How To Do Your Own Market Research

Doing Market Research Will Save You Time and Money

adults in focus group for market research
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Do you ever remember as a kid throwing a blanket over your head and running around until you got whacked by a piece of furniture? I actually still have a scar from the stupid fireplace - but I digress. As pointless as those memories may seem, they illustrate perfectly what it is like to try and start a business without doing market research. A business can literally stumble around blindly, hoping to avoid getting waylaid by some major road block.

It is pretty obvious that running around with a blanket on your head isn't the smartest choice, and neither is avoiding doing market research.

Whether your business aims to sell make-up door-to-door or operate a commercial cleaning franchise, you must do market research (you sole-proprietors thought you could get out of this, didn’t you?). This is where you will learn about your market, potential customers and competitive environment. Doing so will give you a 360 degree view of the lay of the land, help you map out the best possible market approach, and assist you in writing your impending business plan.

What Am I Researching?

Market research is seeking out the answers to help develop your business plan. The best and most efficient use of your market research time will be to research the following areas (which coincide with a typical business plan outline):

  • Industry: Trends, threats, major players, growth rates, sales data
  • Competition: Direct and indirect competitor profiles, including what they do well and poorly
  • Ideal Customer (also referred to as a Target Market): Demographics, geographic location, profile, how needs are or are not being met
  • Products & Services: Description of your offering, how it will be developed, produced and distributed

How To Do Market Research

Market research consists of two separate information collection strategies, primary and secondary research.

Primary Research:

Primary research is basically the information you need which doesn’t currently exist. It is new research you will create and conduct, and is designed to answer specific questions you have about your business (all the burning questions keeping you up at night).

What Types of Questions Could Primary Research Address?

The sky is the limit. This is where you sit down and write out all the questions related to your business you couldn’t find in other sources. For instance:

  • How will your potential customers respond to your company name?
  • How much are your potential customers willing to pay for your product/service?
  • How important is home delivery?
  • How important is the ability to purchase online?

How Do You Conduct Primary Research?

  • Face-to-Face Interviews: This could be people you know or don’t know.
  • Focus Groups: A small group of individuals who represent your ideal customer. A facilitator is present to conduct a group discussion.
  • Online Surveys: There are many online survey services available to assist you in creating an electronic survey. One of my favorite providers is Wufoo.com. The key is to disperse the surveys to those individuals representing your potential customer base or target market.
  • Phone Interviews: Outside of normal phone interviews, consider clandestine methods (i.e. calling a competitor and posing as a customer to get their rates. Some people may call this spying – I call it shrewd market research).

A Word of Caution:

Conducting primary research can take you outside your comfort zone. This may deter you from seeking out interviews with appropriate targets and have you conducting interviews with family members and close associates. Friends and family are not always the most representative survey subjects. To get the most useful and accurate information, you need to seek out the right kind of potential customers to learn their needs, wants and expectations.

This article is part of a 10-Step Guide on How to Start a Home Business.

Now that you understand the basics of conducting customized primary research, it is time to understand how to use secondary research to garner even more knowledge about your industry and customers.

Secondary Research:

Secondary research involves seeking out and reviewing already published information from the Internet, industry reports and media publications.

What Information Can Secondary Research Provide?

  • Market Analysis: A snapshot of your market size and its growth potential.
  • Industry Perspectives: Does the industry face certain threats? Are there greater opportunities now that government restrictions have been raised?…etc.
  • Customer Profiles: Figuring out who your ideal customer is (also referred to as target market.)
  • Competitors: How many are in your area? What makes them so successful? What types of marketing are they using…etc.
  • Product Pricing: Compile a spreadsheet of competitor pricing. This can help you determine where your own prices should fit within the marketplace.

How Do You Conduct Secondary Research?

Utilizing the Internet and local libraries will give you access to already published and useful information. Exhaust your various searches with Google and other search engines. Also consider seeking out information from some of these great online sources:

The Government:

  • U.S. Census Bureau: This source provides huge insight into market size and demographics. A wealth of interesting information. CensusScope is another alternative for census data.
  • USA.gov: provides various government statistics.

Competitors:

Company reports and websites are easily accessible and contain a limited amount of information, especially for public companies. Consider doing a Google search of similar companies in your area. This should detail those in close proximity to you and offer contact information.

If you are in the business of direct sales (i.e. Avon), contact your local office and find out how many representatives are already in your area. Also seek out information on representatives from competing companies (i.e. Mary Kay).

Trade Publications/Organizations:

Seek out organizations or publications focused solely on your industry. Often times they will conduct their own market studies and publish results (this targeted information can be so useful) i.e. The American Massage Therapy Association.

General Media:

  • PR Newswire: Offers access to nearly every press related story. Search by industry, keyword or competitor.
  • Entreprenuer.com offers good franchise information.

A Word of Caution:

Don’t rely solely on the published work of others to give you the full picture. It is a great place to begin, but the information you get from secondary research can be outdated or just plain incorrect. You can also miss out on other factors relevant to your business.

Don’t use the Internet as your only research source. When you use search engines like Google, your search results come up with articles they think are the most relevant to your search - and this may or may not be true. For broader and more targeted information, consider visiting your local library or nearest University.

Final Thoughts

Market research will provide the insight necessary to get your business on the right footing. It will also prove invaluable as you write your official business plan. Now that you understand market research basics, get into the habit of studying your market regularly. Business landscapes and customer preferences are always evolving and market research will help keep you one step ahead.

This article is part of a 10-Step Guide on How to Start a Home Business.