Market research has become a buzzword within the business world. The advent of the internet makes it possible to quickly and easily reach thousands of people within your target market – and you can quickly drown in the resulting information deluge. Consumers are fickle – should your business change to keep pace with every whim and demand of the customer’s desire? Is there a way to conduct valid, useful market analysis that you can use to make informed decisions regarding your business? How important is market research? Understanding how to efficiently and effectively perform market research can not only help you grow and expand your business, it can help you identify the areas within your company that are strengths and/or weaknesses.
In this article we will look at the 1) importance of market research and analysis, 2) things you should look at while conducting research, 3) methods of conducting market research, 3) common mistakes made during market research, and 5) some tools you can use to conduct efficient market research.
HOW IMPORANT IS MARKET RESEARCH FOR ENTREPRENEURS
It depends. Market research, done correctly, can provide clear direction about the path your company needs to take. When market research is done inefficiently, however, it can lead to costly business mistakes and potential business disasters.
Unfortunately, most small businesses are not in a position to spend thousands of dollars hiring market research firms, and either ignore the idea of performing any market analysis or perform a half-hearted approach that doesn’t result in any useful information. The trick is to find a balance of useful information that you can gather using the most reliable and inexpensive methods available – and then analyze that information for results. Sounds easy enough, right?
Henry Ford, the mass-production expert who brought the Model-T to the far-reaches of the United States, is claimed to have once remarked, “If I asked the people what they wanted, they would have said faster horses.”
There is no evidence to support that Ford actually uttered that phrase, but the reality of the statement has merit. Then, as now, people are hesitant to leave the comfortable world of what they know and understand, for the uncomfortable and sometimes alarming world of the unknown. If Ford had done market research for the Model-T, he most likely would have received information that could have prevented his design from ever reaching completion.
Understanding the right questions to ask – and how to correctly interpret the answers to the questions is the key to performing market research that is valid and useful.
In the early 90’s, smart phones were in their infancy, and people were amazed at what could be done with a handheld device. Phones were becoming smaller and more powerful at every turn. Enter the Blackberry – a revolutionary idea that you could be productive in business – even away from the office – with your phone. Market research at the time would have indicated that customers wanted full-size keyboards on their phone – so they could efficiently type and conduct business no matter where they were. Apple, however, went a different direction. Understanding that the ultimate need of consumers was productivity, Apple decided that their vision of how to give people that productivity was better and more efficient than what the customer was asking for. They stuck to their proverbial guns, and a QWERTY keyboard, once a ‘must-have’ feature on a smart phone is now seen as old school. Market research was used to discover not only what a customer wanted, but what that customer needed.
WHAT TO LOOK AT WHEN CONDUCTING MARKET RESEARCH
If you’re a small business owner, you need to become a market research expert if you want to truly capitalize on your market. What are the areas you should be concerned with in the market research you conduct?
START WITH YOUR PRODUCT.
For our purposes, your product is what you deliver to a customer. It may be an actual product that consumers purchase, or it may be a service that you offer to people. Whatever it is that your customers receive from you is your product. Understanding what your product entails is a key element of market research. Do your customers know what your product is? Is there a need for the product? Does it solve a need or a want? How does your product fit into the lives of the people who use it? What does life look like with your product, and how does it look without your product? Finding out the answers to these questions can help determine if your product has a place in the market you’re serving.
UNDERSTAND THE MARKET.
What is the market for your product? Should you be targeting consumers between the ages of 25-40? Or is your target market women over 50 years of age? Determining who the market for your product is can help you identify the best ways of reaching that market. Once you have identified your market, you can begin to use market analysis to not only grow your business within that market section, you can explore ways of expanding your market to include other demographics.
KNOW THE COMPETITION.
Is your product new and unknown or is it a variation on something that already exists? What other products are on the market that may be similar to yours? How does your product compare to what is already available? How accessible is your product compared to the competition? What is the determining factor in choosing between your product and someone else’s? Your customers know who the competition for your product is – make sure that you do as well.
Every product has collaborators – the ‘add-ons’ that make sense for a consumer to tie together with your product. Understanding the connections for your product can help you key in on the market for your product, and give you guidance in ways that your product is used. What are the tie-ins that your product has, and do your customers know what they are? There is a reason that sporting goods stores put coupons on the back of ticket stubs to athletic events – they know that people who attend athletic events are likely to purchase athletic equipment. Are there market connections that you’re missing?
HOW YOU SHOULD CONDUCT MARKET RESEARCH
Once you have identified the areas of market research that you can address, there are a variety of methods of conducting your research. An exhaustive market analysis will include elements of all of the methods, but you can achieve good results with any of the methods.
When conducting your research, think deep and wide. For true insight into the business, you need both quantitative results and qualitative results. Put the time and effort into doing efficient research, and your results will be more beneficial. Finding the method that is most effective can take some effort, and may be a bit of trial and error at first. Don’t dismay if your first efforts aren’t successful – keep tweaking until you get results that you can use.
There are two means of collecting data for market analysis – primary research and secondary research. Both are viable and effective, but need careful consideration and use.
PRIMARY MARKET RESEARCH
Primary research deals directly with the consumer. This direct, raw data from customers gives insight from the people who use your product. This can be essential when looking for actual usage information, i.e.: When do you conduct most of your shopping? Are the business hours of our office convenient to you?
Getting information directly from the consumer can be done in a variety of ways, and can be both time consuming and overwhelming. It is important to determine the goal of your research and then design your method accordingly. Are you looking for demographic information about your customer base? A simple survey may be the easiest method. Are you looking for information about how your product is used? A focus group may be the most effective tool. Investigate the various methods of collecting primary research data and then select one (or more) of them to use.
Setting up interviews with customers can be time-consuming and intimidating. Be respectful of your customer’s time by narrowing your interview questions to the key issues you want to find out about, and keep the interview brief. Interviews can be formal or informal, depending on the information you’re hoping to gather. Informal interviews can be conducted as customers exit your business (“May I ask you a few questions about your experience today?”) or done by calling people off your customer database (“Would you mind telling me about your last interaction with our company?”). Formal interviews require advance set-up, and could be done with a target audience (men between the ages of 18 – 24) or with a random sampling (“Would you be willing to come in and answer a few questions? Please call to set up a time.”) Interviews can be done with current customers, or can be targeted to potential customers.
Surveys are a way to easily collect information from a large number of people. You can conduct surveys during customer interactions, through web-based platforms and through personal interactions. The key to performing valid surveys is properly analyzing and using the data that you receive from the survey. There are multiple sources that will help you set up and analyze surveys (we’ll cover some of them shortly), so conducting a survey doesn’t have to be overwhelming.
Bring in a selection of customers and hold a focus group. Conducted periodically, these can be insightful ways to learn about your business market. Typically made up of 8-10 people, a focus group can be valuable in learning how your product is used, what is favorable about your product, and areas that customers want improved.
SECONDARY MARKET RESEARCH
Another valuable way to gain market information is by using secondary research. Secondary research is using the data that other people have gathered, and can be useful in finding out general information about business. Business analytics, reports and data that are gathered by others can be inexpensive ways to collect market information. Generally useful when looking for large amounts of information (“How many accountants are there in a tri-county area?”) these can help give information about market viability.
COMMON MISTAKES MADE DURING MARKET RESEARCH
CONDUCTING ONLY SECONDARY RESEARCH
Performing market research is time consuming. You have to determine what you want to know, and then determine how to find out what you want to know, and then you have to actually find out what you want to know, and then find out what you found out. Especially for a small business, it is easy to dismiss the idea of market research altogether and hope for the best. Alternatively, businesses take the easy way out and fall into some common mistakes that will misdirect results. Avoid these market research pitfalls to get the most out of your analysis.
Secondary research is easy and inexpensive. You read the results of someone else’s data collection, and make decisions for your business. After all, they already did the hard part – why reinvent the wheel, right? Well, yes and no. For collecting information about a wide segment of population, secondary research can be effective. For detailed information about your specific product and target market, however, nothing can take the place of primary research. Using only secondary research can give you a partial view of your business, but misses out on the rest of your market – leaving you in the dark about what your actual users think. Don’t ignore your primary methods simply because it is too much work.
CONDUCTING MARKET RESEARCH ONLY ON THE INTERNET
The internet is everywhere – and information is just sitting there, waiting to be used. It is tempting to do a few internet searches and consider your market research done. There is just as much truth floating on the internet as there is garbage – and weeding out the two takes skill. (Keep in mind, however, that according to the internet, aliens have landed in Utah and are slowly making their way across the globe by taking control of automobiles.) The anonymity of the internet can be good – and it can be bad – for collecting information about market research. You need to use reliable sources, and remember that the global reach of the internet may not give you direct answers to the needs of your customers and business.
ONLY TALKING TO PEOPLE YOU KNOW
Another pitfall of market research is to ask a few of your acquaintances what they think of your product and consider it research. Again – easy and inexpensive does not always equal adequate research. Talking only to people you know will give you skewed results, and often paint a far different picture from reality. In addition, talking only to people who use your product can give you a different perspective than if you survey people who currently don’t use (or like) your product. Finding out where there are weaknesses or other potential market areas can help you improve your product, and your share of the market.
TOOLS YOU CAN USE WHILE CONDUCTING MARKET RESEARCH
A few tools to help you get started on your quest towards market analysis:
Survey Monkey is a web-based platform that not only sets up surveys; it helps you reach your existing customer base, as well as potential clients. You create a custom survey, and Survey Monkey sends it out to your selected targets. They return results to you in as little as 3 days, and costs are based on completed surveys.
Search.Twitter.com a google-like search engine allows you to search twitter posts – giving you real-time access to what conversations are taking place. Find out what current trends are, see who is talking about products and where the hot-spots are.
Ask Your Target Market (AYTM) is a quick survey creation platform – letting you send short, quick surveys to either your existing customers or the more than 4.5 million people listed in AYTM database. You can create specific criteria that let you find out actual data from your target market. Pricing is determined based on your survey and demographic set-up.
Market research needs to be approached from two angles: the idea that your product is the best thing available and customers need to understand that; and the idea that customers are the best judge of what’s available and your product needs to meet their needs. Finding the balance between the two can help you not only improve your product, but can help you innovate new ways to reach potential customers. Regardless of where you are in your business – starting out, seeking expansion, or simply want a gauge of how your business is doing, performing market research regularly can be a vital checkup for your business health.
If you want to dig deeper into market research, then we recommend you read a little bit in the following ebook.