Doing your own market research isn't difficult, although it does tend to be time-consuming. If you own a small business, you're probably researching your markets continually informally. Every time you talk to a customer about what he or she wants or chat with a supplier or sales rep, you're conducting market research.
But more formal market research is also necessary to keep your business vital and growing.
I think of market research as a grid.
Market Research Grid
The Market Research Grid shows the two types of data sources and the three areas of research that are important to any business. You need to gather information from and about your customers to focus your marketing efforts, maintain and improve your customer service, and to guide your efforts in developing new products and/or services.
Looking at the grid, information gathered about the competition can help you determine what works and what hasn't worked, give you ideas for improving your products and/or services, and provide insight into how to increase or shift your share of the market.
The environment section of the grid refers to those economic, social, and political forces that shape business. Gathering information about the environment allows you to stay abreast of and respond to particular trends or events that impact your small business.
Whether it's a predicted drop in interest rates or the closure of a local mill, you need to be aware of it and judge the ripple effect on your business, for good or ill.
Think of secondary data sources as market research data that's already been collected by someone else. Phone directories, government publications, and sources such as the U.S. Department of Commerce, Statistics Canada, trade journals, and surveys conducted by other companies are all examples of information that's already been gathered that you can use to get a fix on what your customers want, what the competition has done, and what the environment is like.
Primary sources provide firsthand information. When you survey your customers or question the competition, you're gathering information directly from the source. While this kind of market research data can be the most costly and time-consuming to gather, it can also be the most valuable, because it's the most current and the most specific.
Is the Business Idea Viable?
The first step in market research is to frame the question or questions you want answers to. Suppose, for instance, that I already run a successful retail business selling window coverings (blinds, awnings, and drapes). I'm wondering about adding a blind and drape cleaning service to my business. So my market research question is, is a blind and drape cleaning service viable?
Through monitoring business trends (reading as many online or printed magazine, newspaper, and trade journal articles as possible related to business), I know that consumers are increasingly concerned about recycling and reusing. And I've been watching local businesses find success selling used goods, from computers through vintage clothing.
My monitoring of the environment tells me that people may be more interested in doing something with their old blinds and drapes instead of buying new ones.
Researching the Competition
For a market research question of this nature, the first area I would research is the competition. Let's suppose that there are three other window covering businesses in town. I can call them and ask them if they supply this service. If they do, I'll find out as many details as possible. Just because someone else offers the service, doesn't necessarily mean that I shouldn't; it just means I'll have to carefully consider issues such as market share and positioning.
For additional information on how to check your competitors' activities see:
Researching the Consumer
The bulk of my market research will be consumer based. I'd start with a market research survey of my current customers, focused on whether or not they would be interested in such a service. This could be as simple as asking everyone who came into the store, or as formal as a questionnaire which could be handed to customers, posted on my business website, or emailed to my customer list. The interactive (and inexpensive!) nature of social media makes it an ideal platform for market research, so I would also try to survey my customers via Facebook, LinkedIn, or Twitter to gauge response (see How to Create a Social Media Plan).
If the response was positive according to the criteria I had set, I might proceed to more in-depth market research survey interviews with selected respondents. Research can also be indirectly obtained via customer complaints.
As I proceed, my research needs to become more specific. My first market research survey might be as simple as, "Would you be interested in a drape and/or blind cleaning service?" But if indications are positive, I need to know a lot more than just whether or not customers are interested.
For example, I might ask how many times a year the survey respondent would use such a service, or how much he or she would be willing to pay to have his or her drapes cleaned. Generally, the more detailed and specific the information I gather in my research, the more useful it will be for making a decision.
When you're doing your own market research, there are some things you should keep in mind.
1. Your information will only be as good as your market research sample.
Be careful when selecting your market research sample group to question. To get useful market research data, your sample group needs to be relevant to and representative of your target population. Notice that in my blind and drapes business market research example, I moved from asking customers in the store to questioning randomly selected members of my targeted population. That's because just asking people in the store isn't good enough. Some of them will say "Yes" just because they like me or don't want to offend me. Informal market research is always tainted to a degree by the relationships of the people involved.
2. Design your survey or market research questionnaire carefully.
Make sure that it's focused specifically on the information you need to know, and that you haven't included any questions that may offend anyone. Many people are put off by questions that ask them how much money they earn, for instance. If you offend or confuse them, they won't bother to fill out your market research survey.
3. Keep your survey or market research questionnaire fairly short.
If possible, your market research survey or questionnaire should all fit on one page. Some people are intimidated by long forms; others see multiple page forms as just too much of an imposition on their time.
4. Always provide some opportunity for detailed answers.
Not everyone will take advantage of it, but some will, and sometimes these written-in comments are the most valuable of all.
5. Work out your market research recording techniques first.
Telephone market research surveys are popular, but how are you going to record what the respondents say? If you're orally interviewing someone, will you record them or take notes? The purpose of market research is to gather and analyze the data, so you've got to have a system of recording the data worked out in advance.
6. Set the criteria for the information beforehand.
In other words, market research is a process, which may shut down or be redirected at any time. If, for instance, when I was talking to the customers who came into the store in my blinds and drapes market research example, no one expressed any interest in a blind and drape cleaning service, the exercise would be over at that point. But what if 10 customers expressed an interest? Or 32?
Before I ask my customers anything, I need to have the market research process clear in my mind. How many customers would have to express an interest in the service to make it worth my while to continue researching the possibility? Set the market research criteria beforehand, as in, "at least 50 percent of customers need to show an interest in a blind and drape cleaning service or there's no point in moving to the next stage of my market research".
The amount of market research you do is limited only by your time (if you're doing it yourself) or your budget (if you hire someone else to do it). But market research is necessary at all stages of a business's life if you want continued success. Only market research can truly keep us in touch with what's most important - our customers, and their needs and desires.