Archived - What is Market Research

Starting a new business always comes with some risk, but one way to minimize that risk is by doing market research. Experts define market research as the act of gathering and analyzing information about your target customers, discovering who they are, what their greatest wants and needs are, and if those needs are being met. Gaining this insight into your customers will help you determine if your business idea is one that people will pay for, and it will also help you tailor your business to your target customers and their desires.

In addition to minimizing risk and learning how to address your customer’s needs and wants, understanding market research can also help you plan strategically, make financial projections and stay ahead of your competition. If you will be seeking funding for your business, you will also need to demonstrate to potential investors that you have a clear understanding of your market, including the size, growth and dynamics.

Despite all of these benefits, many businesses fail when doing market research, or they ignore it altogether, either because of time and budget restraints, because they don’t know how or because they don’t want to invite negative feedback. These businesses suffer, and have a harder time staying competitive and profitable.

If done properly, market research will help you build a close relationship with your customers, and will increase your chances of creating a successful business.

Market Research Objectives

Before we dive into what is included in market research, think about what you hope to achieve. Objectives often include:

• To find out if your business model or product concept is viable

• To understand your market’s opportunity and trends

• To understand the risks and challenges involved in your venture, and how to minimize those risks

• To find out who your top competitors are, and identify the products and services they offer, their annual revenue and their strengths and weaknesses

• To find out who your target customers are, including their gender, age, ethnicity, location, income, education, profession and lifestyle

• To find out your target customer’s buying habits, including what they buy now and how you can inspire them to buy your product

• To find out your customer’s greatest needs, interests and buying motivations

• To find out if your product offering is attractive to your customers

• To find out the most effective way to attract customers through marketing and research

• To understand the potential sales cycle

• To make revenue projections

Make sure that your research objective is specific and includes who is being studied and what is being measured. This will help reduce the risk of error. You do not want to put time and money into a study only to get skewed results.

Understanding Market Research Methods

There are two types of market research: primary and secondary.

Primary market research is information that you gather yourself. Methods for primary market research include:

• Interviewing customers or potential customers (online, in person or over the phone)

• Focus groups

• Concept testing surveys

• Interviewing industry experts

• Interviewing competitors

• Analyzing past sales records and customer databases

• Analyzing customer data on social media platforms such as Facebook and Yelp

Secondary market research is analyzing information collected by others. To get started, contact local government agencies, trade associations, your local chamber of commerce and reference libraries for studies, reports and surveys. The Encyclopedia of Associations by Gale is a comprehensive directory that can be found in many libraries.

You may also want to contact local business schools, as some business professors will answer market research questions for you for free, or suggest resources for you to check out.

There are also many resources available online, such as:

• The United States Census Bureau’s Small Business Edition: This free resource can generate reports with key information pertaining to your location and type of business, such as demographic information of potential customers, information on competitors like volume of sales and finances, and an overview of consumer spending patterns.

 

• D&B Hoovers : This business database includes information on more than 1,000 industries.

 

• Market Research.com : Database with information on global industries, companies, products and trends.

 

• The U.S. Department of Commerce’s Statistics of U.S. Businesses (SUSB): Includes economic data for a variety of industries, updated annually.

 

• Canadian Industry Statistics (CIS): The most recent industry trends and data from Statistics Canada.

Doing market research can be time consuming and expensive, so be sure to ask the right questions so you will collect the most useful information about your market. Incorporate your answers into your business plan and business model to increase your chance of success. Be sure to complete section 13 of MOBI’s business plan template, “Opening and Marketing.”

For more help, sign up for MOBI’s Starting a Business course, which covers everything from creating a business plan and understanding market research to expanding and handling problems.