Imagine it. A renowned business expert appears one day on your company's premises and with astonishing insight itemizes the things you do extremely well for your customers and a few that need improvement. Would you make the improvements? Naturally. Would you ask the expert back? Emphatically Well, imagine no more: you will become that expert when you start using market research regularly.

Market research consists, quite simply, of ways to learn what your customers or clients think. In primary market research, you observe or survey customers to discover their ideas or analyze sales or other records to understand their purchase decisions. In secondary market research, you consult books, journals and other resources to investigate the demographics of your target audience and track the trends that affect their lifestyles and buying habits.

But why bother with market research when you're already talking with customers and learning their ideas every business day? Because, writes Michael LeBoef in How to Win Customers and Keep Them for Life, the "nice customer," the customer who never talks or complains but then never returns, can ruin your business. Typically, the nice customer expresses his dissatisfaction to eight to 10 people, who pass it on to another 20, requiring you to generate 12 positive incidents, LeBoef calculates, to compensate for each negative one.

What causes such dissatisfaction is usually disregard for customer's needs, an indifference that Paul Timm, in 50 Powerful Ideas You Can Use to Keep Your Customers, defines as lack of courtesy, slow service, unhelpful or uninformed employees or employees with off-putting appearances or mannerisms. Timm's recommended safeguard against dissatisfaction: exceed your customers' expectations-which market research can help you ascertain.

How satisfied are your customers? Eight ways to find out.

Harry Beckwith, author of Selling the Invisible, claims that customer satisfaction is the increment between what customers expect and what they receive; the greater the increment over expectation, the greater the satisfaction.

To determine your customers' expectations, he advises, first determine what they're really buying. At McDonald's, he points out, customers are buying not hamburgers but an experience; at service companies, it's not expertise but a relationship. In short, you need to identify the emotional payoff customers expect when they buy your product or service. Here's how to track it down.

Written customer surveys

In Aftermarketing, Terry G. Vavra cites a successful check-off questionnaire developed by a large Minneapolis store with a president named Charles:

Hey, Chuck:
• I'm very impressed.
• I'm pleasantly surprised.
• I'm satisfied.
• I'm mildly infuriated
• I'm very annoyed.

Space was provided below for comments.

But questionnaires needn't be charming to work. By contrast, Vavra describes Rolls Royce's customer questionnaires, which serve both to gather information and solidify the manufacturer's relationship with its customers. The first questionnaire, a short one, inquires about car and dealer quality and owner demographics. Customers who respond receive a thank you note and writing pen, and those reporting problems are contacted by a company executive.

The second questionnaire, a six-pager sent six months later, probes owners' perceptions of luxury cars generally and Rolls Royce specifically and requests psychographic and lifestyle information. Customers who return it receive a lapel pin and thank you note and are again contacted by a company executive if they express less than total satisfaction.

There is, of course, a middle ground. Carl Sewell, in Customers for Life, describes a garage that zeroed in on just three expectations it considered key to customer satisfaction: price, timeliness and effectiveness of service. Accordingly, the garage developed a questionnaire so short it could be filled out while a customer's bill was tallied, asking 1) if the charge was more, less or the same as the final estimate; 2) if the car was ready when promised; and 3) if this was the second time for the same repair. Space was provided below for comments.

In sum, whether long or short, surveys make it easy for customers to tell you what they need, like and dislike-information too direct and sometimes too sensitive for them to tell you in casual conversation. Customers' answers, particularly their written-out comments, give clues to their expectations and degree of satisfaction. Still, it's possible to miss the boat completely, e.g., by asking about your phone reps' courtesy, but not the length of time customers waited on hold.

One-on-one interviews

According to Harry Beckwith, phone surveys prove more effective than written surveys because they encourage people to open up and are easier to respond to than written forms. The challenge, of course, is to record respondents' comments accurately, especially when they elaborate widely upon the survey questions. Also, the interviewer's personality can influence the responses given, so choose an interviewer with a sympathetic but business-like demeanor.

Phone calls aren't the only way to interview customers personally. You can get considerable information, maintains Paul Timm, simply by replacing standard throw-away questions like "Was everything OK?" with open-ended questions like "How was your meal?" or "Did the price/service/delivery time meet your expectations?" The hard part: you must systematically record every answer.

Focus groups

Focus groups are roundtable-style gatherings of 10-12 people, sometimes fewer, who answer questions and discuss topics presented to them by a moderator. While some market researchers advise against focus groups because group dynamics may distort the discussion, others applaud their usefulness. Limit them to 90 minutes, advises Carl Sewell, and have your group of representative customers focus on only a few key questions, such as:

• Their likes and dislikes about doing business with your company.
• Your company's strengths and weaknesses.
• One special area, such as customer service.

Give participants an executive gift, like a prestige pen set, to thank them for their time and take detailed notes to incorporate later into a written report on the session.

Supplier interviews

Because they do business with many companies like yours, suppliers can provide valuable information on how to improve not only your relationship with suppliers, but also your competitiveness within your field. Whether by phone, in person, by letter or in an informal after-hours focus group, ask your suppliers about their needs, complaints and assessment of how you measure up to their expectations, suggest Greg Straughn and Charles Chickadel in Building a Profitable Business.

Employee interviews

Your employees, Straughn and Chickadel add, constitute another worthwhile source of information about customers' needs, likes and complaints. So organize a discussion group-on company time-in which employees can voice perceptions, opinions and suggestions for improvements.

Observation

Study every point of contact between your company and customers, suggests Harry Beckwith, from receptionist, business card, store/office and sales presentation to closing and follow up. When watching customers proceed through this sequence of contacts, pay attention to body language, which may communicate more truly than words. Physical distance, folded arms, frowns and fidgeting may express a negative response, while smiles, open gestures and consistent eye contact express a positive one. Consistently record your observations.

Analysis of sales records

Look through your internal records, recommend Straughn and Chickadel, to identify your most popular or profitable products or services, your principal sales regions and your best customers by age, gender, lifestyle, business size or other meaningful categories. This information can guide you in evaluating whether to expand your marketing focus to reach a more diverse group or concentrate on reaching more of the same type of customer.

Moreover, it can help you learn enough about your clientele to become what Kare Anderson, in Walk Your Talk, calls a "genuine resource to customers," supplying information sheets, training seminars, services and other helpful offerings that address customers' needs and interests, solve their real problems and, in the end, encourage their loyalty.

Secondary market research

Published materials can offer extensive inform- ation about your customers. Highly recommended in The Entrepreneur Magazine Small Business Advisor, for example, are U.S. government publications like Census Bureau reports, for information on metropolitan, county and central city areas; Case Studies in Using Data for Better Business Decisions, for age and income statistics by region; U.S. Industrial Outlook, for growth statistics and five-year forecasts for key industries; State and Metropolitan Area Data Book, for local information; and Chamber of Commerce market profiles. In addition, magazines like American Demographics and the World Future Society's The Futurist, by keeping you abreast of demographics in your region and trends in American industry and society, can guide you in meeting today's needs and preparing for tomorrow's.

Evaluating the information

The information you collect will be only as useful as your methods of organizing, reporting and acting upon it. First, you must be an unbiased reporter: Terry Vavra writes of a business in which the secretary who collected customers' comments passed along only the favorable ones, thus annulling the benefit of data collection. A far better strategy: assemble all your questionnaires or other materials, count the number of times people answered a question the same way to evaluate the comparative strength of the sentiments expressed, list every customer comment and, based on all this, write a summary statement of your findings and itemize the steps needed to effect improvements.

Second, you must have the organization to respond to customers, notes Michael J. Wing in The Arthur Andersen Guide to Talking with Your Customers. That means having adequate staff not only to serve customers in the course of doing business, but also to effectuate changes your market research may recommend. Indeed, if you lack the means, or will, to make changes, you shouldn't even embark on market research in the first place.

To sum up, market research enables you to go beyond mere lip service to customer satisfaction and discover how your company actually meets, exceeds and falls short of your customers' or clients' expectations. Large businesses benefit from market research in anticipating customer needs and reducing the risk of introducing new products, promotions, packaging or positioning. By doing it yourself, with a little time and money, so can you.

Excerpted with permission from Small Business Success, Volume XII, produced by Pacific Bell Directory in partnership with the U.S. Small Business Administration.