Market Research The Mother-In-Law Way

Good marketers know their customers, but they don't necessarily use high-priced and sophisticated marketing research to get that knowledge. Many consult an oracle of profound repute, their mother-in-law.

Mother-in-law research is pretty simple: look around you at your customers and try to spot some patterns in their behavior. If you are observant and objective, you can learn a ton about who they really are and why they act the way they do. As the term implies, you can also learn some interesting things about your customers by asking people who know them—if not your mother-in-law, then your friends, vendors, and employees.

You can get started by making a simple tally of who comes into your store or office during a given week. Are they men or women? How old are they? What would you guess their household income to be? Their education? Blue-collar or white? Are there any other salient facts that might pertain to your particular business like how many cars they own or whether or not they have children? You can often tell a lot by spending some time in your parking lot and watching the people come and go. Keep in mind that you don’t have to ask the customer a bunch of questions. Use your powers of observation to make some educated guesses—they’ll be close enough.

Another good method is to look at your sales records for a given period. If your data allows, rank individual transactions by profitability (not by gross margin percentage, but by gross profit in total dollars). If gross profit data by transaction isn’t available, use the gross sale figure for each one. Credit card transaction records are a good source, although you’ll get a more complete picture if you can reconstruct single cash or check transactions as well. Even if you don’t have transaction records available, you can use inventory turnover data as a substitute. In that case, rank items by profit volume and try to connect specific customer names to them.

Now make a list of the top 20% of those customers ranked by the size of gross profit they produce. Those are your best customers. According to the justifiably popular 80/20 rule, eighty percent of your gross profit probably comes from them, making them your most profitable customers.

Dave Donelson, author of The Dynamic Manager's Guide To Marketing & Advertising: How To Grow Sales And Boost Your Profits a how-to book for entrepreneurs and business managers.