The entrepreneur’s ultimate guide to market research
It’s interesting how the simple act of searching the internet can yield so much data, but yet so little knowledge! While researching “market research”, I found it’s one of those topics that can be overwhelming, simply because I had to go through endless sources, most of which are very similar, and each carrying only a small piece of the puzzle.
Bringing high-quality content to the world is one of our core values at Knowledge Officer; this is why I decided to save your time and energy, and bring you everything you need to know about market research, all in one place!
As an entrepreneur, one of the first things you will need to tackle is deriving a business plan, the key inputs of which are usually identified by conducting a conclusive market research. In this article, we’ll take a deep dive to explain; what is market research, why and when to conduct it, and the different types of market research along with how and when to use each.
What’s Market Research?
Market Research is defined as “The process of gathering information which will make you more aware of how the people you hope to sell to will react to your current or potential products and/or services.”
Do not confuse the term with “marketing research”. Experts clearly distinguish both terms; “marketing research” is concerned with “marketing processes”, while “market research” deals with “markets”.
Why do I need a market research?
You need a market research to examine the market associated with a particular good and/or service, and determine how the audience will receive it. Market research can be a major factor in helping you
- Understand your customers and their preferences
- Identify opportunities to grow and increase profits
- Recognize and plan for industry and economic shifts
- Identify/Monitor the competition in your market
- Mitigate risk in your business decisions
So, when to conduct a market research?
For new startups, market research is a critical key element of any entrepreneur’s business plan.
That’s because market research data feeds into many areas of the business plan, like
- determining the sales potential of your products and/or services
- attracting customers to your business
- and, selling to customers and earning repeat business
If your business is already established but you’re about to make a significant changes, such as business expansion and relocation, it’s very wise to use market research to support your decisions.
Okay then! Now, how can I do a market research?
First, it is important to establish clear goals for your market research activity by defining what you need to know and why and then, develop a strategy and select the techniques you will use to gather data.
Generally speaking, there are two types of research you can use; Primary and Secondary.
1. Primary Research
This is the research you compile yourself or hire someone to gather for you. The main questions you should be asking are
- Who are my customers and how can I reach them?
- Which products/services do buyers need or want?
- What factors influence the buying decisions of my customers?
- What prices should I set for my products and services?
- Who are my competitors, how do they operate and what are their strengths and weaknesses?
The main benefits of primary research are that you can target desired groups and tailor your research to answer specific questions. If you decided to do this research on your own, not only will you be keeping the costs down, but also you will get to know the market for your business even better.
Conducting primary market research can be broken down into two methods; quantitative and qualitative.
Each method involves a different process and reveals different information. Based on your needs, sometimes in order to gain a full understanding of a business environment, the marketplace and the consumers within it, it is wise to conduct both.
a. Quantitative Market Research
Quantitative market research is the collection of numerical data often resulting in statistical analysis to understand trends in the data.
The main characteristic of quantitative market research is that it allows for comparisons and trends in the data to be easily found and understood. As a result of the standardized questions, it’s a more structured market research process and so it can involve a larger number of respondents to participate.
Some of the ways in which you can collect data are:
- Face-to-face
- Telephone
- Online/web
It is important to conduct a quantitative research before starting a new business, launching a new product, or service as it gives you real figures that highlight target market interest and can help you secure investors.
If you’re using a questionnaire as part of your quantitative research, these guidelines will help increase your response rate:
- Keep it as short and simple as possible
- Make sure it is visually appealing and easy to read
- Move from general questions to more specific questions
- Include a cover letter that explains why you’re doing this questionnaire
- Avoid leading questions, questions that are too difficult to answer
- Make sure response scales are logical
- Present the user with an incentive, such as “10 percent off your next purchase,” when they complete the questionnaire
Even following these guidelines, mail response is typically low. Phone surveys are generally the most cost-effective option. If you’ve decided to go with the phone survey options, then
- Have a script and memorize it; don’t read it!
- Avoid pauses as respondent interest can quickly drop
- Ask if a follow-up call is possible in case you require additional information
Speed is another advantage of telephone interviews. Phone interviews also can cover a wide geographic range relatively inexpensively. Phone costs can be reduced by taking advantage of less expensive rates during certain hours.
b. Qualitative Market Research
Qualitative market research provides reasoning for consumer actions, opinions, wants and needs; it helps you understand why a consumer has acted and purchased in a certain way.
This type of market research differs from quantitative market research as it does not follow a predetermined set of questions. Instead, the research sets out topic, or discussion guides, to ensure that the research aims are met and the appropriate questions are asked.
There are several methods to choose from when planning your qualitative market research:
- Focus groups
- In-depth interviews
- Observation
Focus groups or group interviews are used mostly by big businesses and are useful brainstorming tools for getting information on product ideas, buying preferences, and purchasing decisions among certain populations.
In-depth interviews are either focused or nondirective. Focused interviews are based on questions selected ahead of time, while nondirective interviews encourage respondents to address certain topics with minimal questioning.
Observations involve watching or video-recording how consumers interact with a product or service in a natural setting. Although a time-consuming method, it has the advantage of providing unbiased information, as consumers are not under any pressure and are behaving naturally.
Which one shall I do first?
Choosing whether to conduct quantitative and qualitative market research first solely depends on your unique case.
If your project concept has not previously been researched then qualitative market research should be conducted before quantitative market research.
In this situation, qualitative market research will enable you to understand your consumers’ initial and unbiased reaction and opinions to the new concept with no external influencers such as past experience with similar products.
If the project concept has been previously researched to some extent and some initial information has been absorbed then quantitative market research is your way to go.
2. Secondary Research
Secondary research refers to research that is already compiled and organized for you. Most of the research you gather will most likely be secondary.
While secondary research is less targeted than primary research, it can give you valuable information and answer some questions that are not practical to address through primary research or questions that may make customers uncomfortable if asked directly.
Secondary research uses outside information assembled by government agencies, industry and trade associations, labor unions, media sources, chambers of commerce, and so on.
Your secondary sources can include:
a. Public sources
These are usually free, often offer a lot of good information, and include government departments, business departments of public libraries, and so on.
Government statistics are among the most plentiful and wide-ranging public sources. One of the best public sources is the business section of your public, or local college or university, library.
Other public information resources include local chambers of commerce and their business development departments. They will supply you information on population trends, community income characteristics, payrolls, industrial development and so on.
b. Commercial sources
These are valuable, but usually, involve cost factors such as subscription and association fees. Commercial sources include research and trade associations, banks and other financial institutions, and publicly traded corporations.
Among the best commercial sources of information are research and trade associations, such as Gartner and many similar companies. Information gathered by the larger associations is usually thorough, accurate, and worth the cost of membership.
Local newspapers, journals, magazines, and radio and TV stations are some of the most useful commercial information outlets. They maintain demographic profiles of their audiences and have information about economic trends in their local areas. You can contact the sales departments of these businesses and ask them to send you their media kit. Not only will you learn more about your prospective customers, you’ll also learn more about possible advertising outlets for your product or service!
c. Educational institutions
These are frequently overlooked as valuable information sources even though more research is conducted in colleges, universities, and technical institutes than virtually any sector of the business community.
Finally, there are educational institutions that conduct research in various ways, ranging from faculty-based projects, theses, and assignments. You may even be able to enlist the help of students involved in business classes, which is an excellent way of generating research at little or no cost.
Conclusion
Market research is always a hot topic at any emerging startup. At Knowledge Officer, investing some time and energy in our research at the beginning, definitely helped us stand on a stronger ground now.
Plan wisely. Figure out what works for your startup as well as your customers, and what fits within your budget and time-frame.
As beneficial as market research is, it can sometimes cause a significant financial and emotional burden, if not handled correctly, and especially if you’re just starting out. One thing to beware of is to not fall victim to analysis paralysis.
If you’d like some tips and trick to avoid analysis paralysis at the early stages of your startup, leave me a comment.
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