From asking the opinions of family or friends, to talking to industry contacts and checking the prices of products already available, everyone should do some form of market research before they start in business or launch a new product or service...
Without market research you would have no detailed knowledge of the market you plan to enter, no understanding of your intended customer base and no idea of how much money you may be able to make.
What is market research?
Market research is a way of gaining valuable information that can be used to evaluate your company or new product or service's chance of success. By asking your potential customers about their habits and needs, market research can determine the size of your intended market, as well as the likely demand, price and profit you can anticipate. But it is important to start with the basics. There are five basic questions you should begin with:
- Who are the customers?
- What does the customer need?
- What is my competition?
- What are the gaps in the market?
- Do they like my product? (test marketing)
Some of this information will already exist; all you'll have to do is find it. However some information, particularly that which relates to your specific product or service, will need to be gathered by you. This can prove costly, but there are simple and straightforward steps your business can take.
Before you begin to gather the data you require, you should first have an idea of the type of information you can gather, and how this may be of benefit to you. There are two types of market research: quantitative and qualitative.
Quantitative research
This form of market research produces numerical data. It can be used to determine the size of a market, how much it is worth and where the specific growth areas lie. Quantitative research can also provide you with an understanding of who your customers are or will be: their age, gender, location etc.
Qualitative research
Although it does not provide numerical data, qualitative research can help you understand the attitudes and beliefs of your customers. There are often no set questions involved, instead participants are presented with topics, problems or possibilities to consider. It is ideal for generating or developing ideas, testing reactions to advertising or branding and pinpointing gaps in the market.
Qualitative v quantitative
If, for example, a company had developed a new flavour of popcorn, it would need to gather both quantitative and qualitative research in order to establish the best way to sell, market and position the product.
Initially it would probably find out about the popcorn market as a whole by gathering quantitative research such as:
- the value of the UK popcorn market
- how that market is broken down (% ready-to-eat; % microwaveable etc.)
- recent trends in the snack-food industry (eg the decline in popularity of fatty foods).
This would be followed by qualitative research which would answer questions such as:
- how does the customer feel about popcorn?
- when would the customer think about eating popcorn?
- what would encourage them to try a new flavour of popcorn?
- how aware is the customer of the low fat nature of popcorn?
How can I do it myself?
Use every opportunity to encourage customer input. For example, next time a client phones, say, "By the way, we're trying to improve our service to customers. How do you think we could make it better?" But be aware: people often say what they think you want to hear.
DIY surveys
For most small businesses cost constraints mean that they have to carry out market research surveys themselves. While not as effective as an independent survey, these can still provide invaluable feedback. Here's how to conduct your own market research:
· Set your aims. First decide exactly what you want to know. For example, are you looking for customer reactions to service or do you want to assess future buying intentions? This requires more open or leading questions.
- Design the survey. Whether written or conducted by phone, a questionnaire must have unambiguous questions, a clear flow, and be easy to respond to. Think about the key areas on which you'd like feedback. Consider each question carefully and avoid overloading the survey with too many questions or choices.
- Make your survey user-friendly. Although tick-boxes are easier to analyse and compare, written responses give more depth. For qualitative questions, use even numbers of tick boxes to prevent people plumping for the middle one.
- Do a dummy run. Test a draft on several people to see if they understand the questions the way you intended them.
How many people should I ask?
Surprisingly few responses can provide a reasonably accurate measure of customers' feelings. If you have a handful of customers, you could ask them all. If you have thousands, 200 postal responses would give you plenty to work with.
For an in-depth telephone survey, 50 or even just 20 responses should give you the answers you need.
Checking the basics
A survey is also an ideal way to bring your customer database up-to-date. So ask them to check you have the right name, address and phone number. But you are more likely to get the unvarnished truth if responses are anonymous.
Increasing response levels
Replies to your survey will increase dramatically if you make it easy and potentially worthwhile to respond. Ease of response is down to design. Try to fit your survey on one side of a large postcard with a freepost address or a stamp attached. As an incentive consider offering a reward to every person replying.
Telephone survey
A telephone survey allows you to clarify questions and gives respondents scope to expand on open-ended answers. However, telephone surveys can be time-consuming and costly.
Get more for your money
One big cost of a mailed questionnaire is the postage. So why not take the opportunity to do some selling as well? Pop in details of some special offer or new service, or ask for some potential customers' names. Be careful that this doesn't obscure or compete for attention with the questionnaire.
Prepare properly
Think what would make you answer a questionnaire if it landed on your desk. Explain why you have sent recipients your questionnaire and why they should take the time to complete it.
Show your gratitude
Tell your customers the results honestly and highlight the actions you will take to correct any revealed problems. Thank them for contributing, publish the names of prize draw winners and send out their prizes promptly.
Interpreting the responses
How will you analyse the answers? This depends on the number of responses you expect. You can analyse a few by hand. For larger numbers, you could use a database or spreadsheet. For multiple choices or open-ended questions there are some good, relatively inexpensive survey-analysis packages.
Collate the replies and decide what implications they have for your business. Once you've drawn conclusions, plan what specific actions you will take to address them.
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