Is Market Research Necessary for Small Businesses?
Initial and ongoing market research is integral to every effective business plan. No matter how brilliant you think your product may be, its brilliance is irrelevant if you do not have a market or do not know your market. Knowing everything there is to know about your prospective customer will influence your every business decision.
Market research will be especially intensive during the seed phase of your business. It is important that you do not skimp on the work needed in this phase as it is the extensive market research done now that will determine whether your product is even viable to begin with.
Market research will help you answer the difficult questions of:
- Is there a need in the market for my product?
- Will people be interested?
- Is this a sustainable idea?
- Am I able to reach my market?
If the answers to the some or all of the above are: “no,” then market research can help you determine if these things can be fixed with product development or if you need to go back to the drawing board altogether and think of something new.
Who exactly is your market?
Who is most likely to want and need your product? The answer to that question may start off as blatantly obvious. For example, if you sell body lotion, you may think just about anyone with skin will buy it. But there are many factors which determine which brand they will buy.
The typical factors you will need to determine about your market will include:
- Demographic: Including age, gender and race. This is not discrimination, but a self-tanning lotion is just not going to sell well in a region with predominantly dark-skinned people who have no need for such a product, nor is an anti-wrinkle lotion going to appeal to teenagers.
- Lifestyle, interests: Are your product and marketing strategy in line with these?
- Types of media they consume: This will determine you advertising strategy and approach.
- Income: Can they afford it?
- Education level: This affects the appeal of your product
- Shopping habits: Do they prefer shopping online or brick-and-mortar retail? Do they prefer mainstream stores or specialized and exclusive ones?
- Location: Is a sunscreen going to sell as well in a cold, rainy climate where people rarely go outside?
Some of the above may start off as guesswork. Sometimes the obvious answer is right, other times not. There is existing market research information available (usually from advertising companies) which details the typical buying habits and brand loyalties of consumers based on the above factors.
By comparing your product against similar brands and their respective markets, you can ascertain who your market is likely to be.
However, this is just the start; you need to test your market relative to your specific product to get the most accurate market research possible.
Types of Research
Quantitative vs. Qualitative
Quantitative refers to quantity. This research looks at clear-cut numbers such as “How many people bought new cars in a year,” and “How much money was spent on each purchase?”
Qualitative refers to research that looks into factors that cannot be reduced to a number but is helpful nonetheless, such as opinions and pointers. Think of qualitative research as your “suggestion box.”
It is important to set clear objectives at the outset of your market research as to what type of data you are looking for and how this will exactly affect your business decisions. Research for the sake of research may be a waste of time. Streamlining questions you want answered will save you time from the beginning.
Ways of Gathering Research
Observation: Watching patterns and trends around you including listening to debates, reading online commentary, monitoring social media, etc. will provide a general idea of your market’s mentality. Also observe what your competition is doing so you can do it better.
Surveys: Surveys may be printed, emailed, conducted over the phone or online. You could even consider hiring a survey company who specializes in conducting surveys for clients.
Focus groups: This involves hiring a group of people to participate in various research activities and discussions to gather more information.
Prototype testing and field trials: This means putting an initial minimum viable product out there with the intention to gather information to help improve upon it. Your goal here isn’t acquiring profits yet, but information.
Remember that market research is ongoing as the needs of the market evolve with the changing times. As your business expands, you will need more information to reach wider markets.
Market research does not exist in a vacuum. It needs to be seen as an integral part of the business instead of a one-off chore.