What is Market Research?
You’ve developed a great business idea and can’t wait to start rolling out your plans. However, you need to make sure people actually want to buy your product or service before you pour time and money into a business with no demand.
Avoid jumping the gun and properly research the market you want a slice of. It will guide you through the entire formation of your business and should be taken into account when crucial decisions are made. If you follow the results of your market research, there is less risk of your Startup running into difficulties later down the line, and often before it is too late. You may realise that you have to make some drastic changes to your product, service, pricing or location, however, it’s always best to find this out at the start of your business journey so you can hit the ground running at launch.
There are a few fundamental questions that will form the basis of your research and are essential that you answer. Is there even a need for your product or service? Who will buy it, and how much are they willing to pay? Thorough market research will shape your brand, pricing, location and the details of your product or service itself.
What do I need to research?
This will depend on what stage of planning you’re in. If you’re in the first phases of starting your business, the questions you’ll need to answer are:
- Is there a demand for my product or service? Am I solving a problem customers actually have?
- What sort of people will buy my product? Where do they live, what are their jobs, age and gender?
- How do I measure up to my competitors?
- How much are people willing to pay?
If you already have a potential product or service in place, review people’s opinions to highlight any needed alterations before expanding your Startup further. Analyse what people like and dislike about your business. Is it better than your competitors? Are you more competitively priced or do you offer a solution they can’t?
If your start-up has begun trading, then you need SWOT analysis: Strengths, Weaknesses, Opportunities and Threats. If there’s a particular part of your service your customers like, use that as an advertising angle. If people praise your fast delivery or excellent customer service – promote it! Furthermore, weaknesses your small business HAS can be presented as opportunities; if people are unsatisfied because you don’t offer a certain service, consider adding that into your business plan to capture that market.
Identifying threats from competitors can help you nip them in the bud before it impacts your business too much. You may need to reconsider costs, or perhaps offer more to keep ahead of your rival businesses.
Types of Market Research
There are two distinctive types of market research which Start-ups use to understand how their business is perceived by their target audience.
Quantitative Market Research
This type of data is based on statistics. You’ll receive hard numbers and numerical facts about your business and your customer’s behaviour. You can collect this data easily from surveys, polls and observation. An example from a survey question, for example, would be to ask how many times a week your target audience eats at cafés during the day. Your answers would be “never”, “once”, “2-3 times” or “every day”. This data can all be counted up and analysed to produce results such as “56% of my target market eats at cafes more than once a week”. This could be viewed as a positive statistic that your new café will succeed in your area.
The downsides of this type of research are that there are limitations to people’s answers. You might want to know why people don’t eat out, perhaps there is a lack of choice and that is what drives people away. To reduce the risk of skewed data, your quantitative research should be backed up by Qualitative Research.
Qualitative Market Research
This form of research will unearth the reasoning behind the hard numbers your quantitative research. It’s the best way to truly engage and understand your audience, however, it can be difficult to measure. Face to face interviews and focus groups will give you direct access, and you can probe customer’s answers to questions to dig a little deeper.
Surveys with open-ended questions will also provide a qualitative edge to your research. Using the example above, below the question “How often do you eat out in the day per week?” ask “Why?” Then give the answerer free reign to write a few sentences or a paragraph explaining the number they wrote down.
Ways to Conduct Market Research
The most convenient way to gather data yourself is by asking people to complete surveys. Social media and the internet have furthered the reach you can target, and it’s easier than ever for people to complete them. Survey Monkey and Zoomerang are online survey providers that also offer reporting options to help you understand the feedback.
Telling people how long the survey will take will encourage them to complete it as they are reassured it won’t be too time-consuming. Keep your questions short and concise to ensure the overarching question is the focus. For lengthier surveys, be upfront about the period people will have to spend on it, and perhaps offer a freebie or coupon for their time and honesty.
A good way to measure the outcome of your research is to ask readers to rate elements of your business out of 5, such as price, design and quality. You can then work out your average scores to see exactly what needs improving on.
For more detailed data, break down answers into demographics to hone in on your target market. If a younger age group gives you consistent 1’s and 2’s, whilst an older segment gives you 4’s and 5’s, you know who is your audience. Its then clear who to target with your advertising or where to improve.
2) Individual Interviews
Whilst you won’t get the volume of data you would from a survey, individual interviews down the phone or face to face can delve deeper into customer’s opinions. Ad an option at the end of the survey for people to opt in to receive a phone call. You will better understand why you got the scores you did, and use detailed feedback to direct the next stage of development.
3) Focus Groups
Getting together a group of 8-10 people to discuss your product or service gives you a sample of the opinions of your target market. If you’re selling a product hand round samples for the group to discuss, or give a sales pitch outlining your service. Have questions ready to prompt to direct the discussion and listen to their opinions.
Spend some time in the area to gather how busy it is, and the demographic of people there. If you think they fit the sort of thing you want to sell, it might be a good location. Getting people’s attention on the street to ask their opinion is a difficult task, but some people would be happy to answer if asked politely.
5) Sales Pitches
If you’re planning on selling directly to other businesses, gather feedback from pitching your idea directly to them. Round up 4-5 businesses and ask if they would be willing to sit in on your pitch and offer feedback. This is a great opportunity to directly discuss pricing and your offering
There is a wealth of data cheaply or freely available on the internet to help you analyse your market. Government websites, trade associations and trade publications regularly update reputable and accurate data on almost all industries and demographics. The Office for National Statistics is a great place to start. These will also house any recent legislative restrictions which you may need to consider when starting your business.
It can be a long and time-consuming process, yet ultimately your Startup business will only benefit from understanding your target audience. Deciding which type of research is best for you will probably be the biggest challenge, but remember, there are market research consultants available if you think your business needs a bit more help. The adjustments you may have to make to your business plan or marketing strategy will only serve to help your business start on the right foot.