Once you come up with a business idea, it is important that you thoroughly plan and research it before you begin execution. It is essential that you investigate whether the idea you have is a viable business opportunity. This can be achieved by undertaking market research, either personally or by obtaining assistance from a professional researcher or agency.
The extent of the analysis required will play a fundamental role in determining whether you can do some or all of the research yourself. Should you required a large quantity of detailed objective data, then it will require more assistance from an expert researcher. Professional market researchers will be better able to determine the most suitable research instruments to use and the most appropriate questions and analysis to conduct.
The most important step in the market research process is defining the goals of the research and the main questions that need to be answered on completion. This will determine the information you need and will help keep the research activities focused on the key areas.
After finishing your research activities you want to be able to answer those questions that you have identified as been the most fundamental to whether or not you should proceed further with your business opportunity. The goal of the effective research is to enable you to make better-informed decisions and avoid wasted expenditure on the pursuit of activities where no market exists or the barrier to entries are just too high to succeed.
Why is researching the market prior to launching your business so important?
- By undertaking proper research you can properly assess the viability of your business idea
- It will also help you evaluate if there is potential to earn a living from your idea
- It will enable you to determine the usefulness and position of your product
- Effective research will provide you with a better understanding of your customers and their needs and wants
- It will help evaluate your product with regards to its features and whether potential customers will value these benefits and are willing to pay for them
- It allows you to properly consider your competition and identify what they are doing right and not so well
- Market research can help you identify trends in the market and assess which trends are likely to impact on your business
- It will help avoid expenditure in untargeted or wasted activities.
42 Questions to consider:
- What problem will my product or service solve?
- What types of people will buy my product or service?
- Why will they buy it?
- How will customers and the general public see your company.
- What price do I need to charge?
- How does that compare to similar products on the market?
- Who will I be competing against? What makes my product better?
- What is the extent of the market for my product/service?
- Who is my ideal customer?
- Is the market saturated?
- If it is, can I look at entering a niche market?
- Does your locality really need what my business offers?
- Is there a need for another version of what i’m creating. Coffee shop, pet store etc?
- How many monthly or yearly searches for your product or service are entered into google?
- How much money is spent in your industry each year?
- How much money is spent in that industry each year in your area?
- Is there room in the market for one more business?
- What kind of people would want to buy your product or pay for your service?
- What’s your ideal customer profile?
- Does the market want what you’re offering?
- Will people have an interest in your content?
- Do people want the service you will be offering?
- What is your message you want to put across?
- Are there enough of these types of potential customers living in your area to support your business?
- Where are they located?
- Will they frequently visit the area you plan to be in?
- Can the economic profile of the community support your business?
- Are you selling a premium service with prices to match?
- Can the community support this type of business?
- Will your customers likely become repeat customers? If so, why?
- Is there competition for what you will be doing?
- What do they do well?
- How do these businesses appear to be doing?
- Do they look like healthy, thriving businesses?
- What do they do poorly?
- What’s unique about them?
- What’s unique about you?
- Why would customers go to you over your established competitor?
- What differentiates my business idea and the products or services I will provide from others in the market?
- What could you do to compete with these businesses?
- How would you stand out?
- Is there an opportunity to create a competitive advantage here?
15 Questions to ask in relation to your customers:
- How old are your customers?
- What gender are they?
- What locations do they live?
- How much money do they earn?
- Outline as many demographic features of your ideal client as you can…
- If you could create for them anything they wanted… what do they most desire?
- With regard to your business, what do they want?
- What do they need?
- What are they afraid of?
- What frustrates them?
- What do they worry about the most?
- What will be the biggest challenge in getting them to do business with you?
- Where do these people gather in groups?
- What do they read?
- What other media do they digest?
Researching your business idea will usually focus on three key areas:
- Identifying your target market. This will involve establishing their ages, income, etc.
- Identifying your competition. This will involve considering who are your main competitors, establishing what they do well and not so well etc.
- Identifying trends, both current and likely future trends. This involves looking at trends and considering which trends are likely to impact your business. Technology and social media trends, for example, are particularly important and are constantly changing. Both new and existing businesses need to be up to date with trends in these areas.
When assessing the viability of your business idea it is important to avoid attempting to satisfy all customer needs. This essentially means do not try to be all things to all customers. Too many objectives essentially mean no objective at all. Multiple objectives leave us with no clear objective to pursue and follow. The key to success lies in identifying a niche or target market for your product.
The research you undertake should provide you with the information you need to determine whether or not you should go ahead with the idea, alter it or abandon it. Having a good idea of the results that you would like to obtain in each particular area can make it easier to indicate whether to pursue the opportunity further, amend or abandon the idea when the actual data is obtained. By having a clear idea of what results you need can save a large amount of time and money by preventing the pursuit of an opportunity that is not viable.
Where can we get information?
We will look at traditional methods of gathering information but first let’s look at the medium most of us frequent many times in a particular day – Social Media. Traditional methods should always be included but it’s important to see how brands are utilising Social Media to gain their market research insights. The below infographic highlights the methods very well.
Now let’s look at the traditional methods. Firstly, you will be able to gather huge amounts of information from searching the internet, industry associations, state agencies etc.
Local libraries have online databases containing information about customers. These databases can also be used to identify your potential competition.
Attending trade shows and networking can be another way to obtain valuable information about the market and industry you intend to enter.
Contacting other successful business owners can be a very useful well to get insight on important areas that you may be missing or have not considered. Their knowledge and business experience can be a valuable source of information. They will further be able to provide you will valuable feedback about your idea that you can take on board. What they liked or didn’t like etc.
If you are opening your business in your local city you could contact similar business owners in another city. They should be able to provide you with key insights into customers, trends and other useful information about your business idea.
It’s also important to consider if your idea has already been done by someone else. If it has been done successfully by other companies, is there an opportunity for you to improve or add some unique selling point to yours in order to stand out. Otherwise, it may be too difficult to try to obtain a piece of that market. If your idea has been tried by other businesses and failed. You need to spend some time analysing why it failed, is it just not valued by customers or is there some way you can provide the product or service differently.
Creating a prototype of your product for testing is a brilliant way to obtain information about the market and customers. Creating a prototype is not always possible at this stage for new business owners, but where even a rough prototype can be used it can generate some extremely valuable information. It allows customers to properly interact with the product and inform you want they liked, disliked or would add to it. It provides the customer with the opportunity to tell you what they want.
It is also important that you business idea can be understood by others. This means making sure that you can explain to others effectively what your idea is and how it works. If it is overly complex, others will not be able to understand and obtaining valuable feedback will be impossible. Trying to get others to back and support your idea will be impossible if you cannot communicate it effectively with them.
To assess the potential of a shop, you could consider the shop’s location and the level of passing traffic in that area at different times.
This should provide you with a good understanding of your market.
It is possible to seek assistance from experts when designing and planning your market research activities and questions, as well as conducting research activities. They can provide useful advice on the most appropriate research activities to carry out and help design questions etc.
Sources of Information can include:
- Trade information
- Print or online trade publications
- Trade shows
- Demographic and economic data
- U.S. Census Bureau’s American FactFinder
- State Data Centers
- Recent Economic Census (age range, income, number of businesses by type in a geographic area and total sales in your category.)
- Potential customers
- Talk with friends of friends, (Avoid family as they may be reluctant, to tell the truth, for fear of hurting your feelings)
- Old customers or existing customers if you’re already in business
- Business groups
- Your local chamber of commerce
- Government-sponsored bodies-Small Business Development Centres
- National competitors
- An online search of businesses in your industry and evaluate what they offer
- Local competitors
- Website of competition
- Similar business in a similar city and speak with the owner
Types of research:
1) Primary research refers to information gathered from original sources such as:
- Face-to-face interviews
- Focus groups
- Customer feedback
2) Secondary research is information and data that has already been collected and analysed by other sources such as:
- SBA.gov’s Business Data and Statistics page (USA)
- U.S. Census Bureau (www.census.gov)
- Economicindicators.gov provides access to daily releases of key economic indicators
- SBA Office of Advocacy (Small business statistics)
- Central Statistics Office (Ireland)
- Eurostat (European Statistics)
- Office For National Statistics (UK)
- Australian Bureau of Statistics
- Industry and trade publications
- Social media and websites
- Marketing and consumer lists
- Newspapers and media
- http://www.springwise.com (research industry and societal trends.)
- http://www.trendhunter.com (research industry and societal trends.)
Who are your customers?
You need to try to establish the type of customer that will be interested in or satisfied by your product or service. When considering the type of customers, you’ll need to take into account those groups of customers who will make the decision to purchase your product, those groups that will influence whether the product is bought, and the group of individuals who will directly interact with your product.
Who are your competitors?
Carrying out market research will enable you to size up the competition. Just like customers, there will be different groups of competitors that you will identify and how you will compete with each group will differ. Some competitors you will compete for will on a more regular basis, whereas others less so. It is important to establish the message you would put across when competing with the different groups of competitors. If you are an established business and considering another potential business opportunity, you can Ask your customers who they see as your competition and why they use you.
How to carry out market research
Set up your research with a clear brief, including objectives, deadlines and any important background information. After defining the objective of your research you can now start planning out how you are going to conduct your activities.
Planning involves determining the research methods that will best enable you to obtain the information or data you require. This can include the use of surveys, questionnaires or focus groups etc.
Research planning will also involve considering the type or group of people you want to sample, how and where you will be able to find such individuals. Consideration must also be giving to how you will entice them to participate in the survey or focus group etc.
It may also be possible to conduct your research over the telephone, the internet or will it have to be in person etc. The type of information or data you require will influence the methods used and level of analysis required. The data required will be largely influenced by the objective of your market research, whether it is to obtain a simple overview or a thorough analysis. Therefore, it is important to establish what you need to know and whether you need an in-depth understanding or simple numerical results.
To gain a broad understanding of your market you may decide to use secondary research data, which will enable you to narrow your focus before you go any further. Make full use of easily accessed information from internal records, employee feedback, publications and the Internet. To gain a more detailed understanding on a particular topic you may decide to carry out a survey. This will enable you to dig deeper and obtain more detailed data to analyse. It is also possible to conduct filed research or experiments. This will enable you to test the relationship between certain variables. You must decide how quickly you need the information and how accurate it must be.
If you decide to carry out a survey as a means to obtain information, determining the most appropriate questions will be important as well as the design of the questionnaire.
Consumer market research survey questions:
Demographic Questions Relate To:
- Household size
- Household income
- Education level
This is asking information relating to interests, hobbies, opinions or anything else that will help you learn more about your customers.
Buying Pattern Questions
- Have you ever purchased _______?
- Who in your household makes buying decisions?
- Where do you go to purchase_______?
- How frequently do you purchase _______?
- How long does it take you to make a buying decision?
- What is your typical budget for _______?
- How far would you travel to make a purchase?
- Have you/would you purchase online?
- What features do you look for when you purchase _______?
- What specific benefits do you look for in _______?
- What problems motivate you to purchase _______?
- What needs are you trying to meet when you purchase _______?
- How do you hope _______will make your life better?
To help with your survey, Survey Monkey is a really useful tool for creating your survey, allowing people to take the survey, and collecting information. You can also share your survey across social media platforms to increase it’s reach. You might consider paid advertising on Facebook that will allow you to target the demographics you identified previously.
Should you decide to conduct a focus group, determining the questions will also be important along with the appropriate materials for the moderator. Focus groups allow you to obtain information from customers’ responses to your product or questionnaire, creating a dialogue which will allow them to build on each others’ opinions. They are really good for getting reactions from children or other groups whose level of literacy or attention span may not be robust enough to handle innumerable survey questions.
A focus group should be made up for six to eight participants, all of whom have been pre-invited. Incentives such as a gift or financial reward can be used to encourage people to participate in the focus group.
An hour is an ideal length of time for the focus group, otherwise, participants will lose interest and focus. To prevent people from giving yes/no answers ensure all questions are open and encourage people to discuss topics with each other. If the participants aren’t being particularly forthcoming with their opinions, invite each person to speak in turn. To encourage them to really think about their responses, ask participants to consider a particular issue or topic for a few minutes before they write down how they feel about it. Then, ask each participant to read their response aloud to the group. This should help stimulate debate and will ensure well thought-out and structured arguments.
Keep minutes for each focus group, as well as a brief profile of each attendee. This will ensure you have a lasting record of the focus groups and, in the longer term, will provide you with information on how your market is evolving.
The answers, choices, and observations should all be collected and recorded. You should Analyse research results carefully and objectively. A spreadsheet can be used to collect and analyse the information obtained. Excel or other software packages can be used to put the information you have obtained from tables and graphs.
You can then segment the results by groups according to age, gender, etc. which ever is important for you. This will enable you to establish or identify major trends in your data. You should be prepared to carry out further research if the information you have is insufficient or out of date.
Cold calling is also a useful method in obtaining information and again can be conducted by yourself or an external market research company. It is faster than direct interviews and useful if you need to get hold of a large amount of data in a short space of time. It is more suited to certain types of research such as quantitative statistics regarding age and occupation of customers. It is not an ideal method if you want to obtain more detailed information about product ideas, as this research is better suited to discussion based techniques.
If you intend to use cold calling you should keep the calls as short as possible and make it clear at the start of the call that you’re not trying to sell anything to the person. Asking politely if they would not mind answering a few short questions that require simple yes/no answers or multiple choice questions, will help keep the process short. You can buy direct marketing lists which include telephone numbers, email addresses and other contact details from companies however cold calling has a relatively low success rate, so you’ll need to develop a thick skin.
Keep in mind that a lot of people don’t like to be bothered over the phone so if your questions can be asked via survey, this is usually the preferred method of collecting your information. This is because the person has a choice whether to take your survey once they stumble across it. Answering a cold call can make some people feel like they’re being put on the spot.
You should also take into account that how you interpret the results is likely to be compromised by your own personal feelings and as a result, the use of an agency can provide a more objective interpretation of the results. Therefore it is important to consider using an expertise to carry out larger research projects. You can utilise the skills of an external agency or even a freelance researcher. Market researchers are skilled in asking the right questions and interpreting the results. Therefore their analysis will produce objective results which will provide you with more confidence when making your decision on whether to pursue the opportunity further.
Conducting market research may seem time-consuming, difficult and even tedious. However, in many cases, especially prior to startup, it can actually be quite a fun and exciting process. It is a process, that when conducted carefully and properly, can provide tremendous benefits and insight to a business. It can help avoid unnecessary expenditure in areas of no potential, and make way for more focused efforts. Remember to take it one step at a time, determine exactly what you need to find out and why, get the input of others, and analyse your findings carefully.
It is important to note, that market research should not be viewed as a one-time thing, but rather an ongoing process in order to enable your business to remain current and up to date with your market trends and changes.