Getting to know your industry is an important step in getting to know your business – and making plans for its success. This involves gathering large amounts of data, as well as talking to members of the industry – the ones who know most about it. Important information to know about your industry includes:
– Is the industry growing?
– Where are the opportunities in the industry?
– Who are the key players in the industry?
– Are there young, successful firms in the industry?
– How is new technology being employed in the industry?
– What are the typical financial results for businesses in this industry?
Market research is a good way to understand the viability of your product or service idea by assessing factors like market size, demand, and pricing. There are two types of market research: primary and secondary.
Primary market research
Primary market research is research that you do yourself, or hire someone to do on behalf of the company. You go right to the source of the information or opinion. This differs from secondary market research, which involves using research that’s already been done by an outside party unconnected to your company.
There are four main types of primary market research: focus groups, interviews, observation, and surveys.
Which form of primary market research is the best?
Deciding on the best form of primary market research for you depends on what you’re looking for and who you’re speaking to. Of course, you can combine different forms of primary market research, but keep the following in mind:
Focus groups: Can be fairly time-consuming and expensive (and participants are often compensated), but are good for delving into in-depth issues such as a future product launch or a brand rehaul. Keep the focus group on the small side if you plan on having a very deep discussion.
Interviews: Similar to focus groups, but one-on-one. Interviews are a good way to get information that people might not feel comfortable sharing in a group situation. Here, too, interviews may be time-consuming and involve a financial cost to you. Participants are often compensated.
Observation: Whether you’re observing the buying habits of customers with your competition or reading reviews of your product online, observation can be a good, inexpensive way to get real-time information. However, it’s best to use observation as a starting point for future research – since observation is done without interacting with the customers, you can’t get reliable information about why they do what they do.
Surveys: Whether you use telephone, emailed, or in-person questionnaires depends on what your customers expect from your business. In any case, make sure your surveys are as short as possible, easy to understand, and to-the-point. Don’t get fancy here! And make sure you conduct or send your surveys to a wide enough amount of people – some won’t respond, so it’s important that you get enough info from the people who do.
At GoForth Institute, we’ve seen many entrepreneurs with a great business idea and a burning desire to get going. However, they have no idea who they’re going to sell to! In a way, we understand – starting a new small business is one of the most exciting things you can do in your life. But we also know that knowing your target market inside and out does amazing things to your odds of small business success.
Why do research your target market?
Let’s say you’ve decided to open a flower shop. You find suppliers, lease a great building and flip your “Closed” sign to “Open.” And then you wait. And wait. And wait. By the end of your first week you’ve made a total of two sales. What went wrong? Here are some possibilities:
You opened your shop across the street from a family-run flower shop that has been successful in that location for 25 years, with many loyal customers.
Your shop is located in an area that gets little to no foot traffic, like a business park.
Your prices are much too high for what people are willing to pay.
The people you think want to buy your flowers simply don’t.
Right there are four barriers to small business success that market research could have revealed. We can’t stress it enough – take the time to research your market. It can make the difference between a successful business and falling flat right out of the gate. Don’t be put off by the time and potential cost of it – it’s investing in your small business’ success.
Resources for market research
Market research is a varied thing, with many different avenues to explore. Check out some of our related blog posts for more information about the different types of market research: Primary and Secondary.
Primary market research is a great way to gather information about your small business’ product or service idea. You might conduct market research to determine things like the size of your target market or the demand for your great product idea. Primary market research is tailored to your small business’ specific needs and can be customized to suit. There are four ways primary market research can be conducted – all with their own benefits for your product or service idea.
The four types of primary market research:
Observation – Just as it sounds, observation market research involves watching your potential customers and their behaviours in action. This means – without interacting – watching customers buying products or services similar to yours, listening to what they say as they shop, noticing what they buy and how much they paid. This type of market research works best if your business caters to customers, not to other businesses.
Focus Groups – Focus group market research means assembling a small group of eight to 12 potential customers to gather information and opinions about your product or service. These groups are led by an objective discussion moderator. Focus groups are a great way to get feedback on a product or service idea directly from several potential customers.
Interview – Interviews are like focus groups, but there is only one participant speaking to one researcher, who leads the discussion. Interviews are well-suited for product or service ideas that could be too personal or private for group discussion, like personal hygiene products or financial services.
Survey/Questionnaire – This method of market research involves getting feedback from potential customers through a structured, multi-question survey. Market research surveys or questionnaires can be done over the phone, through mail/email or in person. You may need to conduct several surveys to several groups in order to get feedback from all possible types of customers. One note about surveys – if you don’t have the resources to conduct a large amount of them, small sample groups are okay – but be cautious of making major business decisions based on this small amount of feedback.