what if we could do this, this, and this?” They go, [raises eyebrows]. You have your answer right there. They like it.

By the way, I later learned that I had a client that was a police interrogator, a former police interrogator. I’ve read books by FBI hostage negotiators. One of the things they look for is, when you ask a suspect a question, for example, before they answer verbally, they’ve already given you the honest answer, and it has to do with their face. I’m obviously not a hostage negotiator, but the body language I’ve noticed in my customer-research work is the eyebrows. When they inflect up, when they’ll go up with a voice inflection, “Oh,” That’s a sign that they like it. Then, when you get one of those, you do a timeout, and you figure out, “What did I just say that made you go ‘oh’? Did you like the financing terms? Is it because of the product? Is it because of the pricing plan? The pricing structure? Is it because of module A, B, or C? What is it that I just said that made your eyes light up?” You want to know.

That’s what I do when I do customer interviews. I go hunting for that look. I’m trying to find the idea that sparks interest. I’m trying to understand my products’ usage in the context of the customer’s overall environment. I’m trying to get feedback. I’m trying to see their world through their eyes. When you do, and if you’re paying attention, you get insights. You get insights for a new product capability, a new way to price, a new delivery mechanism. There are lots of different insights you can get on how to alter your business for the better.

That’s my tip for today on how to understand your customers, especially when the market conditions have changed. You want to verify that either their needs haven’t, and their way of thinking about your product category has not changed and have confidence in your current direction. Or, you want an early warning that the market has changed, and in which direction so you can adapt quickly. When the market changes 20%, you have to change more than 20% in order to thrive. That’s the key. The trick is to figure out when the market is changing and where it’s changing toward. Those are the things you want to figure out through customer research. On that note, I will end my video for today. Best of luck on your business, and I’ll talk to you in another video. Thanks, everyone. Have a great night. Bye.

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