We developed this methodology in the late 90's when Procter & Gamble was working with the fledgling online grocery industry to try and figure out how to organize 25,000 sku's in an online grocery site. Since then we have done these projects with dozens of sites that are trying to solve the same problem - how to organize and name content so that site visitors can intuitively find it.
We use a modified version of a market research Focus Group discussion. It's kind of a card sort exercise on steroids. During the sessions, participants complete a variety of individual and group exercises. These exercises are performed to gather feedback on how each individual would want the web site content hierarchy to be presented. The individual exercise feed the group discussions and we reach consensus on the names and number of high level categories, sub-categories, and placement of individual items. We run the initial 3 sessions using one set of procedures and then reverse engineer the process for the last 2 focus sessions to corroborate findings. Our customers love watching these sessions!
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Focus group discussion is very valuable when performed in parallel with product or website design, but can also be performed at any stage of website development.