Market research is a process – an ongoing process - by which you get to know your target market. It involves the collection and assessment of information relating to your goods and services, your clients, your competitors, your industry and the challenges in the marketplace.
It is also a critical part of the strategy for arriving at a well prepared marketing and business plan.
What are the benefits of market research?
Market research and analysis can provide many benefits for people starting their own businesses.
1. make decisions about pricing, promotion, product and location of the business
2. understand how the product or service meets the requirements of the target market
3. gain information about how competitors operate, deliver their services and their pricing
4. assess client needs in order to meet them.
Market research can also help you to answer questions such as:
1. Who buys your products?
2. What goods and services are people likely to buy?
3. What are they willing to pay for them?
4. Where, when and how often are they likely to buy?
5. What is the best way of reaching them?
6. What changes do they want in your product or service?
7. How should your products look, feel, taste etc.?
8. How many potential clients exist in your area?
9. Is there sufficient demand for your product to make the business viable?
Conducting market research?
You can undertake it yourself or you can have the research carried out professionally. If you decide to have the research carried out professionally, choose a reputable firm with expertise and credibility in this field ie get references. If you want to do it yourself, there are two techniques available to you.
This means using other people's information for your research. This can include:
Newspapers and trade journals
This means gathering research information yourself. This can include:
Asking clients what they think, e.g. focus groups.
What should I research?
There are four components of market research.
external environment—research factors you can't control, for example, economic conditions
internal environment—research factors you can control, for example, the skills of staff you might employ
client profile—research detailed information about your clients, for example, where they are, what they need and what they want
competitor profile—research detailed information about your existing and possible future competitors, for example, who they are, what their strategies are or are likely to be and what their strengths are.
Let's look at the client and competitor profile in more detail.
A client profile contains detailed information about your clients—who they are, where they are, when they will buy and why they will buy. It helps you to understand the people who are likely to want to spend money on your products and services. This information can help you develop strategies to generate more consumer interest and to distinguish your business from competitors.
In a competitive environment, knowing your competitors is almost as important as knowing your clients. That's what competitor profiling is about. This form of market research involves finding and analysing specific and up-to-date information about your competitors.
You can find valuable information about your competitors by:
analysing their advertising materials and other promotions they undertake
reading directories in which they list their businesses
consulting official sources such as licensing bodies
shopping in their places and perusing their websites
gathering information about their past clients
observing their business practices over time
getting yourself on their mailing lists so you receive regular information regarding their latest strategies.
Assessing the facts
Once you have gathered your research and data you can begin to assess the facts about your market. Firstly, decide how much weight to give to the various pieces of information you have gathered. The questions you can ask are:
How current is the information? Is the market changing so quickly that some facts can no longer be relied on?
How reliable is the source? Is the information objective and factual?
Does the introduction to any survey mention deficiencies or statistical errors in the work? Very few surveys are free of these and knowing about them can help you analyse the information.
How was the information collected? Were the interviewers trained people and could the questions and questionnaires be misinterpreted?
Does the information cover your area of interest precisely? For example, if you want to sell cakes, does it cover the market for cakes or for the whole of the bread industry?
Is the geographical area covered the same as your own market?
Making judgments about the market is the hardest part of the exercise. If you have been lucky, the information will be easy to arrange and solutions will be clear. If they are not, then it is recommended that you talk with your accountant or your other advisers before you turn the research into action.
Some vital questions
Now that you've completed your market research, it's time to take a long hard look at your business and ask yourself the all important question:
Can my business operate in this market?
Here are some related questions:
Does my business have the capacity, including sufficient capital, assets and human resources, to deliver
Can I compete successfully with other suppliers to this market?
Do I have enough working capital to set up my business in this market?Do I and my employees have the skills and knowledge to operate successfully in this market?
If you can answer 'yes' to all of these questions then you're well on your way to embarking on a successful business venture. If you answered No to any of these questions or weren't sure of your answers, then you may wish to review your business concept. Continue to conduct sound market research throughout the life of your business to ensure the ongoing viability of your business in its marketplace. Factors within your control and outside of your control will change over time, as will the habits of both your clients and competitors.
Who can help?
Sometimes the industry that your business is in has a trade or professional association. These associations have market information and are happy to help their members. They may have already carried out market research studies and surveys and may be aware of trends and future opportunities. Government bodies can also be an excellent source of general information in any given area or industry.