Before setting up a business, you need to research your market thoroughly. Although it takes time and effort it’s worthwhile, because having a deep knowledge of your competitors and potential customers can help your business to hit the ground running and be more successful.
Make sure the scope of your market research is sufficient and don’t rush any stage because both can limit your success. Researching your market need not be a costly exercise, because there are many sources of inexpensive or even free information. And there is also much you can do yourself.
If you’ll be selling to people, you need to know their sex, age, marital status, occupation, income, aspirations, wants, needs, lifestyle habits, etc.
n If you’ll be selling to businesses, you need to know their size, sector, buying patterns and service requirements.
You also need to know what links all of your customers and who makes or influences the buying decision.
For example, a printing firm should understand if its customers are likely to want a thousand postcards or a million brochures. A successful sandwich shop will predict its top-selling sandwiches and how many of each they expect to sell each day.
Toy sellers buy more products later in the year, so they’re fully stocked for the pre-Christmas trading period. A minicab firm will usually expect more business on Saturday evening than Monday afternoon.
A bookseller will know that, while many customers like visiting a shop, many now prefer to buy online. Do a hairdresser’s customers want to visit the salon, or have their hair done at home?
Every new business has to know why customers will buy from them and not a competitor. This will be key to marketing your business and is known as your ‘unique selling proposition’ or USP.
This research will tell you how many people or businesses you can target and how they spend their money. You might be able to buy this from an existing data providet, get it done especially for you or perhaps do it yourself. There are also several sources of free information.
This focuses on how potential customers think and behave. This can be bought, commissioned from various of sources or you may be able to do it yourself.
List all the elements you need to know about your potential customers — who, what, when, where, why and how — and whether you need to find out facts and figures (quantitative) or about their attitudes and actions (qualitative) to give you the answers you need.
Trade associations often collect data from their members, which could give you a good insight into your industry. The Trade Association Forum has a searchable list.
Some libraries and universities store statistics. University departments or experts working in your field could have data they can provide free of charge (or at a low cost).
Government databases are a useful source of statistics. The government-run Office for National Statistics provides free data on various issues.
You can find a wealth of freely available information online, but if you do, make sure the data is recent and from a reliable source.
Many specialist trade publications offer free subscriptions or unrestricted access to their websites.
Find market research providers using the Market Research Society's directory.
You can use specialist websites that offer searchable databases of existing reports.
Your local business support organisation may be able to provide advice on specialist research sources.
You won’t have the time or resources to definitively uncover the potential size of your market with authority and certainty.
Sometimes you’ll be looking to see if there is a market for your product or service, sometimes you’ll be trying to find out what price you’ll be able to charge or what would make a customer buy from you and not a competitor. Have a definite idea (or a number of ideas) about what you want your research to prove or test.
n Find a sample of your target market; get them to try your product or service and give their opinion.
To find out if people would use your service, you could contact potential customers and arrange a morning event so they can drop in for a coffee and a demonstration. Otherwise, offer to visit them.
Approach potential customers about test marketing your product. They may agree to use or sell a prototype of the product.
For example, if you are thinking of opening a high street flower shop, stopping people and asking them ‘Would you like to see a flower shop here?’ may provide you with a high positive response rate. But asking ‘If there were a flower shop here, how often would you use it?’ will provide more valuable results.
Asking a closed question will gain a limited response. ‘Did you like product X?’ is likely to be answered with a simple ‘yes’ or ‘no’.
Asking an open question is likely to get a more detailed response. ‘What do you think can be improved?’ will be interpreted as a request for more than a one-word answer.
Specialists, such as market research companies or marketing consultants, have the time and the expertise to do a thorough job.
Customers sometimes find it difficult to voice complaints to a supplier and some might also suspect that you’re trying to sell them something.
You might also find it difficult to be impartial.
You might ask someone suitable to carry out a telephone survey, for example. This approach will only be successful if the survey questionnaire is simple and well considered.
Provide a briefing and make sure the person fits the image you want to convey to potential customers.
Remember that street interviewers need local authority licences and identity cards.
Trade associations, such as the Chartered Institute of Marketing and the Market Research Society, can provide advice on how to choose the right professionals for your purposes and budget.
Try their products or services. It’s the easiest way to understand the market and what you’re up against when you become part of it. Carrying out a detailed analysis of their strengths and weaknesses can tell you what you need to do to compete successfully.
Look at the potential your competitors have to improve their service or upgrade their products. Work out how you can stay one step ahead.
Make sure you can provide customers with a reason to keep coming back. This could be because your product has been updated, the old one has run out, worn out or because it’s so good they want more.
Find out if the market is affected by external factors, such as the economy or legislation. Are there any protective measures you could put in place?
Anticipate potential problems. You might be able to develop your product for a wider selection of markets to increase its chances of survival.
Do not base market research on the opinions of your friends and family. You risk hearing what they think you want to hear — rather than their honest opinions.
Record comments given, otherwise you might forget feedback that could enable you to improve your products or service.
You can often learn more from criticism — and improve your business because of it.
It will only be finished when you have a clear understanding of your market and where you intend to position your business within it.
Remember that once your business is up and running, continuing your research regularly will allow you to remain aware of your customers’ needs and stay one step ahead of the competition.
Keep looking out for new opportunities, whether this means improving your product or targeting new markets.