Differentiating Business Customers in the Marketing Research Industry

Differentiating Business Customers in the Marketing Research Industry

One of the most respected marketing research firms in the country learned in the mid-nineties that it didn't pay to treat all clients alike. In addition to absolute dollar amount clients spent, they could be differentiated on a number of other factors, notably the willingness to be a research partner and commit to an annual budget. Firms that were willing to do so required very low selling costs while firms that bought research on a project-by-project basis required selling costs as high as 25% of the sales dollars they brought in.

Platinum customers for this firm were defined as large accounts that were willing to plan a certain amount of research during the year. The timing and nature of this research could be anticipated, making it easy for the research firm to smooth supply and demand. The Platinum clients tended to stay with the company and were willing to try new services and approaches developed by the research firm. Therefore, they bought across research service types (e.g., field and tab services, statistical studies, exploratory studies) and had minimal sales costs averaging only 2-5%. Best of all, they were willing to serve as references for the firm, allowing the firm to give their names to new clients wanting recommendations about the company. They were loyal to the firm and used other marketing research companies only when they needed something the firm could not provide. 

Gold customers had similar profiles except that they were more price sensitive, inclined to spread their research budgets across several firms. While they were large accounts and had been customers for multiple years, they were not willing to plan for a year in advance even though the marketing research firm would give them better quality if they did. They provided referrals but on an ad hoc basis.

Iron customers were moderate spenders and conducted research on a project basis, sending out requests-for-proposals whenever they were conducting studies. They were looking for the lowest price and often did not allow sufficient time to perform the jobs. Because they had no overall plan, projects came in at any time, sometimes in the off season (which helped the firm use their capacity) but sometimes during peak season (which created difficulties in allowing the firm to service its best customers well). Selling costs were high because the firm continually kept in personal and mail contact hoping to move these Iron customers up the Pyramid. 

Lead customers spent little on research, conducted isolated projects that were usually of a "quick and dirty" nature. Selling costs were highest in this group, for most advertising and almost all speculative presentations were targeted to these accounts and salespeople had to spend multiple visits to get them. Furthermore, once they became clients, Lead customers were "high maintenance" clients that cost the firm money because they didn't understand the process of research. They often changed projects mid-stream and expected the firm to absorb the costs.