Whether you have a new business, a new product, or a new way of doing things, you need to know whether people want your new idea before you try to sell it to the public. Market research reveals what your potential customers think before selling a product.
Market research should be a part of your business plan. According to the U.S. Bureau of Labor Statistics, half of all startup businesses fail within the first five years. The reasons are simple. Either the business owner didn't do enough research into their market, or they didn't develop a good marketing plan.
Before jumping head-first into the marketing research world, take a moment to review this discussion of the types of market research and how to do them.
What Is Market Research?
Market research is the method small business owners use to develop sound marketing strategies as part of their overall business plan. Research uncovers your core demographics and focuses your marketing on the customers most likely to buy your product or service.
There are two basic types of market research:
- Quantitative research gathers information for statistical analysis. This research tests for brand placement and strength, what percentage of a market preferred a new product over the original, and hypotheses about new businesses or services. Quantitative research will tell you what percentage of a target market may dislike a new product but won't explain why.
- Qualitative research examines consumer behavior and opinions. This type of research can tell you why respondents like a product or don't want your service. Qualitative research uses focus groups and other participation studies to examine customer reactions.
Market research is not an exact science. The research methods are subjective, and it can be difficult to screen out all external variables, other biases, and opinions besides the one you are studying. However, effective market research gives business owners a good base for their marketing plan when done correctly.
Why Do I Need Market Research?
In 1985, the Coca-Cola Company introduced a reformulated version of the popular soft drink. After several years of declining market shares, the board thought the company needed a boost. The "New Coke" tasted similar to Pepsi, sweeter than the original formula. Focus groups indicated they liked the New Coke better than Pepsi. The company introduced the new formula with much fanfare.
Public backlash against New Coke was so intense that "Classic Coke" was back on the shelves in three months. New Coke was a costly blunder. It seems that during their focus groups, Coke's marketers failed to notice that customers liked New Coke better than Pepsi but liked Classic Coke more than both.
No matter how good your business idea is, customers must want or need it. Coca-Cola's target customers valued the Coke brand as well as the drink. Coke's market research process failed to account for other associations people made with Coca-Cola beyond a soft drink. Research after the fact found that the flavor was irrelevant—it was the change in an icon that caused the uproar. Consumers did not want New Coke, and the Coca-Cola Company's market research could have told them that.
Small business owners don't have a multinational corporate bank account to fall back on when a new product fails to connect with the target audience. If customers reject your new idea like they rejected New Coke, you may face bankruptcy or worse. Luckily, small businesses don't need focus groups to assess customer needs and buying habits. They can ask clients what they want to see or how you can improve your services.
Formal marketing research gathers and focuses information so you can make business decisions. If you want to break into a specific market or open up a new area, marketing research helps you determine if that's reasonable or risky. Don't take a chance on being the next New Coke unless you have unlimited international resources.
How To Do Market Research
You've done market research daily if you're involved in your business. Checking competitors' prices, asking customers if they liked their meal, and getting a referral from a business associate are all informal methods of assessing the market. You're comparing your business to similar businesses, monitoring customer satisfaction, and exploring new market niches.
Formal market research takes all this and puts it into a process. Instead of a quick chat with a customer at the door, market research firms create surveys and questionnaires, hold focus groups, and carry out other procedures so they can calculate the data afterward. It is possible to do this research yourself, with the caveat that you also must understand what to do with all that data once you have it.
Marketing Research - How to Begin
If you decide to go it alone, take the time to find help online. There are many places online where you can find research questions for surveys and questionnaires, along with helpful research tools and explanations of how to use them.
You should also discuss any legal questions with a business law attorney before setting up your own market survey. Although advertising is generally legal, email advertising and online surveys may fall under federal regulations that require notices and opt-out provisions. Check with an attorney in your area before sending things out.
Step One: Review your business plan and objectives
Without a goal, you can't develop a research plan. What do you want to learn from this research? For instance, if you want to expand your business, you need market trends in the surrounding area. If you're evaluating brand recognition, you want customer reviews and comments.
Step Two: Research your existing information
You may have some information already. If you have a social media presence, do an in-depth survey of customer reviews and referrals. What comments appear frequently? What suggestions do regular clients have that you might consider? Have some brainstorming sessions with employees about their face-to-face interactions with customers. They hear from customers daily and know what people say, good and bad.
Step Three: Decide what type of research tools you want
Go back to Step One for a moment. If you're opening a new store, you need quantitative research, which is facts about demographics, market segments, and market size in your area. You can acquire that through secondary research. This is data already gathered in trade association journals, government websites, and other commercial sources. The Small Business Administration (SBA) helps entrepreneurs and small business owners find these numbers for new businesses.
Primary research focuses on your particular need. Asking a customer, "How can we help you better?" is primary research. So are direct mail questionnaires created by market research firms. In-person interviews and focus groups ask individuals what they buy, and why they buy it, and develop a profile of the ideal customer.
Step Four: Create your market research tools and begin your research
At this point, all that remains is sending out your surveys, questionnaires, and canvassers to ask questions. This is when you may need a professional team who understands how to do market research. After the exploratory research is complete, a professional company can take the raw data and assemble a research report answering your focus question and breaking down the answers into a format you can use.
Legal Assistance and Other Aid
If you do the work yourself, you should consult a business law attorney in your area. Email advertising must follow federal and state laws, especially the CAN-SPAM Act, designed to prevent business owners from sending unsolicited emails. Other states, such as California, have laws limiting the collection of data from minors. Protect your business by contacting legal assistance before starting your survey.
You Don’t Have To Solve This on Your Own – Get a Lawyer’s Help
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.