An Overview of Using Surveys for Market Research

Using Surveys for Market Research

Most of us, at one point in our life, have been asked to complete a survey. I know I have certainly been asked to complete surveys - most recently by a PhD student I encountered at the local Starbucks! Having personally never relied upon large scale surveys to guide new product design, I wanted to explore the role surveys could play in launching new ventures. Here’s what I have found.

From a pedagogical level, a survey is a short or long questionnaire designed to solicit feedback on a product or service. They are typically used to assess customer satisfaction, conduct customer segmentation studies, evaluate product usage, and, among other things, understand the perceptions consumers have of a business brand. The data gained through survey information are also descriptive; they are expressed in percentages terms and frequency counts, and sometimes cross-tabulated for the purpose of comparison. And while the aforementioned definition and uses of surveys are simplistic and intuitive, their execution is not. Just like business forecasting, it is part art and part science. And just like business forecasting, garbage in yields garbage out.

Merrill Lynch: “We are likely enduring a depression today”

There’s not a lot of good news coming out these days regarding the economy.  Even President Obama’s press conference yesterday was marked by a profound sense of danger.  And while President Obama isn’t yet using the big bad D-word, others, including investment firm giant Merrill Lynch, are: in an economic commentary released 26 Jan 2009, Merrill Lynch summed up the current economic environment with the title ‘Some Inconvenient Truths’.  Given the introduction, you’ve probably already concluded that the news isn’t good.  Yet, we should confront what Merrill Lynch has learned to properly plan for what lay ahead.

In short, the commentary can be broken down into the following talking points:

1. Current events will develop into a long depression marked by deflation
2. The spending era is over - households will become serious savers of cash
3. The global economy will rebalance and the US is not well positioned to lead the post-depression economy

Let’s break this down and look at a few specifics from the report.

The Limits of Quantitative Business Forecasting

As business owners, we use forecasts to understand macroeconomic and microeconomic factors contributing to the success or failure of a product and service.  We use these forecasts to evaluate product ideas and set overall product strategy.  Creating accurate forecasts is however, notoriously difficult.  And setting business strategy around grossly inaccurate secondary forecasts is downright disastrous.  Given the surfeit of industry and technology forecasts, how do we, as shepherds of corporate strategy, determine which forecasts are valid?  Being vaguely accurate is after all better than being gravely inaccurate.

How To Evaluate The Accuracy Of A Business Forecast

If forecasts allow us to implement long-term strategic objectives and quantify future risk, how do we know if our forecasts are accurate?  Making strategic decisions based upon an erroneous forecast could after all, materially and adversely impact the financial health of our business.  Take the cash flow forecasting methods previously discussed: If these projections were to determine your company’s future hiring, and if they were grossly inaccurate, you might find yourself with a serious cash flow problem.  So how do you determine the accuracy of business forecasts?

Using Markov Models To Estimate Accounts Receivable and Cash Collections

This article is a continuation of:

• Managing Your Small Business’s Cash Flow
• Translating Raw Sales Data Into A Cash Flow Statement
• An Overview of Sales Data and Markov Models: Finding Transition Probabilities

This is the final post in the series on managing cash flows. In the previous articles, I covered the impact managing accounts receivable can have on a company’s financial health.  I discussed two methods to forecast collection rates based upon current accounts receivable.  In this post, I will compare these methods (simple average & markov models) against the actual collection rate, and then use the Markov Model to create a cash flow forecast.

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