Eight FAQs on market research.
- What do I need to know about market research?
- How long will my market research take?
- What market research methods would be useful for me?
- Should I do my own market research or get expert help in?
- How much will I have to spend on market research?
- How can I find the right market research agency?
- How much can I trust the results of market research as a basis for business decisions?
- How do I know when to stop market researching and go for it?
1. What do I need to know about market research?
Market research should be carried out when you start your business, before launching a new product or service and whenever an 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 is your target audience? And what is the potential?
- How can you reach and sell to these people or businesses most cost effectively?
- 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 for this type of information are trade associations, Government websites, online research providers and business journals. This is known as secondary research.
2. How long will my market 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.
Many small businesses can get useful results in a week or two. If using a market research company, you must allow longer.
Gathering hard statistics (via quantitative research) can take time. While this type of research is useful if a large investment decision is at stake, there is often a place for "quick and dirty" lighter touch research which provides more emotional (qualitative) clues about the next action you should take.
3. What market research methods would be useful for me?
Research methods are like tools in a toolbox, each more suited to one task than another. They include desk research (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 information will help you move forward. Then weigh up the priorities - eg speed versus detail, or scientific accuracy versus more emotional feedback and so on. These parameters will help you choose the most suitable research method.
For primary research, where respondents need to be asked a series of questions, the choice is between face-to-face interviews, telephone contact, mail or email questionnaires.
Face-to-face: This is useful if you need to show something and get a reaction (such as samples, photographs, a prototype or packaging designs). 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 market research or get expert help in?
There are pros and cons to both approaches.
- 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 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 on market research?
DIY research costs time, not money. A professional survey can cost from £1,000. Day rates for conducting in-depth customer focus groups may well be more. Adding a few questions to an existing omnibus survey is one of the more cost-effective options.
Penny-pinching could jeopardise the quality of the findings. If you end up with misleading answers, the whole exercise could prove very expensive.
6. How can I find the right market research agency?
Ask trusted business contacts, 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 sector?
- Are they specialised in any specific type of market research?
- What range of research techniques do they use?
- Can they supply you with testimonials or case studies?
- 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. Before appointing an agency, you will need to:
- look at previous reports the agency has produced - if they are not confidential;
- draw up a detailed brief describing exactly what you need to find out;
- draw up a timescale, with meetings and review dates;
- decide whether you can work with the researcher or agency;
- ask the daily rate and set a budget limit.
7. How much can I trust the results of market research as a basis for business decisions?
The more information you have, the more specific it is and the more up-to-date it is, the more reliable it is likely to be. It is important to understand, though, that market research can never entirely take the risk out of business decision-making. You are 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 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 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, run another survey with a modified questionnaire.
8. How do I know when to stop market research 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 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.
- 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 alter the situation? If in doubt, re-test the survey questionnaire or run the whole survey again.
There is some truth in the saying that over-analysis leads to paralysis. Getting the timing of a new marketing strategy right can be more critical than being certain you are doing 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.
There is no simple 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.