Jumping into the market with a product or service without properly testing your business idea is a story from “How to Fail in Entrepreneurship 101”. Do not ever do it. Never.
Having an awesome idea that is constantly resonating in your head wishing to come out in the form of a business plan is super awesome. Having that awesome feeling – that you’re making a revolutionary approach to a certain industry – is one of the best things ever. But it all comes crashing down if you don’t put it to the test and that’s why market research is so important. First thing you need to do, and it can’t be repeated enough, is to begin the market research process.
Related Article: Market Research Matters
Your new product or service is, obviously, supposed to satisfy the needs of a certain population, a bigger or smaller share of the market. Each product and service has it’s own market segment, a group of people divided by a number of demographics, psychological or behavioral parameters, that share the same group of needs.
An example of market segmentation based on demographics can be the case of banks creating their portfolio according to the age, marital status and aggregate yearly income. On the other hand, a behavioral segmentation works for restaurants; for example, you have your regular customers, people that come for special occasions, business lunches, or just people that sit for a coffee and use your wi-fi.
How to Begin Market Research
Now that we understand this basic concept, we can move one step closer to understanding the importance of performing market research. The next step is to gather data on potential customers in order to reduce the risk involved in their decision making. We need to know who the potential buyers of our products and services are, what their habits are, their lifestyle choices, their income, etc.
The questions asked should be as precise as possible, and should help you to establish what your market needs, how to approach their problem and how to add value to your customers.
Primary and Secondary Market Research
There are two types of market research – primary market research and secondary. The key difference between the two is defined by the source of information you’re working with. Primary market research is all about finding new information. This information may be gathered in any form you like – direct or phone interviews, focus groups, online surveys, whatever you think is necessary. This type of direct contact with people is valuable as it gives specific feedback to the questions asked.
You must always begin with the two most basic questions; who are your key customers and what are their needs? Expanding on these will bring you the opportunity to choose whether you’d like to do a quantitative or qualitative research.
Quantitative research presents results in a numeric way, using numbers, graphs, charts and/or similar reports. For example, X% of the questioned population said that they use product Y daily. On the other hand, qualitative research can provide you with an overview of how the population feels towards a certain product, what do they expect from it and what would they want from a new product.
Secondary market research deals with existing information and it revolves around analysing sales figures in your niche, other companies market research reports, competitor marketing literature, national statistics, government publications, etc. Secondary research may be quicker to carry out but may give less specific outcomes for the topic in question.
A Barclays case study on market research described it this way, “Numeric data gives a factual basis for planning – a snapshot of a situation. On the other hand, qualitative information can find out the things that really matter to consumers. For example, 80 out of 100 consumers questioned might say they preferred one brand of coffee over another. However, more valuable information comes from understanding what it is they prefer. Is it the smell, the taste, the packaging or the price?”
How Much Data Do I Need?
Determining the appropriate volume of gathered data depends on more than one factor. You should usually start with the planned volume of your production, estimates of the potential number of customers that would keep you profitable, the convenience of approaching people with your questions, and the amount of time you would need to do it. This is no hard science to how much information you should gather.Keep in mind, a representative population of 100 people can provide much better insights than a random group of 1000 people that you’ve met in the park and asked a couple of questions.
When you finally gather the research data, your life gets a bit easier. There are a lot of helpful tools that can help you every step of the way, and here are some of the most prominent ones:
There are many tools that help you get the needed census data and national statistics. For example, there is a tool called County Business and Demographics. It provides information on the areas of the country with large numbers of certain types of businesses. Since this one is made for the USA, try looking for one that shows statistics for your country or region. A fine example of how Americans are doing a great job in this department is Business Dynamics Statistics. It takes census data and allows you see economic data on job creation, startups and shutdowns, business openings, expansions, and closures. If there is not an option to do this online, run down to your nearby government office and kindly ask for statistics and similar reports regarding your city or region.
- Market Segmentation
Nielsen’s MyBestSegments provides researchers with tools to understand an area’s demographic information and lifestyle habits. You can find out which areas would be most receptive to a campaign or launch, which competitors are located nearby, and trends in the area that have shifted. Also a handy tool, PersonaApp makes it easy to outline the person’s behaviors, needs and wants, and demographic data. It will definitely make your life easier when you start a marketing campaign that needs to target a specific group of people.
There are many free or inexpensive tools that allow you to customise and perform online surveys. Google Forms and Survey Monkey are most commonly used, and they both allow you to export your results in a number of formats, everything in line with your preferences.
Remember when we talked about quantitative research? There are also a lot of ways to create reports, graphs and charts. Visual presentation is one of the best ways to grasp the results of your research, along with a comparative analysis and statistical reports. Since this is a key step of your research, you need to use the best possible help. The first pick usually goes to Microsoft Office Suite, with its numerous functionalities and user friendliness, but there are a lot of business analytics software, like Necto, that are a more professional choice with far greater capabilities and performances.
Ready to Get Started?
They say that one man’s garbage is another man’s treasure, but there’s the other side of the coin as well- one man’s treasure might prove to be nothing more than garbage for everyone else. That’s why conducting market research is a crucial step to launching a new business, product or service.
Now that we’ve made a case for why market research is important, you’re fully equipped to get to work and find out what your target market really wants (or doesn’t want). Happy researching!
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