Got a phenomenal business idea meant to bring you a big fortune? Way to go! But don’t hurry to invest everything you’ve got to embody your masterplan. Before you take any meaningful steps toward your goal, be it manufacturing a product, creating a business website, renting an office or finding investors, there’s nothing more important than undertaking a market research in order to figure out whether your product or service is in demand, who your potential customers are, and how much of a competition you should expect entering the industry.
Believe it or not, conducting market research is not as scary and time-consuming as many used to think. But it can provide the priceless knowledge you will need to calculate your chances for success, build your further business strategy, and choose appropriate marketing channels. Information is power. But how to obtain it? This we are going to find out in this post.
What makes market research so important?
One of the most common pitfalls marketers and startups should avoid is launching into action without prior testing the waters. In this sense, market research is the starting point from which a business idea should evolve into a business project.
No matter how confident you feel about your product, it is very unlikely that customers will come just because you think they should be interested in what you have to offer. You need to know your audience and competitors well, as well as understand how to engage your clients and where. Especially nowadays, when the competition is so fierce, and buyers are so picky about purchases of any scale.
As reported by Google, people have become increasingly obsessed with researching the market before buying stuff, even when it comes to ridiculously small purchases. This means that your potential clients are more informed than you might have reckoned, and it is the information they get from online sources that guide their decision-making.
With this in mind, ask yourself a question: do I want to be less informed than people who are supposed to become my customers? Profound market research will help you get a better understanding of the climate within your industry and determine whether your brand’s presence on the market will be beneficial for your potential customers. Unless you have valid and relevant data confirming that your offer makes sense to buyers, counting on big sales and generous revenues isn’t a wise thing to do.
Tasks market research should address
Market research is a complex process aimed at investigating both qualitative and quantitative data that can help you identify your own place within the niche. This is why it is a good idea to start with outlining the crucial goals you want to achieve with your research. These include the following:
- Determining the market size: Researching the capacity of the market you are about to enter will help you correctly assess your chances for success and avoid unjustified risks and losses.
- Defining your market share: A market share is a very specific parameter that indicates the percentage of the market’s total sales accounted for by your brand. It is often taken into consideration when planning a business strategy. Besides, it is an indicator of company success.
- Identifying an ideal customer: Doing business of any scale requires knowing who your target audience is. Analyzing your potential customers will enable you to define your ‘buyer persona’ which is a fictional person representing all the essential characteristics of your typical customers. Besides, the analysis is critical for assessing the degree of customer loyalty, allowing you to answer the question “who buys and why?”. And finally, it helps establish competitive prices for your products, make changes to the products, and optimize the promotion channels and advertising strategy.
- Competitive analysis: The knowledge of your competitors’ products and marketing strategies is necessary for a better orientation on the market, as well as adjusting your individual pricing and promotion tactics. Thorough competitive analysis and the ability to draw proper conclusions out of the acquired data is the key to ensuring yourself a competitive edge.
- Analyzing sales channels: Determining the most effective sales channels will help you arrive at the optimal way of bringing the product to the end user.
Tackling all these tasks at once is not easy and requires a consistent approach. If you are a beginner entrepreneur or just tight on budget and time, try to focus on the most important things first. Market analysis is usually carried out in two stages: primary research and secondary research. Sticking to this scheme is the best way to organize your work.
What is primary research?
Primary market research is collecting information about the market, products, and companies working within a given industry straight from the source, which is usually the client. The idea is to obtain the original information that nobody before you has uncovered.
By doing primary market research, you might want to achieve the following objectives:
- Determine a buyer persona;
- Study the buyer decision-making process within your niche;
- Learn market trends;
- Find out why some of your customers have switched to a competitor;
- Assess the demand for a product.
For conducting primary market research and acquiring the first-hand information, various methods are used. Depending on the tasks you set, these can be: in-person/phone interviews, polls and surveys (online or by mail), focus groups, experiments, etc.
What is secondary research?
Secondary research is a process of examining studies that have already been carried out by someone else. Since the research data is often readily available for the public, the researcher’s task is to find this information, structure, and analyze it. A typical example of secondary research is the search for statistical data and publications in the media on a given topic.
Retrieving the secondary research data doesn’t require leaving your home or office, preparing complex questionnaires, and talking to strangers. All the information you need is easy to find on the Internet or in industry-specific journals and is usually available for free or at a very affordable price.
However, the disadvantage of secondary research is that the results are not specific to your business and brand in particular. Also, it doesn’t give you the full overview of all the variables capable of influencing your business.
Defining your target audience
Finding out who your customers are is a good starting point for your market research, especially if your business is only taking off. The knowledge of your target audience and a clear understanding of their needs should be your primary concern before you even start selling your product. Why? Because everything you are going to learn about your customers will later guide your decisions in terms of business development, product design, marketing, etc.
The same goes for content creators. Unless you have a clear understanding of your audience’s interests and pain points, developing relevant and consistent content for an extended stretch of time will be a challenge you’ll want to avoid.
To make it easier for yourself to envision your prospects, define your buyer persona. As mentioned earlier in this article, a buyer persona is a fictional representation of the most typical characteristics you attribute to your potential customers, including:
- Demographics: gender, age, location, job, income, civil status, etc.
- Psychographics: interests, hobbies, buying habits, reasons for making purchases, challenges, personal concerns and attitudes.
In other words, a buyer persona is your ideal customer. Depending on your business, you may have more than one buyer persona. However, it is not recommended to focus on many buyer personas at once as you can end up catering to none of them. Come up with no more than three and concentrate on those. To figure out what characteristics define your buyer persona, you need to find the answers to the following questions:
- What makes the buyer search for a solution to the problem?
- What material and non-material goods does the buyer associate with success?
- What makes the buyer question the effectiveness or quality of your product?
- What is the path the buyer has to go in order to research and choose the most optimal product or service?
- What aspects of a product, service or brand in general does the buyer evaluate while making a decision?
When you have the answers to these questions, you will be able to identify what kind of audience you should target, how to tailor your product to the customers’ needs, and how to build your marketing campaign. But what’s the most effective way to get the right answers?
Engaging the audience
There’s no better way of obtaining the information you need to understand who your customers are and what drives their decision-making than going social and speaking to them in person. Communication is the key to effective market research. This is why it is important to leverage all possible communication channels you have access to. These may include:
- Face-to-face interviews;
- Phone interviews;
- Conversations on Skype;
- Online surveys;
- Physical questionnaires;
- Focus groups, etc.
To organize the research correctly and acquire accurate results that will help you build your further business strategy, consider the following tips:
- Approach the selection of participants for your research in a consistent way. Since you need to focus on the quality of replies instead of the quantity, there’s no need to enlist too many participants. In fact, 6-10 respondents per buyer persona is enough to give you a clear picture. Aim for people who have interacted with your brand not too long ago. Otherwise, you are risking to receive irrelevant answers. It also makes sense to survey as many audience groups as possible, including actual buyers, people who eventually chose your competitors, and even those who gave up the idea of buying the product altogether.
- Get ready for the coming interview or survey with due care. Prepare relevant and accurate questions which will get you the answers you are seeking. Avoid yes/no questions. Ask open-ended questions so that respondents could offer their own point of view instead of confirming or dismissing yours.
- Don’t forget to leverage social media. People who follow your business account on social networks may turn out to be a valuable source of feedback and might even want to meet with you for an interview.
- Utilize your own online network to get the answers you need. You can start your own business community on NING to keep your customers close to your brand and be able to communicate effectively with your most loyal audience. Besides, you can run polls and surveys, create forums and focus groups which are particularly useful when it comes to obtaining valuable information for market research.
- Remember encouraging people to participate in your interviews and surveys by giving away something for free (a product, service, exclusive benefits, etc.). If this doesn’t render possible, offer access to some valuable content so that your customers have an incentive to spend their time answering your questions.
Secondary Research
Determining your market size
Figuring out whether your market is big enough to accommodate one more contender (which is you) should be your top concern when starting out your secondary research. Why? Because the first thing you need to know launching your business is how many people are interested in buying your product. Unless their number is high enough, you won’t be getting the right amount of revenues to sustain your business and make money from it.
The easiest way to identify your market size is getting your hands on the latest market reports and trade publications. If the market you are trying to enter is a well-developed one, your best option is to find out how many people actually buy the product you are about to offer. Also, try to learn how much your competitors earn so you can evaluate your own chances for success.
If your findings show that there are currently not so many people willing to pay for your type of product, then it is probably worth reconsidering your offer or at least adjusting the prices.
Analyzing the competition
Doing business successfully requires knowing your competitors. Unless you are well aware of other companies or individuals offering the same, similar or overlapping products/services and targeting the same audience as you, making it to the top and ensuring enough profits to sustain your business will be very difficult.
This is why it is so important to do your homework before you enter the market. There are many information sources that can help you gain a deeper insight into your market segment: market reports, censuses, business magazines, industry overviews, etc. Some of them are available for free, and some may cost you money, but generally, the information like that is affordable and not so hard to get.
Besides, no matter how obvious it sounds, you can find most of the valuable data on Google. Just make sure you use the most accurate keywords to search for the information you require. These might be the terms describing your industry or area of expertise, products or services (including the alternative ones), topics, subjects, locations, etc. Start with the most general terms and narrow it down to more specific ones (e.g., online education > online courses > online language courses > online English courses > English courses in Spain, etc.).
And of course, don’t miss out on social media. These are great directories to search for companies and brands within your niche, especially LinkedIn. With the help of its search tool and advanced filter settings, you can find a lot of interesting materials for your research.
Finalizing your research
When both primary and secondary research data are gathered, it is time to summarize your findings. It doesn’t really matter how exactly you document the results as long as you manage to draw the right conclusions out of your study.
The best way to systematize the information you’ve revealed is creating a brief presentation of your findings. This presentation will help you put all the acquired data in order so you can further process the results and have them in front of your eyes while planning your marketing strategy. Besides, you can always make good use of a well-made presentation when talking to your business partners or investors.
Preparing a presentation, concentrate on the following aspects of your study:
- Goals: Why exactly have you started the research? Which goals have been successfully achieved and where has your study failed?
- Participants: Whom have you surveyed or interviewed? What buyer personas did you target? What challenges are your customers facing and how can your product solve them?
- Common findings: What are the most typical answers you’ve got? Is there any common ground between your respondents? What are the most noteworthy facts you’ve learned?
- Strengths and weaknesses: What are the reasons for your customers to choose you instead of your competitors? What makes others do the opposite? Why some of the buyers refrain from making a purchase altogether?
- Decision-making: What factors influence your customers in the process of evaluation?
- Product acquisition: What is the path your customers go through from the point where they decide they need the product (not necessarily yours) to the moment they get their hands on it?
- Strategy: How are you planning to use the acquired knowledge in order to improve?
Carrying out quality market research can be a challenge, but its importance for your business is hard to overestimate. The results you may get can both surprise you and shed light on the issues you’ve been desperately grappling with for a long time.