Conducting Primary Market Research for Your Small Business
If you're a small-business owner or planning to become one, you probably have a great idea for a business or product you haven't seen on the market. Before you leap into the business arena, you should do market research on your plan.
Nearly half of all startups fail within the first five years, according to the U.S. Department of Labor's Bureau of Labor and Statistics. Two big reasons for these companies' failures are being in the wrong market and failing to research their product. Market research helps determine the demographics of your market area, identify competitors, and develop a marketing strategy.
There are two types of market research methods: primary research and secondary research. These methods can help you identify your target market for a new product or business before bringing it to the public.
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Primary vs. Secondary Market Research
You should use "secondary market research" first. Secondary research uses information from general sources. Trade journals, chambers of commerce, and similar sources provide statistics and market trends. You need the other kind of market research for information specific to your business.
Primary market research focuses on your business needs. Specific questions about your new business or product go to a target audience. Their responses tell you what your market thinks of your product.
Performing Primary Market Research
A professional research company can perform your primary market research, or you can do your own. Professional research is expensive, but crafting specific research questions and surveys takes knowledge of research tools and competitive analysis. If you're unfamiliar with those terms, you should have professionals do your market research.
If you're comfortable conducting primary market research, one of these methods works best.
Surveys and Questionnaires
Market research surveys and questionnaires gather information about potential customers. Survey questions should follow your business plan, so think about what you want to achieve before writing the questions. For instance, if this is a new product roll-out, your questions should be about pricing and customer needs. Do your customers want this new product? Do they already buy such a product from someone else?
You can distribute surveys and questionnaires in the mail, by email, on social media, or even by handing out flyers at a public event. Online surveys have the benefit of an immediate response and are easy to create. They are also subject to trolling and jokey replies, so you need to be careful in interpreting the response.
Before you send anything via email, you should obtain legal advice. In 2003, Congress passed the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (CAN-SPAM Act). The CAN-SPAM Act puts tight restrictions on "advertising" in unsolicited email. Marketing surveys can fall under the act if they are not worded correctly. Consult a business attorney before sending your questionnaires.
In-depth interviews can be time-consuming, but they are an ideal way to gather information from a small group of people about an idea or market. You can get different types of information depending on the people to whom you talk:
- Experienced individuals in relevant industries: Specialists can answer questions about target customers, competition, and industry trends.
- Individuals within a target profile: In-person discussions with your target demographic give you a good idea about your customer base. These interviews help assess business or new product ideas, such as asking, "Would you buy this product?" These interviews can be short but offer potential for follow-up if the interviewee is willing.
Feedback From Focus Groups
Conducting market research through a focus group may be the best way to assess a new product or business. Focus group research involves bringing a group of people together to test a product, try a game, or watch a video of a new service. After the demonstration, the group answers a series of open-ended questions about the product. The respondents may also fill out a questionnaire.
Focus groups should come from a good cross-section of your market segment. Analyzing focus group responses takes an understanding of qualitative and quantitative research. If you're unfamiliar with those terms, you should let a professional team assemble and analyze your focus group research.
Get Legal Help With Your Marketing and Advertising Efforts
You may not think about needing legal help for market research. However, there are laws and regulations about how you can solicit information about your products and services. Before you send ads or post surveys on your social media platform, talk to a business and commercial law attorney in your area.
See FindLaw's Marketing and Advertising Laws section for additional articles and resources, including Marketing Your Business: 7 Important Considerations.
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