Carrying out customer research on loyalty, satisfaction and service can make a big difference to your business. If you know how your existing and potential customers make their buying decisions, you can adapt your sales methods to fit their needs.

Knowing such things as your customers' gender, age, occupation, income, lifestyle and attitudes can help with your marketing and sales plans. But knowing what they think of your products and service and how they rate you against your competitors will enable you improve your business' offering.

To target your customers successfully, you should know as much about their buying habits as possible.

Competitor intelligence

Understanding market trends is also important if your business is to make the most of its opportunities and remain competitive. You need to understand your competitors and be aware of what they are doing in order to exploit any weaknesses.

Try to get answers on:

• Demand for your product or service - is it growing or shrinking?
• What are the current general economic and market trends?
• How customer requirements and buying behaviour could change in the future.
• What new products are in your competitors' pipeline - could they make yours look outdated?
• What do competitors offer and what prices do they charge?
• How do your competitors advertise and promote themselves?
• Is there any forthcoming legislation which could affect your market?

Once you have identified the information you need, you can start to gather it.

You can find useful data from a wide range of sources, including:

• your local Business Gateway
• your trade association, local authority or Chamber of Commerce
• the Office for National Statistics - for information on the economy, population and social trends
• the business pages of national newspapers
• commercial publishers of market reports - including KeyNote, Euromonitor, Mintel, Datamonitor, The Economist Intelligence Unit and Market Business Development
• your business' own data - for analysis of your sales records or levels of enquiries
• your customers - monitoring their buying habits and how they behave is one of the best methods of market research

Though there's a lot of readily available market information, you need to be careful how you interpret it.

External data might not be in a format that's easy to use. It may have been collected for other purposes or be from a range that doesn't tally with your target market.

Beware of out-of-date market information. This can be misleading, as the market may have changed significantly since the information was published. It can be particularly hard to tell how recent any information published on the internet is. Some information on the web can be unreliable or biased.

Remember that statistics can sometimes mask the true picture. For example, an 'average' income for the population in your area might conceal a high proportion of low earners - meaning fewer people can afford your product than it appears.

The same principle applies to your own sales records - one or two major customers could distort the picture.

Most importantly, don't make up your mind in advance. Finding market information that simply confirms what you already believe is easy - but only a realistic picture of your customers and markets will be useful to your business.

Published market information and your own data can tell you a lot about your customers and your market - but it's unlikely to tell you everything.

Field research can be quantitative or qualitative:

• quantitative research provides statistical information - for example, how many potential customers there are and what their average incomes are
• qualitative research examines people's feelings and attitudes towards your product or service, and what motivates them

You'll probably need to carry out some of your own quantitative and qualitative field research - talking, observing or carrying out product tests with customers and potential customers. This can help you to:

• test customers' reactions to a new product, and adapt it if necessary
• investigate attitudes of customers and potential customers
• find information specific to your business or a local market, rather than the market as a whole

Good planning is essential if you want to get the right results from field research.

First you need to decide how to collect the information you want. Popular methods include:

• A survey, using a fixed set of questions. The most effective way of carrying out a survey is typically with face-to-face interviews, but phone interviews, online questionnaires and postal surveys are also possibilities.
• A discussion - often held in small focus groups. Discussions are good for qualitative research as they allow you to explore people's attitudes in more detail.
• Observation, to investigate what people do rather than what they say. For example, look at how shoppers react when they pass a particular point-of-sale display.
• An experiment - you might, for instance, run a blind taste test of your soft drink against your competitors' products. Alternatively, you could lend your new product to a customer and ask for feedback.

Once you have decided how you'll gather the information, you'll need to work out how to make it happen. Budget how much time and money will be needed, as the time involved will normally be significant.

You'll need to design your research. For example, drawing up a questionnaire or deciding how you'll run a focus group.

Then there are the logistics. If you want to carry out street interviews, make sure your researchers have the required local authority licence and identity card. If you want to run a focus group or conduct face-to-face interviews or product tests, where will you hold them? Where will you find the participants? And who'll run the session?

Consider carefully whether you have got the skills in-house to do this. If not, it's probably a good idea to get a market research agency to do your research for you.

The way that you conduct your field research will have a significant impact on the quality of the results. Below are the key points to remember when conducting your research and interpreting your results.

Ask the right questions

If your questions are badly phrased then they may produce misleading results. Avoid closed questions which encourage the answer "yes" or "no".

Talk to the right people

A survey at a railway station, for example, will get answers from commuters, but if you're targeting people who stay at home with young children, this won't be representative of your market.

Talk to enough people

A survey, for example, of two people won't get you enough information. Some market research professionals suggest asking at least 150 people in order to get a complete picture.

Keep research impartial

It's easy to encourage people to give the answer you want. For example, by asking leading questions or smiling at the 'right' answer. Discussions, where you're not working from a list of set questions, are particularly easy to distort. And in a focus group, individuals with strong opinions may influence the views of others.

Interpret results with care

You need to make sure you draw the right conclusions from your research. Bear in mind that people may distort answers in the hope of affecting what you do. Qualitative research - where you're investigating feelings and attitudes - can be particularly difficult to interpret.

Be realistic

It can be tempting to pick out results that confirm what you want to hear, and ignore the rest. But ignoring negative results could damage your business. Be prepared to modify your plans if necessary.

If you don't have the time or skills to carry out research yourself, consider using a market research agency.

Though you may be able to do your own field research, it may be better and more cost-effective to outsource the job to professionals and use the services of a market research agency.

The benefits to your business are:

• Market research professionals are likely to get better results. They have experience in designing survey questionnaires, running focus groups and asking the right questions.
• Customers may find it easier to be honest with an outsider, particularly if they have a complaint.
• Customers may worry you're trying to sell them something if you conduct the research yourself.
• You may find it difficult to be impartial, particularly if people criticise your business.

For small-scale field research, your best option may be a freelance researcher. A market research agency won't usually take on projects with a budget below £3,000.

Before taking on a market research agency or a freelance researcher, investigate their reputation. Ask for a list of previous clients and contact them for feedback. Check the agency or researcher has relevant experience and consider how comfortable you'd feel working with them. And get a clear idea of fees for the services you want.

Check the agency's researchers or freelance researchers fit the image of your business. If they'll be carrying out street interviews, confirm they'll have the required local authority licence and identity card.

Make sure you provide a thorough and clear brief. This needs to cover areas such as the business objectives behind the project, the information the research should uncover and how you intend to use the results.

Read our guide on how to write a marketing plan.

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