6 Practical Ways to Undertake Market Research for Your New Business

One of the most important and challenging aspects of developing your business idea is conducting market research.

Yet, to launch a viable, sustainable and successful product or service you need to be able to answer the following questions:

• Who are your target customers?
• Who are your competitors and what are their strengths and weaknesses?
• What price will customers pay?
• How often will they buy?

In short, will you be able to make money from the venture?

The marketing plan is probably the most critical part of the business planning process.

Before you launch your business and spend any time or money on marketing it’s important to gather as much relevant information as possible.

The biggest unknown, estimate (or “guess” as some of my clients tend to put it) is your projected sales figures and gross profit margins.

These are the areas where you are going to have to make most of your assumptions.

To create a robust and reliable plan, your assumptions need to be realistic, otherwise your financial plans are nothing more than figures on a page.

That’s not helpful if your plan is meant to provide direction and reduce risk.

Conducting market research

So, where do you go to find this missing but crucial information to help your decision making?

You have two options when conducting market research:

Primary information – that is information that you can collect yourself directly from the marketplace.

Secondary information – that is information that someone else has already collected and made available.

So, let’s look in more detail at both options:

Primary market research

1. Customer profiling

Think about your business idea from the perspective of a customer.

Work out who your customers are:

• What is their educational level?
• Are they male or female?
• How old are they?
• Where do they live?
• What is their social status?
• What kind of income do they have?
• What are their hobbies and interests?
• Where do they shop?
• Do they use social media?
• What publications do they read?

This may give you useful clues as to how you can contact them, the values your branding should represent and so on.

Ask why they would buy your product (or service) rather than someone else’s.

Recognise the problems they have that you can solve and work out how your product can be structured to provide benefits that meet their needs.

2. Competitor analysis

Know who your competitors are.

If you are offering a service then you may only need to look at local competition but don’t ignore the threat of national or international competition.

The growth of e-commerce companies such as Amazon is a prime example especially as they branch into traditional high street retail.

Figures from the the Centre for Retail Research.

Retail stores have been in decline particularly since the rise in e-commerce businesses.

According to a report by Parcelhero by 2030 e-commerce will account for around 40% of all UK retail sales.

So, undertake a SWOT analysis of your competition.

Look at what they do well or not so well and evaluate their strengths and weaknesses.

You can do this by going and looking at their shop or outlet, trying their service or looking at their website.

Does this analysis show where you might be able to deliver products to your target audience that better meet their needs?

Is there a niche market or a failing you can exploit?

3. Customer surveys

Nothing quite beats asking your potential customers.

Work out exactly what you need to know, ask a few direct questions and get out into the area you intend to operate in with a clipboard and some literature.

Spend a day talking to people and noting their responses.

You could give them a money off voucher for your new service as a thank you for their time.

If you already have a blog/website/Facebook page with followers ask them or run an online survey.

SurveyMonkey is a good option as you can create free surveys as long as they are under 10 questions long.

Consider promoting your survey using Facebook advertising focussing on the area and the demographic you are targeting.

There are also many Facebook groups that exist to promote businesses, share ideas, help the community etc that could be a good place to conduct a quick survey.

The rules for Facebook groups vary so it’s best to ask page admins first if they allow that kind of commercial activity.

Record your results and use them to develop your ideas.

Secondary market research

4. Demographic data

If your plan is targeted at a geographical area then look at census information provided by the Office for National Statistics.

This includes economic and demographic data broken down by area.

If your service is aimed at all households, or a particular demographic this could be really useful information to illuminate your research and your plan.

You can also look on local council websites as they often collect their own information on the local area.

5. Market size

Often a quick search on the internet will reveal information published by trade bodies, researchers or bloggers on trends and figures in identified market places.

For example, here is a report on the state of the UK fitness industry.

6. Industry benchmarking reports

Business advisors and commercial banks will often be able to provide industry guides and benchmarking reports that give good generic advice and might indicate expected levels of profitability.

Conclusion

Any information from these sources could be useful in guiding your thinking and expectations when developing your business plan.

Remember that your plan is primarily aimed at reducing risk but will also guide you in developing and growing your business.

Have you found any other methods or places to get useful market research?