No matter your background, market research is key to any successful business venture. Today starting a business is easier then it has ever been. Nevertheless, those looking for long-term success must have a sound approach to information gathering.
Maybe you are fresh out of business school, maybe you are a retiree who finally has the time to pursue their dream of opening a small business. In any case, you are ready to start your small business and you want to know if other people will like your innovative product as much as you do. Fortunately, there is a clear process for answering this question: the process of market research.
What Is Market Research?
Market research is research that current or prospective business owners conduct to determine the market factors and potential for their product or service. The process can include looking at general marketing conditions, the competitive environment, and current consumer trends. This process can be conducted by the business owner themselves or be aided by a consultant. Many consultants, such as a certified professional accountant–an accountant, have a background in dealing with large amounts of data and identifying trends and opportunities.
The 8 Steps of Conducting Market Research
Conducting market research works the same whether or not you are receiving help from a professional. The biggest difference is that a professional may have the background to gather much more specific data than an individual.
Market research can be a monumental task. Without a defined process, you may find yourself going in many directions at once. Often when this happens, you end up frustrated and lack the clearly defined answers you need.
Although you do not necessarily have to take these steps in order, they do build on each other. If you already have a business and are trying to determine whether taking a certain step in developing your business is the right choice, you will start at step two rather than step one and you might not need to go into as much detail in each of the steps.
1. Clarify Your Business
Even if you have a business dream for many years, you may not have a clearly articulated vision of this dream. You don’t need to create an incredibly detailed business plan, but you will need to create a rough outline of the potential business’s vision so you can conduct a detail oriented market research process. In this step, you should determine which products or services you will offering, a geographical area to serve, your ideal customer, and a broad outline of your goals.
2. Clarify Your Purpose
Next, determine why you are conducting market research and what you hope to get out of your market research. Are you trying to decide if you have found the right place to start your business or are you trying to determine whether you should add another product to your website?
Market research can be completed for a wide range of goals. A trick here is to write down a list of questions you would like to have answered. For example:
- What is the current market size for my service/product?
- What ways are competitors marketing similar products/services?
- What price will the market bear for my product/service?
3. Determine The State Of Your Industry
Next, research the general state of your industry to determine what the current trends are and general conditions. Ask questions such as “Is your industry growing or shrinking?”
However, there are some slightly more complex questions that you should also take the time to consider. For instance, if you are in an industry that is going through quick technological advancement, it may be important to determine whether your industry is in danger of being automated out of existence. There are several examples of industry specific questions that you may wish to answer as you research your next endeavor.
4. Choose Your Target Customers
Who are the target customers for your business or product? Go beyond simple descriptors. Create a series of customer avatars that are complete with interests, ambitions, and personality traits. This will make your customers more real to you.
To often potential entrepreneurs state are too general about who their potential customers are. For instance, they may state “we will target women ages 25-40 in the Miami area”. While that is good at a high level, more research will better position your business. For instance, what does your target customer care about? What else is going on in their life? Where do they go now to satisfy the need your product/service solve?
Answering these questions and more may have a big impact on how you position your business. You may find additional complimentary services or products based on the answers. While you may have an idea on how to market your business, the answers found may find a better platform or messaging for your product.
5. Analyze Your Competitors
This is one of the most important aspects of market research. You need to determine who your competitors are or will be. Look at where your competitors are located to determine whether there are geographic areas that you could serve better. You should also look into the things that might give your competitors an advantage over you.
In today’s world, competition is a given. You will have competitors. However, having competitors is OK. While it may be exciting to enter a market with no competition, there may also be a reason for that. Lack of competitors may mean their isn’t a market for your business.
In speaking with an owner of a kids indoor play concept, he noted that he has 3 different competitors in town. However, in a city of 750,000, he also noted that he and 3 competitors still are not enough to serve the community. However, he keeps close tabs on pricing and marketing of his competitors so he can adjust his business as needed.
6. Gather Data
This is the place where having professional help can be invaluable. Without the help of a trained data gather and cruncher, it can be difficult to determine which data will be most insightful for your business. Below, we give you a series of public and government resources that you can use to gather data.
Many industries also have trade associations with can be a treasure trove of data. Some of this data sits behind a paywall. However, to pay $100-$200 for access to industry specific data can be invaluable. Often times this data speaks directly to your business and can provide answers to questions where before you could only merely guess.
7. Compile and Analyze
A global survey by Splunk found that 55% of all data collected by businesses is “dark data”: information that is collected but never used. The main issue is the lack of ability to compile this information in a usable format and analyze it.
In an earlier step we talked about defining your goals of this process and stating some specific questions you wish to answer. That is critical during this step. Without having clearly defined questions, the data cannot be compiled in a way that is useful.
This is the step where most potential entrepreneurs struggle. Putting data in a usable format is a skill that many don’t poses. As an outsourced CFO, I can’t tell you how many times I have had data presented to me in a format that is just unusable. Data needs to be compiled in a way where trends can be identified and conclusions made. In this step, a tool like Microsoft Excel is vital.
Once data is compiled, it must next be analyzed. When you are analyzing data, look for patterns and trends. As you spot patterns, don’t assume correlation means causation. While most entrepreneurs stop once they find a pattern and make a conclusion, it is important to better understand why a pattern may be happening. Is the pattern logical? Compare your current data against past performance to put your findings into context.
8. Determine how to Apply Your Findings
This last step is essential. You just completed a large project. How are you going to put this data to use?
I like to do an exercise with my clients that I have termed a “white paper” exercise. I tell my clients to literally get a while paper. This paper represents all that is possible – don’t limit thinking based on history. This is a planning exercise that typically starts with a question. In this instance, the question would be, “What concrete steps am I going to take based on this research?”
Hopefully you come up with several concrete steps you are going to take….hopefully you need a second sheet of paper. Regardless, even if you only come up with 2-3 solid ideas, you are armed with a vast amount of information you didn’t have before. This will benefit you as you continue to build your business. Irrelevant information may become relevant as you encounter new situations.
Resources for Conducting Market Research
Sometimes, as an individual, it can be tough to tell which resources will be most useful as you conduct your market research. Here is a list of our ten favorite public and government resources for conducting market research.
Government Resources
- Economic Census –This database will help you look at your target area and determine whether your company can succeed in that area.
- State And Metropolitan Area Data Book – On the other hand, if you are interested in looking at business data broken down by city, the State And Metropolitan Area Data Book will be your best resource.
- Census Product Update –At this point, the census offers so many products to customers who are interested in market research, they have compiled a list of their new products which is work perusing.
- County Business Patterns – This resource breaks down the trends in certain types of businesses based on area code.
- Commerce Department –The Commerce Department offers a list of economic indicators that help businesses determine what reception their products will receive.
Public Resources
- Universities – Business departments in universities are often full of accounting students who will conduct market research for a low fee.
- Chamber Of Commerce – Your local Chamber of Commerce is a great starting point for businesses who want to find local market research resources.
- D & B – This firm offers information for businesses of all sizes that are conducting market research.
- KnowThis.com – This is a virtual library for marketing researchers. It offers comprehensive lists of resources for business.
- ThomasNet – This resource for industrial buyers and sellers is also very useful for young businesses.
Additional Questions to Ask During Market Research?
Finally, if you haven’t answered these questions in the first seven steps, you should try to reach prospective customers to answer these questions.
How Big Is The Market?
You will need to determine how many competitors there will be in the market and how much space there is for new businesses. Although some markets are full of competitors, there is still space for a new business because there is a lot of demand for those services.
How Much Disposable Income Do Your Customers Have?
Not only do you need to determine how much income your customers have, but you also have to compare that to the price of living in the area to determine how much disposable income your customers have.
How Much Do Competitors Charge?
Look at how much competitors charge for similar services to determine how you can get a competitive advantage. Decide whether you want to charge less for a product than your competitors or create a better product than them.
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How Krieger Analytics Can Help You Conduct Market Research
Perhaps all of these steps seem a little overwhelming and you want to hire a professional to help you conduct your market research. Krieger Analytics offers high-quality market research along with all of its other business services. If you work with Krieger Analytics, you know that you will receive top-quality market research from highly-trained professionals. If you are interested in learning more, contact us now.