Do you ever remember as a kid throwing a blanket over your head and running around until you got whacked by a piece of furniture? I actually still have a scar from the stupid fireplace - but I digress. As pointless as those memories may seem, they illustrate perfectly what it is like to try and start a business without doing market research. A business can literally stumble around blindly, hoping to avoid getting waylaid by some major road block. It is pretty obvious that running around with a blanket on your head isn't the smartest choice, and neither is avoiding doing market research.
Whether your business aims to sell make-up door-to-door or operate a commercial cleaning franchise, you must do market research (you sole-proprietors thought you could get out of this, didn’t you?). This is where you will learn about your market, potential customers and competitive environment. Doing so will give you a 360 degree view of the lay of the land, help you map out the best possible market approach, and assist you in writing your impending business plan.
What Am I Researching?
Market research is seeking out the answers to help develop your business plan. The best and most efficient use of your market research time will be to research the following areas (which coincide with a typical business plan outline):
- Industry: Trends, threats, major players, growth rates, sales data
- Competition: Direct and indirect competitor profiles, including what they do well and poorly
- Ideal Customer (also referred to as a Target Market): Demographics, geographic location, profile, how needs are or are not being met
- Products & Services: Description of your offering, how it will be developed, produced and distributed
- Operations & Management: How you plan to structure the business and management structure
How To Do Market Research
Market research consists of two separate information collection strategies, primary and secondary research.
Primary research is basically the information you need which doesn’t currently exist. It is new research you will create and conduct, and is designed to answer specific questions you have about your business (all the burning questions keeping you up at night).
What Types of Questions Could Primary Research Address?
The sky is the limit. This is where you sit down and write out all the questions related to your business you couldn’t find in other sources. For instance:
- How will your potential customers respond to your company name?
- How much are your potential customers willing to pay for your product/service?
- How important is home delivery?
- How important is the ability to purchase online?
How Do You Conduct Primary Research?
- Face-to-Face Interviews: This could be people you know or don’t know.
- Focus Groups: A small group of individuals who represent your ideal customer. A facilitator is present to conduct a group discussion.
- Online Surveys: There are many online survey services available to assist you in creating an electronic survey. One of my favorite providers is Wufoo.com. The key is to disperse the surveys to those individuals representing your potential customer base or target market.
- Phone Interviews: Outside of normal phone interviews, consider clandestine methods (i.e. calling a competitor and posing as a customer to get their rates. Some people may call this spying – I call it shrewd market research).
Conducting primary research can take you outside your comfort zone. This may deter you from seeking out interviews with appropriate targets and have you conducting interviews with family members and close associates. Friends and family are not always the most representative survey subjects. To get the most useful and accurate information, you need to seek out the right kind of potential customers to learn their needs, wants and expectations.
This article is part of a 10-Step Guide on How to Start a Home Business.