The Business Owner's Guide to Conducting Observational Research
As a business owner, staying ahead of the competition and understanding your target audience's needs are crucial to your company's success. One effective way to gain insight into the behavior and preferences of your customers is through observational research. However, conducting observational research requires careful planning and execution to ensure accurate results. This blog will provide a comprehensive guide for business owners on conducting effective observational research to make actionable decisions for their business.
To learn more about other market research methods you can use to understand your customer better, check out my guide on How to do Market Research for your Business afterward.
What is observational research?
Observational research is a market research method that involves observing individuals or groups in their natural settings and gathering data about their behavior, interactions, and other relevant information.
What are the advantages of observational research?
Observational research offers several advantages to business owners. Here are some of the key benefits:
- Accurate and reliable data: Observational research allows you to gather reliable data about your customer's behavior, preferences, and interactions. By observing customers in natural settings, you can collect data free from response biases that can arise in other research methods, such as surveys or interviews.
- Uncovering hidden insights: Observational research enables you to find insights that customers may not be able to articulate or may not even be aware of themselves. Observing customers' behavior lets you gain insights into their unconscious actions, emotions, and preferences.
- Flexibility: Observational research can adapt to different research questions, settings, and participants. This method can be applied to various topics, including consumer behavior, workplace dynamics, and social interactions.
- Real-time feedback: Observational research provides real-time feedback, allowing you to change your business practices based on your observations immediately. This can be especially useful for businesses requiring quick feedback to make informed decisions.
- Cost-effective: Observational research can be a cost-effective method of gathering data, particularly if observing customers in a natural setting requires little to no additional resources.
What are the drawbacks of observational research?
Like any market research method, observational research also has some disadvantages that business owners should be aware of before implementing. Here are some of the key cons of observational research:
- Limited generalizability: Observational research provides insights into a specific group in a particular setting, which may not represent a larger population. The results may not apply to other groups or situations, limiting the generalizability of the findings.
- Time-consuming: Observational research can be time-consuming, mainly if you observe customers in multiple settings or over an extended period. It may also require a large sample size to generate meaningful results, increasing the time required.
- Potential observer bias: Observational research can be susceptible to observer bias, where the researcher's expectations or preconceptions may influence their interpretation of the data.
- Ethical concerns: Observational research can raise ethical concerns, particularly if you are observing people without their knowledge or consent. Obtaining the necessary permissions and ensuring participants' privacy is respected is essential.
- Lack of context: Observational research may provide valuable insights into behavior and interactions, but it may not provide context or explanations for why people behave in a particular way. It may be necessary to complement observational research with other methods, such as interviews or surveys, to understand the behavior completely.
Common use cases for observational research
Several common use cases exist where a business owner might use observational research to gain insights into their customers' behavior and preferences. Here are seven examples:
- Store layout optimization: Observing customers' movements, interactions, and behaviors in-store can help business owners optimize their store layout, including product placement and aisle design.
- Menu optimization: Observing customers' interactions with menus in restaurants or cafes can help business owners optimize their menu design, including item placement, pricing, and descriptions. This can help increase sales and improve customer satisfaction.
- Website design: Observing customers' interactions with websites can help business owners optimize their website design, including page layout, navigation, and user experience. This can help increase website traffic, engagement, and conversion rates.
- Event planning: Businesses may use observational research to gain insights into attendee behavior and preferences at events such as conferences, trade shows, or product launches. This can help them optimize event planning, including venue selection, booth design, and product demonstrations, leading to increased engagement and sales.
- Packaging design: Observing customers' reactions to product packaging can help business owners optimize their packaging design, including color schemes, graphics, and messaging. This can help improve brand recognition, customer engagement, and sales.
- Advertising effectiveness: Observing customers' reactions to advertisements can help business owners optimize their advertising strategy, including messaging, placement, and targeting. This can help improve brand awareness, customer engagement, and sales.
- User testing: Observing customers' interactions with a product or service during the development process can provide valuable insights into usability, user experience, and areas for improvement. This can help businesses create products that meet customers' needs and expectations.
Types of observational research
- Naturalistic observation: This type of observational research involves observing people in their natural environment without interfering with their behavior. This is the most cost-effective and common form of observational research businesses use.
- Participant observation: Similar to naturalistic observation, a researcher will observe people in their national environment. However, with participant observation, the researcher will participate in the activity, such as joining a focus group or trying out a product. Participant observation can help to gain deeper insights into customer behavior and preferences.
- Controlled observation: This type of observational research involves observing customers in a controlled setting, such as a laboratory or research facility. Companies with products or services that need to demonstrate reliability, such as a glucose monitoring product, may use a controlled observation to conduct the observational research required for their business.
What are the steps to conduct observational research?
Step 1: Define your topic
Start by identifying your objective for observational research. For example, a craft beer company might use an observational study to understand better how customers view the artwork they designed for their can label in a crowded grocery aisle.
Step 2: Select your observation type
For most businesses, naturalistic observation will suffice.
Step 3: Determine how many people to observe
Set your sample size for the experiment. As a rule of thumb, you'll want to observe as many people as possible to identify trends and common behaviors.
Step 4: Create a run-of-show
Detail the behaviors and variables you'll be observing, the data collection methods you will use, and any specific procedures you will follow.
For example, here's a craft beer company's run-of-show:
- Behaviors and variables: We will collect the gender, age range, and ethnicity of observed participants. We will record their time in the alcohol aisle, whether they recognized our brand, and whether they purchased one of our beers.
- Data collection methods: We will use two trained team members at each end of the aisle to observe the subjects and have received permission from the grocery stores to supplement our findings with video recordings.
- Specific procedures: We will remove from our dataset any subjects who become aware of our team members who are observing them at any time.
Step 5: Train your observers and recruit participants
Train your observers to follow the protocols outlined in your run-of-show document and to ensure they understand how specific actions, such as getting caught observing someone, may bias participants.
Recruit participants who you will observe for the study. For this example, the beer company could email people from their customer database or advertise the study with a flier in one of their locations.
Step 6: Conduct your observational research
With all your preparation to get to this point, you should be confident to conduct your observational research. Don't be afraid to adjust if you notice details or things you did not prepare for. However, ensure you are not making these changes because you want to confirm your previous assumptions (confirmation bias). You may observe behaviors in subjects you didn't expect to see or predict, which you should welcome as valuable insights to leverage with your business.
Step 7: Analyze the results
After the observational research study has finished, organize your notes, transcribe your recordings, and analyze them carefully to draw meaningful conclusions.
Step 8: Thank and follow up with participants
It is essential to thank the participants for their time and effort in participating in the observational research. This can build trust and goodwill with your business and encourage future participation, as it may be necessary to complement observational research with other methods, such as interviews or surveys, to understand the behavior entirely.
What biases do you need to control for observational research?
- Hawthorne effect: Participants may change their behavior when they know they are being observed, leading to inaccurate results. To control for this bias, use unobtrusive observation methods or inform participants of the observation in advance.
- Selection bias: The sample of participants may not represent the studied population. To control this bias, select the participants carefully based on the research objectives and criteria.
- Contextual bias: The setting or context in which the observations occur may influence participants' behavior. To control this bias, conduct the observation study in a naturalistic setting and consider the context of the observed behavior.
- Experimenter bias: The experimenter may unconsciously influence the participants' behavior or the interpretation of the data. To control for this bias, ensure that the experiment is standardized and that the experimenter is neutral and impartial.
What tools should you use for online observational research?
- Glassbox: best overall
- Hotjar: best free plan
- Mouseflow: best for small businesses
Tips to get the most value from observational research
- Use multiple observers: One way to get the most value from observational research is to use numerous observers. This can reduce observer bias and increase the reliability of your findings. By having multiple observers, you can compare their notes and observations to identify patterns and trends.
- Document context: Observations are often context-dependent. Therefore, it's essential to document the context of your observations. This can include details such as time of day, location, weather, and any other relevant environmental factors. This can help you better understand the factors that influence the behavior you are observing.
- Observe over time: Observing behavior over time can help you identify changes in behavior and help you understand how different factors influence behavior. By observing behavior over time, you can also specify the long-term effects of interventions or modifications to the environment.
Common mistakes with observational research
- Lack of clear research question: Without a straightforward research question, observational research can be aimless and lack focus. This can lead to collecting irrelevant or uninterpretable data.
- Overgeneralization: Observational research should not be used to draw conclusions about a larger population. The findings should only be used to generate hypotheses for further investigation.
- Failure to account for contextual factors: Contextual factors, such as the environment or social norms, can influence observed behaviors or events. Researchers should document this and make sure that they take these factors into account.
Observational research examples
1. IKEA
IKEA uses observational research to understand how customers use and navigate its stores and to improve the store layout and design. By doing so, they have mastered the Gruen effect, which makes customers more susceptible to purchases. Ikea's creative director admitted that only 20% of customer purchases are logical or based on actual needs.
2. SoFi
SoFi uses Glassbox to conduct observation research to get the most accurate picture of how members experience their app.
3. Hewlett-Packard
Hewlett-Packard is well-known for using observation research to gain insights that it can use to drive business success. In one instance, they conducted a two-week study on customers' buying behavior at a large independent bookstore Kepler's Books & Magazines, in Menlo Park. Notably, they acknowledged many unexpected findings, such as more gift buyers than initially anticipated.
Conclusion
With a solid understanding of observational research and a commitment to following best practices outlined in this guide, business owners can unlock valuable insights into their customers' behavior and preferences.
