When starting a small business, making sure your business has a market is vital. Without a strong customer base, your business will founder and fail. By doing a little homework before you open the doors of a new business, you can improve your chance of entrepreneurial success.
American Marketing Association experts define marketing research as gathering, documenting, understanding and applying information concerning how to market goods and services.
When you launch a new small business, you need to develop effective marketing strategies to gain customers and keep them. By engaging in market research, you answer the key question concerning:
- Who your customers are.
- What their wants and desires are.
- Where are your customers located?
- Are they able to afford your goods or services, and if so will they want them?
- Is the location you’ve picked the right one for your business?
- Are my prices competitive?
- What marketing promotions will work for my business?
While marketing research is not 100 percent perfect, it can give you a better idea of the wants and needs of a target audience for your business. The feelings and behavior of the public is almost constantly in flux and are influenced daily by an unlimited number of variables. To do good market research you must find out what people are likely to buy, based on current public mood.
The need for marketing research is simple: You can’t sell things to people that they don’t want. Small business has some important advantages in terms of market research. While bigger companies must deal with mass markets and will likely need to hire consultants to do the research, small business owners deal with a smaller market and can do a lot of market research on their own by simply observing customers’ buying habits.
The small size of small business also gives them another key advantage. Because there is less bureaucracy in small businesses, they can often move more quickly on applying the lessons they’ve gathered from their marketing research to launch new products or services, make changes to how they do business, etc. This ability to stay closer to the pulse of their market can help small businesses compete with larger competitors who may have better access to supply chains and the leeway to offer lower prices.
Benefits of market research
However, in the face of globalization, and changing customer wants and needs, it may be worthwhile for small business owners to take a more scientifically based look at their markets. Scientifically based market research offers a more focused and organized approach to markets, and allows for timely information. With market research, small businesses can reduce risks, identify rising trends or business challenges, find new opportunities and develop short and long-range plans.
Getting it done
Formal market research is just an extension of the evaluations business owners regularly do when they look at their inventory to see what’s hot and what’s not, ask customers questions about their purchases and check out competitors’ prices.
There are seven basic steps to market research:
1. Identifying challenges and opportunities for marketing – By using questionnaires, surveys or engaging a professional researcher you’ll conduct research to help you create a marketing strategy.
Your research should show you where the problems and opportunities lie for your business, such as possibilities for new product launches or problems with your company’s reputation for quality and service.
2. Making a plan – When you’ve finished step one, you’ll need to form a specific plan using the information you gathered from your preliminary research. You’ll need to decide what problems or opportunity identified in step one merits research, and then set goals, allocate budgets and form schedules to make the research plan come together. An example of a market research project would be determining whether bundling certain products together at a reduced price would result in increased sales volume.
3. Deciding on primary or secondary research – This is simply whether you’ll gather information generated specifically for this research project (i.e. launch a customer survey) or make use of existing information.
4. Deciding on research tools – Will you use an online survey or examine monthly sales figures? If you use a survey, what kind of questions will you ask? When crafting surveys and other research tools, you want to make them as specific and unambiguous as possible so you don’t receive muddled information as a result of vague or misunderstood questions.
5. Collecting the data – When gathering the data, be sure to try to keep your results as untainted by error and bias as possible to get the most accurate results possible. Also be sure to collect enough data from enough sources to make sure your data isn’t skewed because of demographics or other factors that may interfere in your research.
6. Organization and analysis – Once you’ve gathered your data, you’ll need to make some sense of it. This means editing, categorizing and tabulating your results. When organizing your data, you’ll need to focus on the information most relevant to your business’ needs, use subjective information only as a backup for findings gleaned from more objective research, make sure your research is consistent, and be sure you understand each piece of information and how it interacts with the other information garnered by your research.
7. Apply your findings – When you’ve finished collecting and analyzing your data, you’ll need to decide what to do with it. Give the decision makers in your business a copy of the research summary and get started on some brainstorming sessions on how best to make use of the data. It may be that the time is right for a new product launch, or the data you gathered may convince you that the market just isn’t there for a new product. Whatever the findings of your research are, use them to make informed decisions about how best to move your business forward.
Market research doesn’t have to be horribly complicated. It can be done with just a few questions printed on the back of a monthly bill, asking your employees a few questions or an analysis of your store’s receipts. If done correctly, it can be greatly helpful in charting the right course forward for your small business.