Over the years, I have seen literally hundreds of prospective business start-up clients that have arrived at our first meeting together full of energy and enthusiasm for their new business venture.
However, after just a few questions on my part, it becomes clear that the client has not done their required homework – market research. This is about asking important questions:
- How are you going to do it?
- Who is your target audience?
- How much can you find out about them?
- What does your customer need?
- Who is your competition?
Market research is key when starting a business
They have assumed, for example, that just because there appears to be a gap in the market for a particular product or service, it must mean that there is a demand for this. Perhaps someone had beaten them to it and already investigated the market only to discover that there was no business to be had!
There is never any substitute for undertaking some comprehensive and meaningful market research to understand the proposed market place you are intending to enter with your new business product or service.
Also, never forget when running any business, the whole point is to attract customers in order to make sales and of course, profitable sales. In order to make these, it is important to view what you sell – product or service – from your customers’ perspective and not yours. Do they need or want what you offer?
Look at your business from your customers perspective
People buy firstly for emotional reasons rather than logical ones ie how a product or service makes them feel, rather than how much it costs. Even with this in mind and with the exception of the impulse buyer (‘I want it now!’), the customer will consider this question. Ergo, the ‘want’ businesses have to work harder than the ‘need’ ones, to both attract their customers and then sell to them.
So, it is essential is to gather market information. This should include anything you need to know in order to formulate strategy and make business decisions. Information is available in the form of statistical, economic and demographic data that can be found from online, libraries, research companies and professional associations. This is called secondary research and will require some interpretation or manipulation for your own purposes.
Additionally you can carry out your own primary research through customer feed-back, surveys, questionnaires, mystery shopping and focus groups and this can be tailored to your precise needs. It requires less manipulation, but all types of research need careful analysis.
Whichever way you choose to do your research make sure to analyse it
Be careful when extrapolating or projecting. If the starting point is inaccurate, the resulting analysis will not be reliable. The main elements you typically need to understand and quantify are:
- Customer profile and mix
- Product mix
- Demographic issues and trends
- Future regulatory and legal effects
- Prices and values, and customer perceptions in these areas
- Competitor activities
- Competitor strengths and weaknesses
- Customer service perceptions, priorities and needs
Primary research is recommended for local and niche services. Keep the subjects simple and the range narrow. A good sample size is important ie 100 completed questionnaires will give you more information than 20! Remember to formulate questions that give clear yes or no indicators and always understand how you will analyse and measure the data produced. Use focus groups for more detailed work. Be wary of using market research organisations, as these can become extremely expensive. If you do, the most important thing to do is get the brief right.
Make sure the questions have clear yes or no indicators
With your initial market research completed, you are then in a position to consider ‘test trading’ your idea. One straightforward way to do this if you intend to sell products online, is via existing platforms ie EBay. You can sell this way for a period of time to test the demand for your product without expending resources on your own retail website. You might also consider offering free ‘taster’ products eg food or drink samples. This should be done for a limited time only, so as not to lose out on too much income!
Start your business today by downloading your free start-up guide!
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