What Is Market Research And Why Is It Important For Businesses?
Market Research For Starting A New Small Business
Market research. It sounds intimidating, possibly confusing. But mostly, it sounds like something only huge companies with vaults full of gold can do. It isn’t though. It’s actually a fairly straightforward process, and it’s absolutely something you can do on your own. No vault full of gold required.
So, what does market research involve? Mostly, it involves asking questions about your target audience AKA the people you hope will become your customers. Questions like:
- Who are they and what are they like? (Men, women, younger, older, etc.)
- What’s important to them? (Convenience, cost, etc.)
- What do they do in their spare time? (This can help you decide the best way to communicate with them.)
- What products and services do they like and buy? (Tech gadgets, financial advisors, etc.)
- How do they perceive your products and services compared to your competitors’ offerings? (Better, more expensive, etc.)
How Does Market Research Work?
As you saw above, market research just means gathering information to learn more about your market or customers. This information will help you identify marketing opportunities, attract leads, and boost sales. There are two main kinds.
- Primary research – this is research you do about your business.
- Secondary research – this is research someone else has already done about your business or industry.
But beyond who collected the information, there’s also the way the data is collected.
- Qualitative research is research gathered by interviewing people, running focus groups, or simply observing people’s behavior. While this type of research can give you a lot of useful information, it’s technically not statistically valid, which means it’s a good idea to take these insights further with some quantitative research. Speaking of…
- Quantitative research is research that involves information or data based on numbers. For example: Nine out of ten people prefer cheddar cheese to mozzarella. While some quantitative research is statistically valid, some isn’t. Doing a poll online, for example, will gather quantitative data. But unless the poll uses a true random sample, the data will not be statistically significant.
Which Type of Market Research Should You Choose?
It depends. What’s best for your business may not be what’s best for someone else. It all depends on how you plan to use the information you collect—and the riskiness of the decisions you’re making. The higher the risk, the more time and money you should invest in gathering solid information.
So, if you’re thinking of creating a new product that’s going to cost a lot to produce and market, you’ll want to get a good idea of whether people will buy it. But, if you’re just testing the waters with some inexpensive product changes or new offerings, why shell out money if you don’t need to? A simple Google search can help you find secondary research that may be good enough to help you make a decision.
The good news? In lots of cases all you’ll need is that quick Google search. Add in a simple online poll and some convos with customers and you’re good to go.
Where Can You Find Great Secondary Sources?
What would we do without the internet? It’s a great source of information, but it can be hard to figure out what’s real and what’s not. If you stick to .gov, .edu and .org sites, and respected trade associations in your field, you’ll be in good shape.
No matter what you do or what you sell, there’s an online resource for you. A few examples:
- The Small Business Administration, the U.S. government’s website for small business owners.
- The National Restaurant Association for restaurant owners and others in the industry.
- The American Marketing Association for all things business and marketing related.
- The National Retail Federation for retail and ecommerce businesses.
Check out Rutgers University’s list of trade associations for an amazing list of other options.
Government info is another great—and free—option. Census data is one prime example. The Bureau of Labor Statistics is another—and there are many more. And of course, Yelp also offers valuable research and surveys.
The internet is also a great place to find useful information about your competition — competitive analysis. Their websites and social media can tell you a lot about their own market research and business strategy. You can also learn a lot about your competitors just by reading what people are saying about them on Yelp. The Securities & Exchange Commission (SEC) is another good source for in-depth financial info on publicly traded companies.
Can You Do Your Own Primary Research?
The simple answer is yes! Yes, you can. And don’t be scared, today it’s possible (and not even very costly) to do your own consumer research.
Online tools like SurveyMonkey, and others, make it quick and easy to get input from lots of people online. You’ll find plenty of examples, tips and easy-to-use templates to give you a head start.
Write simple questions to get the best responses. Make sure each question is asking about only one thing. Like: “How would you rate the quality of our products?,” not “How would you rate the quality and service of our products?” Don’t ask leading questions either, like: “How much do you like our product?,” which assumes that they do like your product. Instead, a simple request to “Rate our new product on the following…” (price, quality, etc.) will give you better info.
You can post polls online on social media platforms, for instance. Or, you can use an email list to send polls or surveys to specific people. If you already have email or snail mail addresses for your customers or prospects, great! If you don’t, you can rent or buy these lists. And, you can send your poll only to certain people based on things like how old they are, where they live, their income, and other demographic market data.
Interviews and Focus Groups
Interviews and focus groups are also great sources of input and it’s easy to do them yourself. You’ll just want to make sure you don’t let your own opinions or biases get in the way. You’ll want to keep an open mind and listen more than you talk! And, just like with surveys, you’ll want to ask simple questions that aren’t biased or leading. So: “What kind of breakfast cereal do you like?,” not “You like Frosted Flakes, don’t you?,” for example.
We know it can be hard to stay unbiased about your business when you’re so close to it. When you love what you do, it’s difficult to hear critical feedback. Asking someone else—a friend or business contact—to help you out, can be a good option.
Or, if you’ve got the budget, it can be a good idea to hire a consultant or market research company to help with this research and analysis. Local schools can be a good starting point when you need a hand. University business and marketing classes often help local small business owners do market research.
Looking for More Sources of Useful Information?
If you sell online (and even if you don’t!) you’ll find lots of low-cost, no cost online tools to help you learn more about your audience and your competition. Google Analytics and other Search Engine Optimization (SEO) tools let you know the keywords consumers are using to find your—or your competitors’—sites. You can even see the online ads your competition is running and how well those ads are doing. This gives you great info about your competitors’ business strategies. Again, though, keep in mind that they’re also able to get this info about you!
Search engines can also help you uncover creative sources of secondary data. This data can help you better understand your industry and market or spot key trends. Browse social media and online groups to learn what your audience is interested in. Be careful, though. Social media is very popular, but not every demographic is on it. If your target audience isn’t, the info you gather may not be valid.
You can learn a lot by paying attention to what big companies are doing. They spend a lot of money on research to decide what products to sell and where to place them. Walking the aisles at Walmart or Target, or looking at their websites, for instance, can help you see what they do—and give you ideas to use in your own store or on your website.
Market Research is All About Listening to Learn
Market research may sound big and scary but really, it’s just all about listening to people. Listen to people who are already your customers. Listen to people who you would like to be your customers. Listen to your competitors. And listen to their customers! It’s not rocket science and, hopefully, you’ve already come up with a few great insights to boost your business. You don’t need vaults of gold. With just a little effort, you can set your small business up for long-term success!