How to conduct market research before starting a new business
Starting a new business can be an exciting and at the same time stressful prospect. To try and ensure success, and of course ideally make a profit, your need to aim to find an exploitable gap in the market you’re focusing on. But no matter what you are looking to launch, an innovative product or a new service within an previously untapped area, your target remains the same – to stand out!
One of the most useful tools at this point will be ‘market research’. Investing time at the start of your company’s journey to conduct a systematic review of the market you are focusing on, and your potential customer base, can make a lot of difference to your business. It can be the difference between starting a thriving business and wasting a large amount of time, energy and money.
So to help here’s some thinking on the the two main market research data collection strategies – primary and secondary research.
Primary market research
Primary market research involves gathering data that is specific to your business concept. It consists of information that doesn’t currently exist such as the assessment of customer likes and dislikes, opinions and beliefs about your specific product, service or idea. Primary research is obtained through research and analysis and can be gathered through a variety of means including focus groups, field studies and simple observations of customer behaviour.
Here are just some of the questions you need to tackle in your primary research:
- Will your company stand out from the competition?
- What is the typical demographic of your targeted customer base?
- Will customers be willing to pay the the price you are planning to charge for your product or service?
- Are your customers more concerned by the quality of your product or service or the price?
- Would customers prefer to order your product online and have it home delivered?
- Do customers have any concerns about your product or service which will need to be addressed?
Ways to conduct primary research
As mentioned there are different ways to collect primary research data and here is more detail about some of these:
- Interviews – can be either face to face or over the phone with people you know or random members of the public.
- Focus groups – typically involve identifying a small group of individuals who match the ‘personal characteristics’ (e.g. age, gender) of your target customer and engaging them in a group discussion based on the questions you want to answer about your product.
- Online surveys – there are a large number of tools you can use to create online surveys which you can then direct to your potential customer base. Remember though you’ll need to think carefully how to ensure they’ll get answered and not just be deleted – think of your own inbox and how many surveys you delete because you don’t know who they are from or what they are about!
What you need to guard against while conducting primary research
It is imperative that you step outside your comfort zone if you want to avoid the risk of being misled by inaccurate information. Although your product or service idea may sound great to you, and all of your friends and family, those views are almost always unconsciously biased. So don’t be afraid to ask those you don’t know and be prepared for hearing different opinions. They may trigger something you’ve not thought of already!
Secondary market research
Secondary market research is basically the collection of data which already exists. This can include data on consumer demographics, major competitors, and the general usage of products and services which is available online and in books and publications. Doing your secondary research will therefore involve gathering data from these sources which is relevant to your specific idea, product or service.
What information would you potentially gather from secondary research?
- The market – an analysis of the market need for your product or service, it’s size, it’s growth potential and possible barriers to entry.
- The industry standpoint – where you stand in relation to the latest industry know-how and your competitors. Also this can involve building an understanding of the existing rules and regulations which directly impact the industry and therefore your business.
- Identifying your ideal customer – this is vital to planning your business strategy and helps determine the channels you would use to market your brand/product. This includes analysing their demographic, where they live, their social class and typical buying patterns.
- Knowing your competitor – this will enable you to get an insight into who your competitors are at both a local, national and even international level. You can use this research to compare your marketing strategies and planned pricing for example so you get a clearer idea of where you stand and how you could position your unique selling point.
- Monitoring past and present consumption trends – this can give you valuable pointers into how you would operate your business, what you need to guard against and what the key areas are that you need to focus on in order to successfully grow your business.
Reading this and other guides about market research can sometimes feel overwhelming, or a burden and an exercise that will be both lengthy and painstaking. Or it can also feel like a waste of time – you know your market and your idea or insight can feel like it’s obvious and will clearly work.
Whatever extent you decide to carry it out though any market research will pay handsomely. It doesn’t all have to be done at once, and indeed can be broken up into bite sized chunks and tested and re-tested as your business grows. Accurate market research helps challenge those assumptions which are inevitably built up about your own business and can help build that initial business plan which could prove to be your first stepping stone to success.
Have you thought of a name for your new company? Check if it is available.
Latest from Basics of Business
Does your business really need a website?
Posted on 6 September 2017
A quick Google search on “how to start a business” will return many checklists, and...Learn more
Join the banking revolution through Lightwork
Posted on 14 August 2017
Lightwork Business are delighted to partner with Metro Bank to offer you the best in business...Learn more