Every company aims for consistent and steady growth in revenue. The last topic in a business meeting that executives want to address is, “Why is revenue down?” There are a multitude of reasons a company’s profits can decrease, but to learn the core reason a problem occurred your organization should consider root cause analysis.
What is Root Cause Analysis in Market Research?
In market research, root cause analysis is a systematic method of discovering the truest and main reason a problem has occurred. Business is ever-changing. Sometimes changes are positive and lead to increased profits, while other times the changes can have a negative impact on the company’s revenue. When a company can identify the root cause of a problem, they can implement action steps to solve that problem at its core. Understanding the underlying causes of change is referred to as root cause analysis.
Imagine you are sick. You may take a trip to your local pharmacy and purchase over the counter medication to feel better. What if this over the counter medicine does not cure your ailments? You may only be masking the symptoms, and to truly heal you may need to visit a doctor and take an antibiotic. The root cause of your ailment may not be solvable by over the counter medication. This basic healthcare example we all experience each year is applicable to business as well.
If revenue has decreased and problems have occurred with the customer service department, implementing customer service training or letting go of an inadequate employee may not solve the problem. The root cause of a significant loss in customers could be a completely separate issue. Identifying the root cause allows for a deeper understanding of the true problem with the product, service or company.
Root cause analysis can be a complex process, but the basic fundamental is to identify the root cause and design strategies to impact the outcome positively. This is a perfect fit for standard market research methodologies like surveys, focus groups, and other approaches.
Market research is all about asking questions and identifying themes. Some of the best focus group moderators excel at obtaining root causes by simply asking, “Why?” Then, “What do you mean by that?” Then, “Why?” again. A market researcher continually asks why to get to the root cause.
Both qualitative and quantitative research can help an organization arrive at a root cause and examine a situation. Market research companies will help create an action strategy to fix the root cause based on data, facts, and evidence.
4 Steps for Using Factors in Root Cause Analysis
As previously stated, there are a multitude of factors that can contribute to a decrease in profit, declining revenues, negative customer experience, or poor customer support. A key aspect of root cause analysis is to identify the possible factors that have caused the problem.
Step 1: Identify Factors
Identify all the possible factors that could have contributed to the change. This needs to include internal and external factors. Internal factors are actions the company has taken, for example, a new product launch, restructuring of management or marketing campaign changes. External factors are factors beyond the control of the company. For example, a direct competitor has decreased their prices or launched a new product.
This can be accomplished through some initial qualitative focus groups or in-depth interviews (IDIs) which are methodologies designed to explore topics or issues. While they are not great tools to measure, they are excellent tools to acquire depth, detail, and cover the realm of potential root causes to test in follow-up phases.
Step 2: Sort Factors
Identifying factors can yield a long list of possibilities. Step two involves sorting those factors into the most likely causes. The best approach is to start with the metric (measurement) that indicated the change initially and the segments (parts) included. Once the top segments that seem to be related to the undesired change are identified, factors are selected that appear to mostly likely have caused that change.
Unlike the first step where qualitative market research is recommended, this sorting or prioritizing of factors is an excellent fit for a survey. For example, let’s say the root cause of declining customer satisfaction is the customer support team. Through focus groups with customers, you learned this is centered on lack of knowledge of the product, unfriendly reps, unresponsive reps, and long wait times. Using a survey will help you measure the root cause and perhaps you find out 80% of the negative satisfaction is driven by responsiveness. All other factors were less than 10%.
Step 3: Classify Factors
Once a ranked list is established that identifies potential causes, each factor needs to be analyzed to uncover the root cause. Factors can be correlated, meaning they are factors which are caused by the same root cause but not the truest problem. Factors can be unrelated, meaning they are unrelated to the change. They can be considered contributing, meaning they are part of the chain of events but not the root cause of the problem. Once all factors have been categorized, the root cause of the problem will be discovered. Remember there can often be more than one root cause of a problem.
After the survey, you have identified responsiveness as the root cause. After doing some internal investigation of data and discussions with managers and stakeholders, you realize the majority of customer support calls take place early in the month after new products are shipped to distributors. Yet, no staffing adjustments are made to cater to this as schedules and hours for the customer support reps remain steady across the monthly schedule. This causes a backlog of inquiries and calls, which need follow-up and not enough time to handle the customer questions. This results in slower response times. All driven by customer experiences from the 1st through the 6th date of each new month.
Step 4: Design an Action Plan
Once the root cause has been identified, a company has the opportunity to create an action plan to eliminate the problem at the source, leading to increased customer retention, satisfaction and revenue.
The best market research companies do not stop with data. Once the fieldwork is concluded the job is just beginning. They will work with your organization to tie the insights into actionable recommendations, strategies, and next steps. This will help with your action plan and set the foundation of changes from the market research. All good market research assists with not only marketing, but operations and strategy as well.
Often times in business, the problem is not the actual problem. Root cause analysis through market research enables a company to identify, understand, and correct the problem at the source, instead of fixing surface-level issues which simply mask the true crisis. Identifying, sorting and classifying factors through simple techniques like focus groups, interviews and surveys play a key role in solving the root cause problem, and results in more long-term success for the company.
Contact Drive Research
Drive Research is a market research company who assist clients of all shapes and sizes explore and measure topics, issues, and opportunities. All forms of market research involve some type of root cause analysis: formally or informally. Questions about an upcoming project our team can assist with? Contact us below.