Know Your Market: Market Research
Ideas are good; viable, profitable ideas are even better. But how do you tell the difference? Conducting thorough market research can help.
Types of Market Research
Marketers focus on four types of research information: secondary, primary, qualitative and quantitative. Here’s a breakdown:
Secondary research. This is market research information that has already been gathered and can be readily implemented. Information like this can come from an industry association, the general or trade media, and/or third parties like Forrester Research who develop market profiles and publish them for a fee.
Primary research. In this scenario, you gather the research first hand from customers, users or key constituencies. You might conduct a survey or a focus group. Generally, this research information is proprietary to your company.
Qualitative research. This type of research focuses more on open-ended questions. The end result is not numbers; instead, it shows motivations for purchases. Why do people want to see a new category of services developed? Why is this product better than that product?
Quantitative research. The result of this research is numbers. How many people can be expected to use this product? What price will they pay? How many competitors offer the same product? What are the sales forecasts?
What do you research?
Start with the basics: your company, potential customers and the competition.
- Your Company. Start by evaluating what your company currently provides: products, services, benefits to customers, your brand, and how your new idea fits into your existing operations. To serve a new market profitably, your operations will need to be able to cost-effectively service that market, especially if you have competition.
- Potential Customers. The size of your market is important. Look at the number of potential customers and their demographics (age, income levels, spending ability, etc). Establish a geographic limit on your market that you can effectively service unless you provide e-commerce.
- Competition. Who currently serves this market? Who are your local competitors? Who are your national competitors? Who serves your market remotely through e-commerce or online services? Then take it a step farther: What competitors are likely to enter the market at a later date?
When you complete this process, you won't have a full picture of market feasibility but you will have a much clearer picture of the possibilities.
To round out your research, take a close look at the competition you identified. Visit their stores or websites. Check out prices, delivery, service levels, etc. Note strengths and weaknesses. Pay special attention to opportunities to distinguish your product or service.
Most importantly, try to determine if there is room for your business within the marketplace. All businesses need customers to succeed and thrive. If storefront doors at businesses similar to yours aren’t swinging open, then you should reconsider your business idea.
Additional steps in determining the viability of your business idea include:
- Gathering information from databases, market surveys and competitive intelligence firms.
- Talking to prospective customers. Ask how they feel about their current vendors or suppliers. Ask what factors are most important in their buying decisions.
- Talking to potential suppliers. Product suppliers have a great sense of different markets. They can tell you if a market is under-served or over-served, and are typically willing to do so since they have a vested interest in finding good customers like you.
Make sure you use objective data to make decisions. It's easy to get excited about an idea; temper your excitement with data, information and research. When the result of your market research matches your expectations, your idea has the greatest chance of success.