How to conduct market research
Market research is a useful undertaking in order to determine whether a product or service is in demand and the business will have a chance of success. The results can be helpful in minimising risks and making practical decisions in business.
Starting a business is an adventure. And although we often associate adventure with risk and uncertainty, it’s important to have a good balance of risk and the likelihood of success.
It might seem like common knowledge not to embark on a business venture without proper preparation, which should involve thorough research into the market. Understandably, it’s inadvisable to launch into a new business without first ensuring that the market will support what you have in mind.
This is where market research comes in.
What is market research?
Market research involves a systematic process of collecting and analysing information about the customers, competitors, and the general state of the market.
The market research is undertaken to determine the chances of a particular product or service being successful. From a conservative standpoint, it’s about making decisions that will help to minimise risk.
A sole trader would conduct market research in order to test the potential of a business idea. Hence the importance of a better understanding of future (potential) customers, competitors and the impact that the business could have on the market.
Define the purpose of your market study
Before launching an intense Google session, it’s useful to first define the reason (why) and objective (for what purpose) of your market research.
While it might seem straightforward, there are in fact a number of reasons to conduct market research as it can be used for a variety of purposes. From launching or improving a product or service, to starting a new advertising campaign, to better meeting the needs of customers.
However, for the purposes of this article, we focus mainly on the use of market research in launching a business. Now that the reason is defined, we can move on to the objective. For example:
- To analyse and better understand the sector
- To analyse the potential impact of your product on the market
- To analyse your target audience - that is to understand the preferences, interests, habits, etc. of your potential customers
- To analyse your competition
Using general objectives is alright as a first step, but as you continue, you might find that you would like to further narrow-down what purpose your research serves. The SMART approach can be helpful: Smart, Measurable, Achievable, Realistic and delimited in Time. Defining these can be a quick way to determine the deeper purpose of your research.
Define the research
Before starting, it’s important to determine what kind of information you’d like to collect and potential resources. Today, we have so much data at our fingertips that it has become even more crucial to be clear from the start in order to obtain your desired results. A few questions you might consider to figure this out include:
- What is the current condition of the particular sector?
- What products/service does the competition offer and what are the strategies being used?
- What behaviour are the customers exhibiting?
Once you have your guidelines in place, you can start considering the best sources for gathering information. It’s always important to check that your data comes from a reliable source. Primary and secondary sources can be defined as follows:
Primary sources: This is information that is gathered first hand, meaning any data that is directly obtained from customers or companies and can be expensive and time consuming to collect.
Secondary sources: Secondary sources come from other businesses or individuals that have already undertaken the gathering of relevant information. We’re talking about sector studies published in specialised magazines, for example, or databases of chambers of commerce, business organisations, etc.
Define your methods
The method of market research refers to the instruments and tools used to achieve the aforementioned goals that have been set. Methods, in the this regard, can be split into quantitative and qualitative.
- Quantitative methods
The quantitative approach essentially provides data in numerical form. It quantifies the collected information and with the use of the correct formulas, provides insight into the market. Surveys are perhaps the most popular form of quantitative research, allowing a large reach across different demographics in order to provide a more accurate sample.
- Qualitative methods
Qualitative research allows a deeper look into the data, though likely from a smaller sample size so can arguably be less accurate if relied upon on its own. One of the most common qualitative approaches is the in-depth interview or a discussion group with a limited number of participants from the sample group.
Analysis of market research
Once you have collected enough research, either from secondary sources like specialised reports and journals, and/or primary sources such as interviews or discussion groups, you can begin determining what it all means for your business.
To analyse the data will allow you to interpret the data as it relates to the objectives you have set for your research.
The analysis of all the information you have gathered should provide you with a new perspective on the industry that you are researching, including the products and strategies of competitors, the interests and tastes of potential customers, and the condition of the particular market overall. This is the kind of information crucial in determining whether your business/project/campaign is likely to be successful.
Final write up
Like any good research, the final should include a write-up of the findings. While this might harken back to school-days that we don’t all want to revisit, it is in fact a useful reference for any business to help keep up-to-date in the market.
The report can be included in an initial business plan, for example, for quick comparison or understanding of the conditions when the company was launched.
The importance of market research
You might discover after deciding to undertake a market study that it’s a bit more involved than you had expected. It’s not a simple task and requires a commitment involving time, effort, and money. It can be overwhelming for one individual to undertake, so it is possible to hire a specialty company to conduct the necessary research.
However, businesses that specialise in market research can be pricey, ranging from £100 for a basic online survey, up to £5,000 full an extensive, in-depth study. While it might seem like a big investment, it can save you a lot of money down the line by providing a better understanding of the business marketplace you will be entering.
A thorough view of your market can help you make more practical decisions in your daily operations and give you a better base for launching your small business.