Research on a small scale

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There are a few things that all businesses need to know to operate successfully, regardless of their market. Understanding customers and what they are willing to pay for a product or service is crucial, while the need for good knowledge of wider market trends, competitors and the economic climate can’t be overstated. 

Yet for SMEs, market research is often considered too expensive or difficult to do – despite it playing an even more critical, often immediate, role in such businesses. Research helps companies to identify gaps in processes, correct pricing strategies, remove assumptions and, in some cases, change their business model. 

SMEs, generally defined as businesses with fewer than 250 employees, are the backbone of the UK’s economy, contributing £202bn last year. This figure is expected to rise to £241bn by 2025, according to research from Hampshire Trust Bank and the Centre for Economics and Business Research. But, in an uncertain economic climate after the UK’s vote to leave the European Union, companies need to be more clever than ever about how and where they invest. 

Common hurdles for SMEs include not having the budget or time to invest in research; this is particularly true for those firms at the micro end of the scale. In recent years, technology has alleviated some of the pressure on small businesses and start-ups, helping them to get the measure of their customer base, or easily assess the impact of a campaign. Websites such as SurveyGizmo offer a cost-effective means of conducting research and carrying out sense checks, while tools such as What Users Do allow companies to test and learn simply and cheaply.

Phil Morrison, managing director at Whycatcher, says the arrival of market research software has helped SMEs to unlock “deeper insights” – which, previously, may have needed outside expertise – without breaking the bank. But research also requires a shift in mindset, and businesses must be prepared to take on any negative feedback they encounter. Culturally, moving from assumptions and gut feeling isn’t always easy.  

“SMEs often get their insights from gut feel or conversations with customers,” says Alex Johnston, director at Jigsaw Research. “It takes a shift in thinking to trust a survey, but many SMEs who do research for the first time report that the project busts their own pre-conceived ideas wide open.”

Morrison adds: “Businesses can’t be sure what value they’ll get from market research until they’ve done it. As a result, they often rely heavily on assumptions – or internal data that is readily available – but miss out on the full picture because there are limits to what that data can tell them.”

Research might yield easily actionable insights requiring simple tweaks to processes, propositions or messaging. At other times, it uncovers the need for a bigger rethink. “The findings may speak to the core of your business, making it necessary to review your pricing, products and processes to gain or maintain a competitive advantage,” says Morrison. “But there can be big rewards – or savings – as a result.”

Listening to the majority, not just the minority

Edinburgh-based photo website Blipfoto changed its business model because of insights derived from research. The site had a loyal following, but ran into financial trouble – and the team wanted to understand how its members could help make it sustainable. Blipfoto worked with independent research consultant Ruth Stevenson to find out which new membership model it could use to be financially viable without driving away existing members. 

Blipfoto founder and director, Ian Stevenson, said the company didn’t simply want to be swayed by a “vocal and influential minority. We had a lot of very vocal members in the community, some of them saying, ‘we can’t offer a free membership tier – the cost of supporting it will kill the company’, and others saying, ‘we must offer free memberships, it has always been part of the ethos of the site’. We had no way of knowing how this vocal and influential minority reflected the views of the majority.”

A survey presented five theoretical types of membership, and attracted 1,300 responses. While a minority only wanted free membership, more than half felt there should be a paid option as well. The realisation that the company’s income could be equally as high with, or without, a free membership option was key to the board’s decision to offer a free tier. “It allowed us to follow our inclusive values with confidence, and avoid the controversy that withdrawing a free membership option would, undoubtedly, have caused,” explains Stevenson.

The company has since run a second consultation exercise to assess member satisfaction across areas such as content moderation and site rules, helping it to adjust where there is consensus among members. 

Insights baked in

BKD, a company that makes baking kits for children, is in a period of rapid expansion. With recent investment from Peter Jones on Dragons’ Den, and its products now available at John Lewis, the company has had to scale up quickly to stay on top of demand for its products. 

Amid this expansion, it undertook a piece of research with Jigsaw, to gauge customer reaction to its products and test whether its pricing was a barrier to purchase. Price point was a concern for BKD, as the products launched with premium retailers, such as Harrods, before being made available nationwide at John Lewis. The company was worried customers may view the products as too expensive, says founder Adelle Smith. “We found that customers wanted the quality, but not the matching price tag – so this is something we had to look at closely.”

BKD reviewed its pricing structure, which also meant working on its wholesale prices and rolling these out to current stockists. 

Another key insight from the research was that many customers were buying the products for use at home, not as gifts, as BKD had assumed. Customers wanted the products to be cheaper so they could use them on a more regular basis – as a result, the company has developed a new range to pitch to supermarkets.  

Actions, not words 

Of course, all the effort that goes into research is wasted if the insights uncovered are not actioned. This is where issues can arise for SMEs in particular, as a barrier to conducting research in the first place is that they don’t necessarily know how to interpret the findings.

Morrison advises that key representatives of the business are involved throughout, to input to the process and build a coordinated plan of action afterwards.

BKD’s Smith adds: “We think it’s really important to stay connected to our customers and make sure we’re providing the products and services that they really want. It’s easy to make presumptions about what people want and, unfortunately, we are not always right about these things.” 

This article was first published in the January 2018 issue of Impact.