[Business Planning] Seven Ways to Find Demographic Information

If you’re in the process of starting a new business, or if you already have one and you’re trying to expand it, chances are good that you’ve come up against one of the toughest questions in the process:

“What are my customers like?”

Big companies always seem to have exactly the right answer when they’re asked this. “We’re very big with the 18-24 male segment, though we can skew as high as 34,” a marketing rep might say. “We’ve seen a lot of growth in the East Coast market, and we’re noticing a particularly large amount of interest with men who have at least 1-2 years of college under their belt. An emerging secondary market comes from young professionals who like to read, but who don’t have the time to get into full-blown novels.”

Huh? How did they find all this information, and how do they know it’s accurate? Are they polling all their customers somehow, or do they have some secret source of demographic information that the rest of us don’t know about?

I used to wonder about that too, but then I took a class on marketing research. Now, since I was old enough to start filling our product registration cards and to say “no” to people trying to get me to take a poll in the mall, I’ve been aware of the field of marketing research. And, like most folks, I’ve even been resentful of it, at times, because it seems like a practice that only big companies with too much money can afford to engage in.

I won’t say my class turned me around on this viewpoint entirely; marketing research is extremely expensive, and it really is something that most small companies can’t afford to do on a regular basis. But the class piqued my interest enough that I’ve joined the Master in Marketing Research (MMR) program at SIU-Edwardsville starting this fall, and I know enough about the field now that I can dispel some of the myths… and tell you how even a small company can use basic marketing research tools to describe his or her customers.

First of all, let’s start with what marketing research is: it’s a subset of marketing that’s geared towards qualitative and/or quantitative analysis of marketing problems. Quantitative analysis means that the field is working with numbers; this is where all those statistical techniques come in, such as calculating average incomes, correlating a customer’s age with his or her brand loyalty, and using regression analysis to create a mathematical model that helps a business create an ideal pricing package. This is also the majority of what a marketing research firm will do — creating surveys, measuring results, and making really snazzy bar graph charts to explain the firm’s analysis.

Qualitative analysis deals with the less firm details, such as the findings of a focus group, the reports from “man-on-the-street” interviews, and so forth. The idea of qualitative analysis is to open up communication with customers and to try to find out what they think about products. It’s a little trickier, since the results have to be interpreted and filtered by someone with experience and skill. Unlike qualitative analysis, which generates statistical figures, quantitative analysis generates a bevy of opinions which may or may not be useful to a company.

Unfortunately, when a lot of small publishers engage in marketing research, they tend to use quantitative data rather than qualitative, and they don’t sample their customers properly to get the correct results. I’ve seen comic book publishers attend conventions, poll a few dozen of the fans who approach their booth, and then attempt to use that information to learn more about their customers. Such a sampling technique (“convenience sampling”) will yield extremely inaccurate results, and the subsequent analysis can really mislead a publisher. After all, the fans who attend conventions tend to be the hardcore fans who spend a lot more money on comic books than the average fans. They’re also generally a lot more savvy than regular readers might be, and there might be a larger number of local readers than usual. They might want things that regular fans don’t, like variant covers and special edition issues. They might also be more inclined to buy ancillary merchandise (posters, t-shirts, coffee mugs) than regular fans.

What’s worse, the publishers often don’t talk to the fans in a systematic fashion. Often, they are more concerned with hearing opinions than they are in collecting data. The problem with this is that there is an element of human bias associated with such a technique. A publisher is less likely to hear the bad, and more likely to hear the good. Fans are also less likely to complain than they are to gush. A publisher can walk away from the experience feeling very good about fan support, only to discover later that sales are tanking in retail due to a lack of readers.

I use this example because I want you to understand that when you seek out any marketing information about your customers, you have to be careful. There are lots of ways to determine the demographic information about your audience. But many of them, even the really expensive methods, are prone to bias if you don’t take the time to do them right. If you cut corners and sample the opinions of people who are convenient to talk to rather than using proper, scientific statistical methods, you’re going to get results that don’t reflect reality.

Now, let’s briefly touch on what demographics are. I think that most people know that demographic information includes the basics — age, gender, income level, educational level, occupation, place of residence, number of children, and so forth. But what I don’t think a lot of people understand is why this information is important, or how it can help you. Simply put, the more you know about your customers, the better you’ll be able to describe your market segment — the people you’re targeting with your products.

For publishing, I’d suggest that age, gender, income, education, geography and household size are probably the most important details. It might also be helpful to know how many books a month a customer purchases or how many magazines he or she subscribes to, but I’ve found that that sort of information often isn’t very reliable and doesn’t tell me very much. It sounds good on a report, but it usually doesn’t really mean anything. Some marketing researchers like to have that sort of information so that they can look for correlation — “Females tend to buy more books per month than males.” But correlation isn’t causation, and just because two items appear to trend in the same direction doesn’t mean that they truly go together.

Once you’ve decided what you need to know about your customers, the next step is to gather information. There are, of course, many reasons why you might need this information, and they will likely affect the amount of time and money you’re willing to spend, so I’m going to list them in order of least to most expensive, with the added assumption that they’ll provide the least accurate to the most accurate information:

1. Use a competitor’s demographic information. I’ll probably take heat from others in the marketing research field for suggesting this, since it’s questionably ethical and it’s going to give you some fairly unreliable information. But if you just need the info because you’re throwing together a business plan and you don’t have the time or the money to do market research, using the information your competitors list in their media kits, press releases, and market reports is probably your most practical option. Just keep in mind that the information isn’t going to be very useful to you for the purposes of segmenting, targeting and positioning; it’s just going to give you a general idea of what your customers are like.

Where to look: Check our competitors’ websites and see if they have media or press kits you can access. You might also try some Google searching, or making use of an academic library to search periodicals for more specific information. If they’re publicly traded, check their investor reports, which often have segment information.

2. Use Census Bureau information. You can find a lot of good, general information about general segments on the US Census Bureau website. All you need to do is go to “People & Households” and search the findings by narrowing down the demographic data you’d like to isolate. This really only comes in handy if you’ve already narrowed yourself down to a segment (such as males, age 18-24) and you’re looking for general statistics. You’re probably not going to find a lot of specific use, but again, it’ll give you an idea of the national (and regional) averages for income, household size, and so forth. And hey, some demographic information is better than none, right?

Where to look: The Census Bureau website. I particularly like the FactFinder tool because it’s easy to use and it can give you some detailed data very quickly.

3. Use free market research information. There are companies out there, like Claritas, that have made powerful information available via the web. One of my favorite sites uses their PRIZM system to deliver information on segments by zip code. Visit the site and type in your own zip code. You might be surprised what you learn about your neighbors. You can also explore the segments and use them to narrow down your target demographics.

Where to look: You might start with the Market Research Portal. I tried one site I found via Google, free-research.com, but didn’t find any information of significant value. KnowThis.com has a Media & Publications section. You can find plenty more via search engines. (If you happen to know of or find any that are worth posting, please put them in the comments below.)

4. Talk to the Small Business Association. Most college campuses have a Small Business Development Center (SBDC). I’m currently working with the guys at the one in Edwardsville to secure financing for Army Ant, and I’ve had a great experience. Since SBDCs are not-for-profit and community-service-oriented, they often can help you get access to information you wouldn’t be able to easily find on your own, and often for free. As a bonus, they’ll also help you spruce up your business plan and point out things you might have missed in your planning and/or your financials. Plus, their services are free.

Where to look: You can vist the SBA website, or check your local state-run school for an SBDC. Request an appointment with a counselor and tell them what you need specifically. They’ll often be able to easily point you in the right direction.

5. Poll your customer base. You’re going to need an understanding of statistics to do this, and you’re going to need, at the least, a spreadsheet utility like Microsoft Office Excel 2007. I’d really recommend a more powerful statistics-oriented program like SPSS 16.0, but that learning how to use the program properly may require more time than you’re willing to put in.

Polling requires planning, so you’ll want to first figure out what your population is (I’d start with something like “every customer who buys a copy of one of my books between Janurary, 2009 and March, 2009″) and figure out a way to sample that group appropriately. It’s going to be hard to find a system that’s not a convenience sample, since you’re probably going to have to solicit a response (“Win a free signed copy by visiting this web address and completing a survey!”), and even those little insert cards magazines like to use rarely get a high response rate. You can learn more about different methods of sampling here. Whatever you work out, you’re going to need at least 30 people to achieve a normal distribution. Depending upon the variability, you’ll need more people to generate correct results. A good rule of the thumb is to shoot for around 200 respondents for a 95% confidence interval and 500 respondents for a 99% confidence interval. Since you’re just gathering demographic information and not trying to, say, figure out who will be the next president, your margin of error is less important than it might be in a newsworthy poll, so don’t worry if your sample isn’t going to give you perfect information. Statistically speaking, that’s going to be impossible, and getting anywhere close is going to be extremely cost-prohibitive.

What to do with the information: Once you collect your demographic information, put it in a spreadsheet and run some simple descriptive analysis (mean, mode, median, standard deviation, and so forth) to generate your demographic statistics.

6. Order market research reports. Why do the research when someone else has probably already done it for you? You can buy some amazingly specialized market research reports that will tell you everything you want to know about an industry. But these are generally quite expensive (often in the $1,000-5,000 range) and may give you more information than you need. Still, they’re generally cheaper and easier than doing the research yourself.

Where to look: Just Google “market research reports.” You’ll find lots of sites. I’d stick with those that allow you to preview reports, like MarketResearch.com.

7. Hire a marketing research firm or consultant. This is your most expensive option, and it’s likely going to cost you in the thousands to tens of thousands unless you’re seeking very basic information. Depending on your goals, this may or may not be your best option. I’d suggest that it’s something you will only want to do as a small publisher if you’ve exhausted all other options.

Where to look: It’s best to either go with a firm that’s local (check the yellow pages) or one that operates in your industry. Here’s a Greenbook directory of several firms that specialize in media. Sadly, I don’t know of any specific firms to recommend, since I’ve never dealt with any.I will take this moment, however, to plug myself as a marketing research consultant. I can only offer limited services while I’m in grad school (I just don’t have the time or energy to take on a large number of clients or run large research projects), but if you just need someone to help you track down demographic information and other basic information about your customers, you might want to contact me. My rates are very reasonable, and you know that I know your industry.

I hope that this article has been helpful to you. When I was writing my business plan, I was enormously frustrated at the lack of information out there about tracking down demographics — it seems like every site I ran into was trying to sell me services I didn’t want (or make me register for a site I’d never use again) just to get to some basic “how-to” info. As always, I wish I’d had someone to guide me through the process, and that’s exactly why I decided to post this piece.

If you’d like to add more resources or ideas, please feel free to make a comment below. I’d love to hear some fresh new sources, so don’t be shy!The more we share information, the better we’ll all do at running our businesses. And that’s good news, because when industries thrive, business owners have a lot less to worry about. That frees them up to focus on the main reason they’re in business anyhow: their products and their customers.

-SJJ

2 Comments

• 

  By Geoffrey Faivre-Malloy, March 7, 2009 @ 5:03 pm

  Awesome tips. Especially like the marketresearch one. That will help me out building campaigns for affiliate marketing.

  G-Man

• 

  By M., May 15, 2009 @ 8:04 am

  Wow! Thanks so much! Great tips!

Other Links to this Post

RSS feed for comments on this post. TrackBack URI

Leave a comment