Tag: customer observation

Why is customer research so important?

Many entrepreneurs go into business because they have a great idea. But it’s important to consider the needs and wants of your customers.

Want proof? Take the story of the Mustang.

In the sixties, Ford Motor Company noticed a drop in sales of their Ford Falcon. They also noticed that two other major American car companies weren’t seeing success with similar small car models.

Based on this evidence, Ford could have decided that customers just didn’t want small cars. However, they decided to talk to customers and potential customers, and uncovered the real issue behind the low interest.

Through customer research, Ford discovered that they wanted sporty options and features like manual transmissions and bucket seats, but didn’t want to splash out on a sports car. To respond to this need in the marketplace, Ford launched the Mustang, and was able to achieve record-breaking sales.

Entrepreneurs use market research to figure out important things like:

  • The number of potential customers for their product or service (the size of their target market)
  • What price a customer would be willing to pay for their product or service
  • Customer pains that need to be solved
  • Customer motivation
  • How satisfied customers are with what they’re selling and how they’re selling it

For more about understanding your customers, try an Empathy Map.

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The four types of primary market research

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.

Do you have questions about primary market research? Ask us in the comments, or visit our website’s Q+A section to get market research advice from experienced entrepreneurs!

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