When launching a new small business, you must pay close attention to several details. However, completing market research is an important step that no entrepreneur should overlook. In fact, it should be one of the first things you do when starting a new business—ideally, long before your company opens its doors or starts its website.
Market research can provide useful insights into your market, the industry into which your new small business is venturing, and the competition it will encounter. Here’s how to perform market research for your company, as well as more information on why market research is important in the first place.
What Is Market Research?
Market research is fundamentally a technique of acquiring information. When conducting small business market research, you look at things like consumer behavior, competitor presence, economic conditions, and market trends.
Market research might provide your new business with a competitive advantage. It can also assist you in finding and attracting new customers (including target customers) as well as understanding how prospective customers may see your organization and the things it provides from the outside.
Why Is Market Research Important?
Market research is essential when beginning a new business for a variety of reasons. Even established businesses may want to conduct market research from time to time to gain additional information before launching a new product, expanding, or performing a checkup.
Here are four important reasons why market research is important for your small business:
- Reduce your company’s risks. As a small firm, releasing a new product that fails to perform effectively could jeopardize your entire organization. However, if you test the product with a small audience and get feedback on what works and what doesn’t, you’ll be able to make changes before the official launch. This type of safeguard can protect your small business from unforeseen disasters.
- Determine your target audience. You may have a notion of who your company’s target audience will be. Market research, on the other hand, can disclose which consumers are truly interested in the items and services your company provides. You may learn more about how to discover these customers, how to contact them through tailored advertising and marketing materials, and the best ways to address their demands as you define your true audience.
- Increase your competitive advantage. When your company is good at market research, it can use what it learns to outperform competition. Market research may assist your team design relevant add-on goods that can help raise business revenue, locate clients that your competitors aren’t reaching, and provide answers to disgruntled consumers looking for services or products to meet a need.
- Maintain your concentration. As a small business owner, it’s tempting to fill your days with hectic work. When you perform market research, you can ensure that your staff devotes the majority of their efforts to improving the customer experience—an important step in maintaining your brand’s reputation and overall profitability.
How Can A Small Business Conduct Market Research?
Larger companies and corporations frequently hire outside consultants to do market research on their behalf. Such services, however, are often beyond of reach for small business owners, especially if you’re just starting out and have little startup capital.
On the plus side, you can conduct your own market research. However, conducting your own market research takes time, effort, and a grasp of the objectives you want to attain.
The Goals Of Market Research
You can, on the other hand, conduct your own market research. However, conducting your own market research involves time, effort, and an understanding of the goals you want to achieve.
- Identify new business opportunities
- Avoid business failure
- Create a more robust business plan
- Secure business financing
- Make informed business decisions
- Deliver a better customer experience
These objectives are applicable to many enterprises, large and small, whether they are in construction, retail, healthcare, restaurants, or another industry.
Primary Vs. Secondary Research
Primary market research is research that is gathered directly from the source—your company’s consumers and prospective customers—by a small business or an outside consulting agency. Primary research methods commonly used include questionnaires, interviews, surveys, focus groups, and scouting tours to competitors’ locations.
When obtaining data under the primary research umbrella, you can collect two sorts of information to influence your business decisions:
- Qualitative research, also known as exploratory research, provides answers to broad, open-ended inquiries about your company, market, customers, and so on. Qualitative research can offer you with information on your target audience’s attitudes toward your company, as well as their views, values, and other characteristics.
- Quantitative research: This type of information, also known as particular research, can offer you with numbers and data. Quantitative research may give you with mathematically based answers to problems such as whether your items have a market, consumer purchasing behaviors, market awareness, how long visitors stay on your website, and so on.
Secondary market research is not tailored to your industry. Instead, a small business owner or consultant can use publicly available data from government agencies, trade groups, industry associations, news releases, and other sources to gain an understanding of what’s going on in your sector and market.
For small businesses, this form of study may be more economical and less time-consuming. The data you acquire, on the other hand, tends to deliver less business-specific insights.
The 4 Types Of Primary Market Research
There are various methods for gathering data if you decide to perform primary market research for your organization (obtaining information directly from the source). Interviews, surveys, focus groups, and consumer observation are four of the most frequent forms of primary market research.
Market research interviews entail approaching potential customers personally and asking pertinent questions about their requirements, issues, and opinions. You could want to ask questions about your interview respondents’ demographics, such as age and gender, to assist you better understand your target consumer.
Plan your questions ahead of time for the best results. Take your time with each question to ensure you collect information that will help you achieve your market research objectives. This extensive preparation should yield the greatest outcomes, and your interview participants will appreciate the respect you show for their time.
Surveys are similar to interviews, except that they are not conducted in person. When used for market research, surveys can help you gather relevant information from larger groups of individuals.
User-friendly (and frequently low-cost) survey software can make this procedure accessible to small business owners as well as larger corporations. For example, SurveyMonkey provides free market research survey templates to assist guide your questions and produce the most actionable findings.
3. Focus Groups
A focus group is an example of primary market research conducted by a market research firm. This is one of the most expensive types of primary market research.
Focus groups are frequently formed by gathering six to eight people to discuss a company’s product. If an official focus group is out of your price range, consider holding an informal focus group yourself.
The evaluation you receive in this context may not be as objective, and you must ensure that you are prepared to handle negative comments effectively. Regardless, it may be worthwhile to compare the responses you obtain in a group vs an individual setting.
4. Customer Observation
Customer observation is a type of primary research in which you observe prospective consumers without interacting with them. This observation may even occur at a competitor’s place of business.
It is critical to watch how your potential clients interact with similar items and services to yours, such as:
- How they purchase
- What they say
- What they buy
- How much they pay
- How they pay
Answers to questions like the ones above can provide useful insight that you can apply in your own organization.
Types Of Secondary Market Research
Secondary market research is based on information gathered in the past by another person or entity (also known as a secondary source). Libraries, government data, colleges and universities, and trade periodicals are examples of secondary market research sources.
Even if it seems archaic, a library should be one of your first locations while conducting secondary market research. Libraries are useful because they have a priceless resource: librarians.
Your local library (and, if possible, a research library) can assist you in launching your market research with books on the subject, journal papers, and other secondary market research sources such as government statistics and trade periodicals. When beginning a small business, you can’t afford to pass up free advice from an expert.
2. Government Data
The scope of government data is vast, and it can give powerful insights. This information is available for free, but for some enterprises, the sheer volume of government data can be intimidating.
There are numerous government data databases worth analyzing depending on the type of business you’re creating and the industry in which it will operate.
- Census Bureau: Fascinating and informative demographic data.
- Bureau of Economic Analysis: Statistical data on economic trends, including GDP.
- National Center for Health Statistics: Pertinent healthcare information for those starting a healthcare-related business.
- Bureau of Transportation Statistics: Data on transportation safety, freight industry trends, airline safety, and other useful information (especially for those who plan to start a trucking business).
- Energy Information Administration: Helpful information for energy-related businesses.
3. Colleges and Universities
Colleges and universities, like libraries, can sometimes supply research skills to cash-strapped small business entrepreneurs. You want to find out who is researching your specific topic and if they are affiliated with a specific college or university using this method. Such students (particularly graduate students) may be able to supply essential data that can be used to inform your business decisions.
4. Trade Publications
While your unique product or niche may not yet exist, your small business will most likely be entering a well-established sector. Trade journals can inform you about industry issues and how other professionals in the sector are approaching those issues. These same sites can assist you in staying current on developing trends and industry innovation.
How To Conduct Market Research
Now that you understand the many sorts of market research, it’s time to discover how to begin the research process. The four steps below will teach you how to perform primary small company market research on your own.
Step 1: Set your goal.
Before you begin your market research, you should identify your study’s objectives. Market research should try to answer particular questions and collect certain sorts of information for the best results.
For example, your research could be looking for solutions to queries like:
- Who are your target customers?
- What are your customer’s product preferences?
- How will the public respond to a new product or service you have to offer?
- What is the public perception of your brand?
- How does your company compare to the competition?
It’s critical to know what information you’re looking for ahead of time. Defining these objectives can help you stay on track with your study.
Step 2: Find the right people for a sample.
Following that, look for the ideal people to take part in your main market research study. Whether you’re conducting an online survey, interview, or focus group, it’s critical to select people who have qualities that correspond to the target customers you’re attempting to reach with the items or services your company is attempting to offer. And, if your company is attempting to reach clients in specific parts of the United States, your primary research participants should be located in those same areas as well.
It’s a good idea to have several volunteers for each customer profile you want to study. Each sample group should have at least 10 members. Remember that you may need to offer incentives to persuade people to participate in the market research process, such as a free gift, a substantial discount, free shipping, and so on.
If you’re having problems recruiting volunteers, consider reaching out to social media followers or recent clients. Other potential participants include people who abandoned their online shopping basket during the checkout process or contacts from your own social network.
Step 3: Prepare research questions.
Prepare research questions to ask participants in advance of the focus group, online survey, or interview. Remember that these questions must correspond to the objectives you established in step one of this procedure.
You’ll also want to acquire some basic background information on the individuals in your study. These specifics might assist you in learning more about your target audience and how your company can better meet their demands.
It might also be beneficial to incorporate open-ended questions in your research. This enables for valuable feedback from participants about your brand and its items that you may otherwise overlook.
Finally, ask participants to indicate who they believe are your competitors—companies they would turn to when looking for similar products or services (and why). When interviewing consumers who have previously purchased products from you, you can also ask them why they chose you over the competition.
Step 4: Create a summary.
The primary research process concludes with the creation of a market research summary. This report will compile the material gleaned from your study so that you may examine it and apply it to your small business.
You can format your market research summary as you want. However, some important details to add are as follows.
- The goals of the market research
- Information about participants (including the different buyer personas you analyzed, if applicable)
- Executive summary detailing the most important takeaways from the study
- Key reason(s) consumers purchased your product or service instead of buying from the competition
- Key reason(s) consumers purchased goods or services from competitors, instead of your company
- An action plan identifying how to use the results of the study to improve the business
Other Times To Perform Market Research
A small business’s inception phase isn’t the only time to conduct market research. Consider market research at the following other crucial junctures.
1. To Gauge How Your Customers Feel About You
When it comes to customer happiness, you never want to take a “set it and forget it” attitude. Once you’ve established yourself, surveying your customer base can help you identify how your customers feel about your brand, how they experience your product (what they enjoy, dislike, or struggle with), and how they feel about your competitors. This information is critical for growing and maintaining a healthy business.
If you are unable to conduct a formal poll, incorporate market research into your daily company processes. Inquire with your customers about what they enjoy about your company and what you might improve. Listen and accept input cheerfully, even (or even especially) if it is negative. If you receive similar comments from multiple people, it may suggest that your organization needs to make changes.
2. Before Launching a New Product or Venture
When it comes time to grow your company, you can consider launching a new product or creating a second location. You may utilize market research to assist you through any of these adjustments in order to reduce risks for your company and ensure that the next steps you take to build your company are just as successful as the first.
As a small business owner, you most certainly put a lot of time (and sometimes even money) into your firm. Market research can help you protect your investment and increase your chances of long-term success.