You've come up with what you believe is a sure-fire idea for a business. Your friends and family agree. So therefore it must be a stellar idea! Unfortunately, gut instinct, passion and the enthusiastic support of those near and dear aren't always enough to guarantee success or protect you from potential risks.
Before you jump in the deep end, it pays to sit back and take stock of what you're jumping into. Questions need to be asked and several big boxes (plus quite a few small ones) must be ticked if your business dream is to become a profitable reality instead of an expensive nightmare.
Why conduct market research?
Market research is absolutely critical for a business start-up as it helps you discover:
Growth trends in your proposed market
Size of your target market
Best location for your business
How your business stacks up against the competition
Degree of demand for your product or service
Market research helps you understand what people want, need or believe. It can tell you how your target market behaves and what motivates them to buy. It gives you invaluable information, data and insights for creating your all-important marketing plan.
Answer key questions
Your market research should answer any questions or uncertainties you have about your business idea and provide some great feedback and insights into the industry. Some key questions to consider:
Does your product or service fill a gap in the marketplace?
Who and where is your target market, and how do you reach them?
How much are they willing to pay for your product or service?
What can you do to win these customers?
Who are your competitors and what are they doing right/ wrong?
How can you outshine other businesses offering something similar?
How is your product or service perceived?
Do potential customers like your brand and what it represents?
What market trends and events could affect your business now and in the future?
Start your market research
Take your time with market research, as it is a large task and something that you need to get right if you want success. Get started by checking out:
The Internet: Search key words relevant to your product and service to see what type of competition exists online.
The industry: Industry Websites, forums, blogs, email newsletters, trade magazines and events.
The neighbourhood: Visit competing businesses and read the annual reports of competitors. Don’t be afraid to call them up and ask a few “customer” questions. If you’re feeling really cheeky, ask to be sent a price list and a marketing brochure.
Basic methods of market research
Your research should aim to find out what your market needs, wants, doesn't want, and why. Your goal is to build a demographic profile of your customers so you know how to market your product or service to them.
Where and if appropriate (keeping in mind that you should protect your idea and not give too much away just yet), you could use a succinct written description of your service or product, photos, your prototype if you have one, your marketing materials, plus any other useful aids to help people get a clear idea of what you're offering.
Prepare concise and straightforward questionnaires that analyse the needs and behaviour of your target market. The more people you ask, the better quality the information you get back.
Distribute your questionnaires by hand, email, snail mail or via online forums. Think about using an incentive for returning the completed survey.
Conduct one-on-one interviews in high-traffic public spaces, such as industry events or at shopping centres. Get feedback on your product samples, packaging, advertising or anything else you’d like to know.
2. Focus groups
These are run by a moderator, who uses a scripted series of questions or topics to lead a discussion about issues related to your product or service.
People don't always tell the truth in surveys and focus groups, with their answers sometimes at odds with their actual behaviour. When you see people in action by watching them in stores you can find out how they really buy or use a product.
4. Personal interviews
Like focus groups, personal interviews include unstructured, open-ended questions. Personal interviews provide more subjective data than surveys. The results are not statistically reliable, which means that they usually don't represent a large enough segment of the population. However, like focus groups, interviews can give valuable insights into customer attitudes and are excellent ways to uncover issues.
5. Field trials
Placing your product in selected stores or your service with an agent or representative to test customer response under real-life selling conditions can help you assess its chances of success, make product modifications, adjust prices, or improve packaging.
Proving the case for your small business
As well as determining if your business idea is a good one and helping you to develop your marketing plan, your research findings could help you get others on board, such as a financial partner or specialist supplier. A positive research outcome could also help you get your partner and others to fully support your venture.
Find out more about setting up a Small Business, and writing a Business Plan and naming a Business.