market research

How to Conduct Market Research

Latest posts by Jeff Williams (see all)

Conducting market research can help provide  entrepreneurs a boost of confidence or send them back to consider changes to their strategy.

Quite often the first thought that a new entrepreneur has is “I am going to be free – I am on my own; no boss; and no schedule!”

This thinking is understandable but unfortunately not realistic.

The ability to live an individualized lifestyle as a new business owner is critically dependent upon obtaining one valuable resource – customers!

Your customers become your new bosses. But unlike most bosses you had in the world of employment, you have the chance to pick your customers when you are self-employed. You can choose customers who are friendly, professional and caring. Or you can choose customers who are manipulative, demanding and unreliable. The choice is up to you.
However, be careful: the organizational decisions are easy enough to complete that you may start to think that the whole business planning process is this easy. It is not.

You are ready now to enter into one of the most challenging pre-launch activities you will be faced with – finding a group of customers that wants what you are offering badly enough to pay you for it on a regular basis.

Why and How People Buy

There are many reasons people are motivated to part with their hard-earned money to obtain a product or service.

Among the most powerful reasons are: convenience, comfort, security, style, social approval, health and well-being and profit.

The problem in trying to figure out which emotion is motivating your desired customer is that they sometimes don’t completely understand why they buy. There is, however, one reality that you will likely face: people don’t like to change their ways!

Virtually every business concept I have seen is in a category where somebody is already providing the same or a very similar product or service.

Not always very well, but still available. It is not easy to get someone to change suppliers, even mediocre ones because they are often more uncomfortable about the unknown of a new supplier than they are about the less than great service of their existing supplier.

Buyers today, both industrial and consumer, are very demanding about their purchases.

They want sharp pricing, attractive features, style, variety, and convenience.

These factors all combine into what people feel is “value.”

It is common for new entrepreneurs to start with themselves when looking for customers, by adopting the mentality: “I like this product; I am sure they will too.”

There is some sound logic to this approach. There probably are hundreds of people who think like we do, and buy like we buy. But you may be heading into trouble if just assume that this is true. You need to ask questions.

Do-You-Really-Know-Your-Vendors-Contractors-The-Hard-Evidence-for-Vendor-Screening-and-Employment-Background-Check-Searches

Finding Needs Through Market Research

Many new business owners seem to go into a stall when they are directed to go out and talk to prospective customers.

Some think they will be seen as nosy. Others are afraid someone will tell them not to pursue their hot business idea.

Don’t kid yourself — every business idea can fail if enough of the right customers are not found quickly. Many new businesses find themselves in a race – to see whether their initial capital will last until customers can be found and persuaded to pay.

Market research really is fun — If you like people.

If you don’t we suggest that you stay in your job.

It is very invigorating to locate some potential customers and sit down with them for a causal conversation.

You will discover very quickly that they are eager to talk. Often none of their other suppliers have ever asked them their opinion. is already providing Sometimes, even your competitors will talk with you if you come across as sincere and desirous of making good use of their help.

There are three areas in which it is critical that you do research:

  1. Industry
  2. Competitors
  3. Customers (or prospects at this point)

 

Industry Research

Almost every business is part of a larger group of similar businesses, known as an industry. Public and private organizations do extensive research by industry.

One of the most widely found types of organizations that does this research is a trade association. These are voluntary groups of similar businesses who each pay a fee to belong to the group.

This money is used to do industry research on matters such as average profitability, insurance needs, product development and promotional strategies.

Many trade associations also publish monthly or quarterly magazines, which can contain very useful articles. And some very large trade associations sponsor annual conventions (known as trade shows).

It is your aim to find out as much as you can about businesses similar to yours before you start to invest your money. You want to find out:

    • How large is the industry?
    • Who are the industry leaders? How have they succeeded?
    • What obstacles have new businesses had to overcome?
    • What is the average initial investment?
    • What is the average profit per dollar of sales?
    • What manpower, equipment, vehicles, etc. must you have to compete?
    • What training is helpful for success?

There are two very useful resources for doing industry research:

  1. Encyclopedia of Associations – A multi-volume set of reference books, usually kept behind the Reference Department desk, which lists all U.S. trade associations by industry and location. Provides the goal of the association, its size, its activities and how to reach its managers.
  2. SRDS Guide to Business/ Consumer Publications – This is a directory of all magazines published in the U.S. There are editions for consumer magazines such as Time and one for industrial magazines such as Coin Laundry Weekly. Because many of these magazines specialize in just one area of business, they will present very specific articles, which can give you many details about your type of business.

Competitive Research

Your closest competitors have probably been in business for some time, which means that they know enough to survive.

Their knowledge can be very valuable to you and can help you to save time and money. Many new businesses face so many competitors that they can’t identify them by name.

Other new businesses, such as retail stores, know exactly who their competitors are.

How do you get your competitors to talk with you? Ask them!

Not all of them will share with you but you will be pleasantly surprised how many will, if you are well prepared and come across as sincere and determined.

Remember all of your competitors were small start-up businesses at one time.

Many want to share their success with new small businesses. But you must be prepared when you go to talk with them. Do enough research about your type of business to be able to discuss the following topics:

    • What were the two or three most difficult obstacles to overcome in the beginning?
    • How long was it before you made a significant profit?
    • What promotion worked best in the beginning? What was disappointing? What were your best sources of information when you started?
    • Is there government help available? Trade association help?
    • How many total competitors are there in the desired market area? How do you set your prices?
    • Do you offer special services such as custom ordering?
    • Do you have a favorite promotional “gimmick”?
    • How long can you grow without hiring an employee?

How do you find your competitors if they aren’t around the corner from you?
Here are some tips:

    • Do an Internet search using a phrase that describes the kind of business you wish to run.
    • Spend some time clicking into the first ten websites shown.
    • Make notes on what each competitor offers.
    • Look in the local Yellow Pages
    • Look in area “shopper” newspapers
    • Check Chamber of Commerce directories
    • Look for newspaper ads
    • Check the library reference librarian
    • Ask customers who they buy from
    • Ask suppliers who they sell to

Customer Research

There is a tendency for individuals pursuing the launch of a new business to believe that just about anyone is a potential customer.

They never get real specific about the why and how of how their product or service is purchased – a big mistake.

Many of the most successful new businesses in recent years have succeeded because they came into a very specific marketplace with a specific message.

For example, Boston Chicken appeals to people who want to duplicate mom’s baked chicken with fresh side dishes without having to cook.

Not every fast-food consumer is a good prospect for Boston Chicken, partially because of the pricing and partly because not everyone cares if the fast food is ultra-fresh.

Remember, in most cases you will be the owner-operator – a one-person shop. You don’t have enough time or money to try to serve several large markets at a time.

You must concentrate on one reasonably large group of prospects and concentrate your marketing on them. Even when you are specific it can commonly require up to six months before prospective customers start to recognize your company’s name and its selling offer.

The most effective way to hone in on specific parts of the marketplace is to discover specific customer needs and respond to them.

To discover what people want and need from your product or service you must talk directly to them. Some of the key questions to ask are:

    • Who is the ultimate customer?
    • Who or what influences their buying decision?
    •  How do they shop for your product or service? · How can you divide up the marketplace (segmentation)?
    • How many potential customers might there be?
    • Who do they buy from now?
    • From current suppliers: What do they like? Dislike?
    • How much do they pay now? How much might they pay for better/different features?
    • How important is time and distance convenience?
    • What demographics are important? Family size? Age of purchasers? Education level? Hobbies?

There are three main ways to survey customer wants/needs:

  1. Mail Survey – Based on library research and your own experience, write down customer information you need but don’t have now in the form of 10- 1 2 short questions, combining multiple choice and essay type questions. Obtain prospect names and addresses from phone books, chamber membership lists, or industrial directories. Mail a professional looking survey form to each prospect.
  2. Phone Survey – Using the same types of questions as in the mail survey, create a ‘script” of the order in which you want to ask the questions and directions on how to proceed depending upon a “no” or “yes” answer to each question. Obtain prospect names and phone numbers from directories and call each.
  3. Live Survey – Face-to-face asking of opinions and feelings of prospective buyers. There are two methods commonly used to do this: “exit surveys” where you stop shoppers near where they shop and ask a series of questions; and “focus groups” where you invite a small group of prospects to a comfortable environment for a part-social, part-research experience.

Focus groups are particularly good when you want the prospect to evaluate a number of features at the same time, such as product color, packaging, ad message and pricing. It is common to give some token of appreciation for their time. Tape recording the session is the most reliable way if everyone agrees.

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