Thursday, May 24, 2012

Know Thy Customer

One very important thing I've noticed in participating in startup events is the need to focus on the value your business provides to the customer.  The simple way to address this issue is to say it solves some problem for them.  But the "problem" goes far beyond simply defining the value of your product for the customer.  It involves knowing your customer on a deeper, dare I say, sociological level.

How can I get to know my customer?  
Talk to them!
Yes, I mean literally talk to them.  Don't just ask your friends who are just like you.  Talk to people who a different age, gender, whatever.  Think about who might use your business or service..  You may be surprised at what you hear.  Here are a few questions you can ask:
  1. Here's the product/service I'm working on.  Do you think you'd use it?  How often?
  2. Would you pay for my product/service?
  3. Where do you go now if you're looking for a product/service like mine?
If you're concerned that people are giving you overly-positive feedback and are hiding their real feelings out of politeness (sociologists call this response bias), ask these types of questions in terms of friends, as in, "do you think your friends would use this?"  By putting the focus on someone else, people sometimes feel more comfortable giving negative feedback. And getting constructive criticism in the beginning is much better than launching a lousy business model!

Find out what else they like.
Knowing the kinds of activities your customer is interested in may help you better understand how to relate to them.  Do they like fast cars?  Gadgets?  Sparkly things?  All of these can help you design the feel of your brand around the customer you've already figured out wants your product or service.  Be targeted, but make sure the market is broad enough that you're not shortchanging the potential size of your market.

But won't everyone want to use my app?  It's so awesome!
No.  And if you think your market is "everyone" you are wrong.  Before getting into more specifics, check out this graph from Nielsen that shows the proportion of people who use smartphones by age.

Note that even in the group with the highest use of smartphones, age 25-34, only 62% of them actually have a smartphone.  That means that 38% don't even have a smartphone on which to download your app.  That doesn't mean your app won't make money, it just means that you need to recognize that your market is not "all people ages xx to zz." 

What else should I know about my customers?
Once you get a handle on the basic demographics of your target market, find out how much money they spend on stuff related to your business.  A great place to start is the Bureau of Labor Statistics, which provides FREE (paid for by your tax dollars) information on how much people spend on various items, broken down by demographics like income and age, in the Consumer Expenditure Survey.  This is a great resource to get a feel for the market size.

Wednesday, May 23, 2012

How can I use social networks to grow my business? Understanding Multiplexity.

As a sociologist who dabbles in social network analysis, I sometimes get asked questions about social networks from a business perspective (what does Sociology say about how to use social networks?).  Though it would take more than a dissertation worth of research to answer these questions fully, the concept of "multiplexity" is a great starting point.

If you think about people in your own social network, you'll have a variety of people.  Family, friends, work colleagues, acquaintances from a social club, your doctor, and many other kinds of people make up your social network.  Each of these individuals represents one social tie - or does it?  What if your work colleague is also a friend?  Or if your doctor is your spouse?  Or your church friend is also your child's teacher?  These kinds of network ties are multiplex, meaning multiple kinds of relationships embedded in one network tie.  These "ties" are also real relationships that operate in a real context.  Understanding the different contexts in which relationships take place is a critical point in understanding how different types of information are shared in social networks.

What does this mean for business?
Blindly targeting "social networks" and "key opinion leaders" is not a good strategy if you don't understand the type of social network your customer uses to find purchasing information. If you want to leverage social networks in the digital age, just as in traditional marketing, you need to understand your audience.  Where do they go for information about your product or service?  Do they ask friends?  Do they look for anonymous reviews?  Do they use Facebook, Twitter, Google?

The chart below, from eMarketer, shows that female Internet users are more likely to use social networks such as Facebook to keep up with friends and family, while they will go to specific niche communities for information on specific products or to make purchasing decisions. 

Many internet advertising venues would have you believe that simply targeting certain demographic characteristics will get you to reach your target market.  But think of it this way: would you rather capture a woman's attention while she's checking out pictures of her niece's kindergarten graduation on a social networking website, or while she's on a niche website looking for information about a product like yours?  I know where I'd put my advertising spend!

Tuesday, May 22, 2012

What Sociology can Learn from Infographics

One thing that stood out when I returned to graduate school after working in market research was the horrible data visualizations used in sociological publications.  The top journals are published only in black and white, and the only "visual" data representations are simple line or bar charts, sometimes executed poorly, and all too often with missing axis labels and having awkward titles.

For example, take this chart from a 2009 paper by Cedric Herring, published in one of the top three sociological journals, American Sociological Review.  I chose this article because it is available publicly and it illustrates my point.

Before I pick on the visuals in it, I do have to say that it is an impressive, peer-reviewed academic paper that makes a substantial contribution to organizational sociology.  Looking at about 1,000 randomly sampled businesses around the US, Herring shows that gender and racial diversity each are associated with better business outcomes.  Diversity in the workplace is better for the bottom line, in terms of sales, relative profits, number of customers, and market share, regardless of industry.  Pretty important stuff, and something any entrepreneur should be aware of in building their team.

But back to the visuals.  Herring has one chart in this paper.

It's called: Figure 1. Percentage Distribution of Racial and Gender Diversity Levels in Establishments.

He is trying to show the percentage of organizations that fell into each category, with high, medium, or low levels of gender or racial diversity.  Despite missing a vertical axis label, this 3D grayscale bar chart takes us back to 1994.  Furthermore, when you're showing data that adds up to 100% and you really want to use a chart, you should use a stacked bar chart or a pie chart, depending on the complexity of the data (more than 2 pie charts side-to-side is too many). The rest of the data in the article was presented in standard boring tables that every Sociology journal uses.

What can sociologists learn here?
Take a look at the infographic from Social Media Chimps below.  It explains why visual representations of data are important.  Now imagine if Dr. Herring had used these tips in his article.  Would you be more likely to read it?  Would you share some clever graphic that showed that diversity in the workplace benefits the bottom line?  I would.  Especially if it had cupcakes.

(Citation: Herring, Cedric. 2009. Does diversity pay? Race, gender, and the business case for diversity. American Sociological Review 74:208–24.)