As a market researcher, I help small businesses understand their target market to achieve varying business goals. Currently, I am working with a client who wants to disrupt the renter’s market in the United States by introducing a new service: allowing renters to pay rent through their credit cards.
The service itself is not entirely new, but its usage has yet to reach mainstream and there is a very small competition pool. Currently, there are existing platforms that allow people to pay rent through their credit cards. Some platforms are marketed directly to renters, while many others are marketed as a platform that allows you to pay different services using a credit card. Despite the high credit card usage rate in the United States and progress in financial technology, most renters still pay using cash or bank transfers. All of this leads him to believe that there is untapped potential in the market. What the client wants is to improve the rent payment market by offering renters better payments options.
There are advantages to paying rent through a credit card. For one, it affords renters a grace period—rent is technically paid when the credit card is due. Furthermore, many credit card products offer perks and privileges, such as cashbacks, travel miles, rewards points, insurance, etc. The disadvantage of using a credit card is a 2.9% transaction fee. That said, people who perceive value in the service will typically be willing to pay for the service in exchange for the value they receive and enjoy.
He approached me with two questions: How do I sell this service to the renter’s market? Who in the market will buy this service? To help the client achieve his startup’s goals, I reframed the question: Why will people subscribe to this service? To answer this question is to understand consumer behavior, specifically customer trends and preferences.
I recommended that we investigate consumer behavior related to paying rent, specifically the following information: (1) what payment method or methods renters typically use to pay rent, (2) why they chose to pay rent this way, and (3) what pain points they experience when they use their current rent payment method. The research also aims to understand demographic details, such as income, average rent paid, how long they have been renting, and their current location, to help us segment the market and figure out the right pricing scheme.
The client has assumptions about renter payment behavior and why the market has yet to embrace paying rent through a credit card. In understanding customer trends and preferences, the client can confirm or debunk his assumptions about the market and their rent paying values. Most importantly, in understanding the three salient points stated above, the client will know who his target market is and what they value. This will help him achieve two things.
First, it will help him understand how to develop a product that the target market wants. Product development is a feasible marketing strategy particularly at this early stage. Knowing who the market is will help him identify which features to offer and, as a corollary, which partners to work with so that he can offer the features that the target market wants to see and use. This will help ensure that he offers a service that addresses the customer’s pain points and aligns with their consumption values.
Second, the consumer information will also help him craft an integrated marketing campaign that will communicate the service’s value to the target market. Because this is a relatively new service, one of the primary marketing communication thrusts would be educating the market about the benefits of using the new service. In the early stages of the launch, it is important to communicate how the service addresses the target market’s pain points and aligns with their values.
Tales from the classroom is a special blog series where I share research and articles I produce in my DBA (Doctorate in Business Administration) program.
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