From the December 1997 issue of Startups

How did Mo's 36 Herb Tea--a hand-picked blend of herbs packaged in muslin bags and fastened with scrap telephone wire--become Celestial Seasonings, America's favorite herbal tea company? Celestial Seasonings' success has been due in large part to founder Mo Siegel's insistence that the company listen to one voice: the customer's.

Dedication to discovering and fulfilling its customers' desires explains why Celestial Seasonings' Sleepytime brew is the most popular specialty tea in the United States. With net sales totaling more than $70 million in 1996, Celestial Seasonings has more than 50 percent of the herbal tea market and has single-handedly popularized herbal tea--previously used primarily for medicinal purposes--as a healthy, flavorful alternative to caffeinated beverages.

The principles that guided Siegel's earliest market research efforts remain the foundation of market research at Celestial Seasonings today, proving that you don't need a big budget to find out what your customers will respond to. But you do have to make market research a priority, devoting your resources and energy to interacting with and understanding the most key component of your small business: your customers.

From the inception of the company, product testing has been a priority at Celestial Seasonings, even before it had a budget for market research. Siegel loved to travel, so before he started the company, he went abroad to gather data about tea consumption. When he returned, he tested his teas by offering samples to customers. "Mo would intercept people in natural-food stores and ask questions about what they thought of the flavor of the tea," says Michele Karrasch, senior manager of consumer and marketing research at Celestial Seasonings. "Even today, he will go up to anyone and ask them questions about how they feel about our product or how they view us getting into a particular market. He's very much in tune with the consumer."

Karrasch offers these tips on how to create and maintain a successful market research strategy:

  • Test market your product before you try to sell it. You like your product--that's why you believe in it enough to try to sell it to others. But don't assume everyone else will like it just because you do. It's vital that you test your product with the people who will be buying it.

Through focus groups, concept testing and product testing, at least 250,000 people will test Celestial Seasonings' products next year. Even if you can't afford to run focus groups, test your product concept with your neighbors at local organizations, clubs or businesses.

Remember, though, that your friends and family might not be willing to risk hurting you by telling it like it is. So make sure the opinions you solicit are objective and unbiased. Invite criticism and suggestions as well as positive feedback, and you'll learn more--even if the process is a little painful.

  • Know your customers. You could call this Celestial Seasonings' mantra; the quest for more knowledge of who its customers are forms the heart of the company's market research efforts. Find out what your customers need. What are their lifestyles? How much free time do they have? How much money do they make? This information is vital to your success.

"The breadth and scope of learning the attitudes and behaviors of your customers--especially if you're going into a new business--should not relate to the size of your research budget," Karrasch says. "You need to find out who these consumers are. Get into their minds: Find out not only their shopping behaviors, but their attitudes--everything from how many children they have to how they exercise." You can do this by conducting informal surveys during conversations with customers, by having customers fill out questionnaires that automatically enter them in a free drawing--or even by starting a frequent-customer mailing list that requires the customer to answer a brief questionnaire in exchange for coupons, discounts or similar premiums.

  • Know your competition. You might be tempted to focus your market research efforts on your company alone, but it's a mistake not to find out what people like and dislike about your competition. "It's extremely important that you identify and understand your competition's equity. If you don't do that, you're not clearly differentiating yourself in the marketplace," Karrasch says. "Find out what needs are not being met by your competition. We talk to Lipton users, for example, and say, `Okay, you like Lipton because it's cheap and you can find it everywhere, but how is it not meeting your needs? What would you like to see Lipton doing that they're not doing?' "

Once you know where your competition is failing, examine your company's strengths. Emphasize the things you're already doing that the competition isn't doing. Accentuate these features in your advertising and sales efforts.

  • Don't forget packaging. Market research has to extend to the packaging of your product as well as its contents. Finding out what will entice consumers is a crucial element of any market research strategy. How you package yourself--including everything from your employees' uniforms to your business cards, letterhead and promotional materials--affects the way your customers see you, and is often a deciding factor in where they choose to take their business.

"People are looking at the shelf and making decisions in three seconds," Karrasch says. "There are women who have been with our brand forever, but can't tell you the name of the tea. When their husbands go shopping, they'll say, `Look for the green box with the bear on the front.' Consumers will tell you that packages don't matter, but what they say and what they do are two entirely different things."

To get results in this category, you have to test your packaging against that of your competition. The key, according to Karrasch, is shelf impact. Does your product pop off the shelf? To catch the eye of a consumer making a split-second decision, your product needs to stand out.

  • Be willing to change. "Don't be too limited by assumptions based on what your brand represents," Karrasch says. Evaluate your company to see what possibilities for growth or expansion into new areas you may have missed because your definition of what your company does is too narrow. Celestial Seasonings didn't limit its offerings to herbal teas just because herbal teas are what made the company successful. Instead, it looked at where it could expand most logically--and profitably. In addition to adding iced teas and specialty black teas, the company now markets herbal throat drops under the name Celestial Seasonings Throat Soothers.
  • Go beyond your core users--the loyal customers who have stuck with your company from the beginning. "Core users will narrow your options," Karrasch says. "They don't want you to become the next Coca-Cola. It's almost a selfish agenda for them." Your core users may not want you to grow; they don't want to share you with the rest of the world. They may be afraid your commitment to them will shrink as your company grows. Widen your focus groups to include those people who are not already customers.
  • Leverage your brand equity. This means using the reputation of your initial product (for Celestial Seasonings, hot herbal teas) to expand your product line. Celestial Seasonings now manufacturers an expanded line of specialty tea products, all under the name that--through the success of its hot herbal teas--has become synonymous with quality and flavor in the minds of consumers.

But don't try to make your name mean something it's not. You run the risk of alienating your customers: "Don't try to be everything to everybody," Karrasch warns. "If we did, our customers would say `Hey wait a minute . . . You're putting the Celestial Seasonings' name on coffee?' " Make sure, through careful market research and planning, that the new product is something your customers will accept and buy.

Above all, remember the goal of market research is to impress the one group of people who can make or break your small business: your customers. Follow Siegel's example, and seek out interactions with your customers every day. Listen carefully to everything they have to say. Find out what makes your customers tick: what makes them happy, sad, bored or indifferent. By welcoming customer feedback and making yourself accessible to customers, you'll show them you care what they think. Before you even translate your market research into action, you'll be creating a customer-friendly image that will keep them coming back for more.


Jessica Hale is proof that market research pays off; she has three boxes of Celestial Seasonings tea in her cupboard.

Contact Source

Celestial Seasonings, (800) 351-8175