Perhaps you’ve come up with a great idea for a product or have noticed a gap in the market you think you could fill. The question is, is your idea profitable? Instead of assuming that it is or consulting with a few other people, they best way to figure this out is to conduct market research.
What is Market Research?
Market research is an indispensable part of business planning. It helps us answer important questions about our customers, market and products to avoid any unnecessary problems.
Whether you are aware of it or not, you are conducting market research more often that you realize, though on a smaller scale. Every time you ask a customer for feedback or check out what’s new with your competitors, you are essentially gathering new information that could help you in the future. The only difference is that a systematized market research gives you more insight and answers more questions about customers, a product or competitors.
Types of Market Research
There are two types of data that we compile during the process: primary and secondary information.
Primary research consists of all the data you’ve gathered yourself or by hiring a research firm to do it for you. Usually, it helps you answer questions directly related to your business or a product, such as:
•Who is my ideal customer?
•What does my target customer want or need?
•What does my target customer value in a product or a service?
•What are the key factors that persuade my customer to make a purchase?
•What does my customer consider to be the ideal price?
•Who are my main competitors?
•What are their strengths/weaknesses?
•What are my strengths and weaknesses?
•Which components of my product can be improved?
These are only some of the questions primary information gives answers to, but as you can see, they are some of the most important ones any new business needs to ask.
A huge benefit of primary research is that it allows you to target specific groups of customers, not examine the market as a whole. Plus, you can get answers just for a specific set of questions, without having to bother with things that are not of immediate concern at a particular time.
On the other hand, secondary research consists of all the data acquired by other companies, associations or government agencies.
It examines existing resources, such as books, surveys, records and research studies, but the difference is that all the information has already been gathered by someone else. Consequently, this type of research is less time consuming and less expensive, but you are limited to what other people have asked.
This data is better used as a starting point to determine whether there is a need for your product, consumer habits and things like that, before you continue developing your product further.
Some of the questions secondary research can answer include:
•What is the current state of economy?
•What are some of the trends that influence the market?
•How is my business affected by economic influences?
•How is my business affected by technological expansion?
•Can my product be sold internationally or just locally?
•What age group, social status or income level does my ideal target market belong to?
•Is there demand for my product?
•Is the market over-saturated with similar products?
•Is the interest for my niche increasing or decreasing?
Obviously, you will ask most of these are questions before you launch a business or start building a product, not after. They give you a good base knowledge of the market and your chances to succeed, not specific information about your product.
Why Should You Conduct Market Research?
Some business owners are so eager to get their product out there and launch the company that they’d rather skip this important process. Although I admire people with confidence who believe in themselves, in this instance, not doing enough research could be detrimental for your business.
Every aspiring entrepreneur needs to equip himself with enough information, in order to successfully run a business and avoid unpleasant surprises. Just because you have “a really good feeling about this product” or “know that it has potential” doesn’t mean you can simply dive in without proper information to back you up.
Market research is a valuable process that gives you an ability to tackle different aspects of your business more efficiently. Here are 9 vital reasons why:
1. Locating and solving problems
With proper information, it will be much easier to determine where your problems lie and how to fix them, thus minimizing the risks.
2. Setting realistic goals
Research also stops you from getting carried away and envisioning an unrealistic future for your business. You will be more aware of what’s possible, what isn’t and how much time it will take to get to a certain level.
3. Improving a product/service
Whether your company is product-based or service-based, market research helps you uncover glitches and issues of what you are offering to the audience. It helps you realistically examine different aspects of your product – design, appearance, usability, functionality, disadvantages and so on. It allows you to figure out where the issues with your product may arise and tackle them directly.
4. Determining a price
Price is a common issue when you are just starting out; your product needs to be affordable, but still secure a decent profit. You needs to compete with your contenders’ prices, but not undersell. It’s a lot to think about and market research helps you make those decisions.
5. Choosing forms of advertisement
How are you going to attract different group of customers? Are you going to use social media as an outlet? If so, which platforms would fit you best? Do you even know which kind of advertising will appeal to your audience the most? A good product is key, but without proper marketing, you might as well give up before you even start. If you don’t know how to attract your target audience, market research is a valuable tool to figure it out.
6. Understanding potential customers
Sometimes we think we know what our buyers want, when we, in fact, have no idea. Market research helps you understand your customer better and allows you to tailor your product to fit your buyers.
7. Understanding existing customers
It’s good to know why someone chose you over your competitors, what made him buy your product and return to your store. With that kind of information, you will learn what to emphasize in the future and where you still need to improve.
8. Pinpointing new business opportunities
You never know what the results of your research could be. In fact, you might be surprised and discover that there is a gap in the market that you could fill. In opens your eyes to new business opportunities, even it that wasn’t your primary goal of research.
9. Preparing for expansion of the company
For example, you might want to turn your local business into an international one or introduce a new product. Market research is not something you only do in the initial phase of starting a business, it is a process that can continually help you make the best possible choices and choose the right projects even when you become an experienced business owner.
How to Develop a Market Research Plan
No business owner that is in his right mind will start a company without first conducting an extensive market research.
There are business owners who would rather skip this step out of fear of negative feedback. They are so convinced that their idea will be a success that they don’t even think gathering additional information is necessary. However, the most popular kind are owners that avoid research due to its costs.
Let’s face it, market research is not only time-consuming, but also expensive. What many business owners don’t realize, though, is that it can be done even if you can’t afford to dedicate a large sum to research. Whatever the case may be, you will need to develop a good market research plan and execute it in accordance to your budget.
1. Setting a goal
The first thing to do before you even start gathering information is to set a goal of your research. It’s wise to determine a few main points that will guide the research process. With specific goals in mind, it’s easier to figure out what the right questions are, where to look and what to focus on. Think about which specific issues you want to address, whether it’s who your target market is, customer retention, acquisition or something else entirely.
For example, one of your main goals could be to determine whether your idea is profitable. In order to do so, you will need to research the marketplace, see how many similar products are out there, what differentiates you from them and which unique qualities you can bring.
Or you might want to start also selling products online. That means you will have to figure out which kind of customers shop online, why and if they prefer it to regular shopping, what they are looking for and if your website is user-friendly.
2. List all the platforms you could use to gather feedback
Luckily for you, this is the age of digital media, so gathering customer impressions is a faster, more convenient and a cheaper process than it was 10 or 20 years ago.
Assuming that you want to spend as little as possible on research, you have many options available that will either be free or cost very little. Some of them include:
•Online surveys (SurveyMonkey, AYTM)
•Online video interviews (GutCheck)
3. Assemble a list of questions
The questions will mostly depend on the goal you’ve set previously, so there it’s no one-size-fits-all type of thing. However, there are certain guidelines that will help you craft an efficient survey.
•A survey should be short so the participants don’t lose interest;
•All the questions should be easy to read and understand, because it will help you get more accurate answers;
•It should be visually appealing and easy to gloss over;
•Avoid questions that take a lot of effort to answer;
•Let participants decide whether they want to stay anonymous;
•List the most important questions first;
•Avoid surveys that take longer than 5 minutes to complete;
•Lean towards multiple choice answers or scales instead of written answers;
•Pre-test your survey with a group of people before you send it out and, if there were issues, make sure to correct them
4. Choose the most fitting platform
You’ve already brainstormed a list of tools you could use to submit your survey, but you are obviously not going to use all of them. You need to figure out which one is the most appropriate for your target group.
For example, if you want to start an elderly care business, these people probably don’t use Twitter or Facebook very often. For this particular group, a telephone or an in-person survey is a much better choice. Think about who your target audience is and choose an outlet that feels the most natural for that group.
5. Analyze the results
Once you are done gathering information, it needs to be organized. Group different types of answers and display them in a way that is clear and easy to follow. Charts are one of the easiest ways to have an overview of the results without getting lost in them.
When you’ve gone through these 5 steps, you will have a much better understanding or your customers and the direction you want to take.
Most common mistakes with Market Research
Due to the fact that research is costly and takes up a lot of your time, business owners often try to take shortcuts and don’t want to fully dedicate themselves to the task.
Since that kind of an approach will do you more harm than good, here are the 3 most common mistakes that you should avoid making.
1. Surveying only the people you know
Although help from friends and relatives is a great thing, most of these people will not have a lot in common except for knowing you, which means they probably don’t belong to your target group (at least not all of them).
Furthermore, they will be influenced by the fact that they know you and will probably refrain from saying anything negative, to avoid hurting your feelings.
Avoid this route – instead, survey people that might actually buy your product and have real use for it, it will grant you much more accurate results.
2. Using only secondary information
While it is true that secondary research costs less and is much easier to do, it shouldn’t be your only source of information, simply because it’s not accurate enough for your business.
Secondary information gives you insight on the current state of the market or economy, but when it comes to a specific product, it won’t tell you an awful lot.
As I’ve said before, secondary research is only a general overview, but to get more specific results (which I promise you will need), you need to also conduct primary research, no matter how much you dread the idea.
3. Using nothing but online resources
We can agree that the Internet is a powerful thing and that you can find almost anything on Google. However, when it comes to starting a business, you need to dig deeper. Using only web resources is lazy and probably won’t give you an accurate predicament.
Be prepared to look for information it libraries, books and business centers, because not everything is available to the public on the web.
Sometimes, the results might surprise you and require additional questionnaires, but it’s completely acceptable. You shouldn’t try to rush it or make business decisions if the results don’t back you up. Take your time, do as much follow-up research as you need and be prepared to adapt if the results aren’t what you’ve expected.