Eight FAQs on market research.
- What are the key things I need to know?
- How long will my marketing research take?
- What research methods would be useful for me?
- Should I do my own research or get expert help in?
- How much will I have to spend?
- How can I find an outside agency with the approach and skills I need?
- How much can I trust the results as a basis for business decisions?
- How do I know when to stop researching and go for it?
1. What are the key things I need to know?
Market research should be carried out when you start your business, before launching a new product or service and whenever any unforeseen threat or opportunity arises. The process of SWOT analysis (strengths, weaknesses, opportunities, threats) may be useful to help you focus your thinking. You need to know:
- Where are the market opportunities not filled by competitors?
- What might the demand be, at what price level, and is it subject to seasonal or cyclical variations?
- What benefits of your product or service need to be highlighted?
- Who forms your core target audience? And what is the potential?
- How can you reach and sell to these people or businesses most cost effectively (direct sales, advertising, trade shows, via the internet)?
- What are the problems in delivering your product (sourcing components, design, legislation)?
- Can you make a profit, and what are the implications for your business plan?
You need to know what your customers or potential customers do now, what they think and what they believe they want or need. But you cannot know until you have asked them - that is what primary research is all about. The information you are seeking will be about factors such as products or services, pricing, image and awareness, customer care, after-sales service and the competition in the market.
Two areas are vitally important.
- Are you offering precisely what your target customers want?
- Is your price right? (For most small firms, this means "Am I charging enough?")
You need up-to-date information about your market - size, trends and changes. The best sources are your trade association, the internet, the marketing advice sections in city central libraries and trade and business journals. This is known as secondary research.
2. How long will my marketing research take?
The time needed for primary research, where respondents are asked a series of questions, depends on the scale of the project (the sample size) and the method employed (doing it yourself or using an agency). As a guide, your minimum sample size should be at least 10% of your customer base, or 50 customers.
Many small businesses can achieve useful results in a week or two. If using a market research company, you must allow longer.
Secondary research information is often available immediately, free or at low cost, from the marketing advice section of a central library or from your trade association or local business support organisation's information service.
Generally, the more statistically accurate (quantitative) you want the research to be, the longer it will take to prepare and complete. While this type of research may be apt if a large investment decision is at stake, there are other decisions that benefit most from timeliness, rather than accuracy. There is almost always a role for 'quick and dirty' lighter touch research which provides more emotional (qualitative) clues about the next action you should take.
3. What research methods would be useful for me?
It is important not to consider research methods in the abstract. The various methods are like tools in a toolbox, each more suited to one task than another. They include desk research (much of which can be done, literally, from your desk, using the internet) and field research, which can include customer research (focus groups, street interviews and 'hall tests' of your products), product research and pricing studies.
The key to successful research is to first identify what it is that you need to know - what information will most helpfully move you forward. Then weigh up the prevailing circumstances - eg speed versus detail, or scientific accuracy versus more emotional feedback and so on. The parameters you establish here will help you choose the most suitable research method for your situation.
For secondary research information, approach the marketing advice section of the central library or your local business support service.
For primary research, where respondents need to be asked a series of questions, the choice is between face-to-face interviews, telephone contact or mail or email questionnaires.
Face-to-face: This is useful if you need to show something and get a reaction (eg samples, photographs, a prototype or alternative designs and colours). It is also appropriate if you are talking to people who are not already customers.
Telephone: Use the phone to interview established customers or if doing a business-to-business survey.
Mail or email: These should generally be avoided, as you will get very few replies. If there is no alternative, consider offering a worthwhile incentive.
4. Should I do my own research or get expert help in?
There are pros and cons to both approaches, depending on the circumstances.
- DIY will give you a 'feel' for what people think.
- You could save money by doing it yourself.
- DIY research is time-consuming and could be a distraction.
- You will be inexperienced - even the design of a simple questionnaire can be more complex than it looks.
Tip: If you are asking questions try to obtain unbiased responses and avoid revealing your true connection with the subject business. "I have been tasked to carry out a survey looking at..."
Using an expert
- You should end up with a professional job.
- The project can be completed quickly and thoroughly.
- The task will not eat into your own time.
- You will benefit from 'tricks of the trade'.
- The cost - experts can be expensive.
- The challenge of vetting and appointing the right support.
5. How much will I have to spend?
DIY research costs time, not money. If you use an outside consultancy, expect to pay between £250 and £600 per day, depending on the size and prestige of the firm. If you are happy to retain control of the project and its design, consider using a telemarketing operation to do the legwork and get the cost down to around £250-£350 per day.
Penny-pinching could jeopardise the quality of the findings. If you end up with misleading answers, the whole exercise could prove very expensive indeed.
6. How can I find an outside agency with the approach and skills I need?
Ask friends, trusted business contacts or your local business support agency or trade association if they can recommend research agencies or consultants, or search online. Take sensible precautions and ask the right questions to make sure you find the best candidate before you go ahead. Check the following:
- Is the firm big enough to do the work but small enough to charge realistically?
- Does it have enough suitably qualified staff?
- Are they in tune with your particular needs?
- What is their reputation in your area of interest or industry?
- Are they specialised in any specific type of market research?
- What range of research techniques do they use?
- Can they supply you with case studies or previous success stories?
- How long have they been in business?
- Will you feel comfortable working with them?
- Have they made it clear what the charges will be?
- Does their approach make sense to you?
- Above all, do you feel that they value your business?
Of all these questions, the last is probably the most important.
Professional researchers usually belong to The Market Research Society (020 7490 4911). Before appointing an outsider, you will need to:
- Examine reports the person or agency has produced - if they are not confidential.
- Draw up a brief describing exactly what you need to find out. The woollier the brief, the less value you are likely to get.
- Find out what knowledge the researcher has of your sector.
- Draw up a timescale, with meetings and review dates.
- Decide whether you can work satisfactorily with the researcher or agency.
- Ask the daily rate and set a budget limit beyond which you will not go.
7. How much can I trust the results as a basis for business decisions?
The more information you have, the more specific it is to your situation and the more up-to-date it is, the more reliable it is likely to be. It is important to understand, though, that regardless of how professionally it is conducted, market research can never entirely take the risk out of business decision making. Remember that you are ultimately in the driving seat of your own business and from time to time you will make unsecured decisions. Market research will almost certainly provide you with additional information and food for thought.
Taking any market-related business decisions without research evidence is pure gambling. Even so, nothing in this area is absolute, and you still have to use your judgement and common sense.
The real challenge is how you interpret the results - and the big danger is refusing to quite believe the findings. Many small business managers fall into this trap and end up skewing the interpretation of the results to suit their own prejudices. If in doubt, extend the survey, or run another with a slightly modified questionnaire.
8. How do I know when to stop researching and go for it?
When you are reasonably certain you know what customers think and how they are likely to react, go ahead. As a final cross-check, ask yourself three questions.
Was your sample size adequate? The smaller the sample, the less reliable the conclusions will be. The smallest sample should be 10% of one year's customers - 20% would be better. In any case, you should have surveyed at least 50.
Are you sure your respondents were not led by the questions or the way they were asked? Check this by changing the wording and testing whether the revised questionnaire appears to produce different results. If it does, you must do the field work again, with different respondents.
Are you sure nothing has happened since the survey to radically alter the situation? If in doubt, re-test the survey questionnaire. If the results look like being substantially different, run the whole survey again.
There is much truth in the saying that 'over-analysis leads to paralysis'. Getting the timing of a new marketing strategy right can sometimes be more critical than being certain you are doing exactly the right thing. For example, a new line of Christmas goods must be in the shops in good time for the festive season. To delay while a detailed research programme was completed could mean missing the boat. Alternatively, a major investment in a new innovation would justify considerable pre-analysis.
Unfortunately, there is no neat rule to follow about when to stop the research and get on with the project. This is one of those areas where you must be prepared to back your own judgement and experience. Research is there to give you clues. Ultimately it is you who must make the decision to move forward.